5 things you must know about the new ADU laws 2021 edition

A Summary of changes including Approval process, financing options, HOA rules, and more

My friend owns a duplex with a huge backyard. He's owned the duplex for 10 years, his tenants have almost paid off his entire mortgage.

Having experienced the benefits of a long-term hold strategy. His goal was to add another rental to his portfolio. But he didn't want to pay retail or compete in a bidding war for his next investment property. With surplus cash and the market is hotter than ever his choices were endless. He could invest in a different market, stocks, businesses, or anything else.

But what did he do?

He hired a builder to put a 1200 sq ft ADU in his backyard.

He should have been approved within 60 days and avoid impact fees. He didn't. Almost 12 months after applying for an ADU permit was he approved. After many back and fourth requests for changes and demands for fees to be paid.

The lesson here is even though the law states one thing what actually happens may be different.

Things don't always go according to plan. The nice thing for him was that he had the BEST ADU Financing Option and hired a trusted contractor. He had cash saved up. Not everyone has that much cash but there are several ADU financing options available. The contractor had 20 years of experience building in CA.

"Anyone that knows how to build in CA can build anywhere. The ability to navigate California Bureaucracy is nothing short of a superpower." @theADUdude

You must know and understand the law in order to use it effectively.

Below are 5 things you must know about the ADU laws.

But first, know this...

These are from the new HCD December 2020 ADU handbook updates.

CA needs housing. The California Department of Housing and Community Development (HCD), has come out with yet another iteration of handbook updates. To provide local jurisdiction further clarity in order to comply with state law.

Every time HCD updates the ADU handbook it's basically a kick in the pants to the local jurisdictions. Several cities still have not gotten a stamp of approval from HCD which indicates if local law complies with state law.

Local law must comply with state ADU regulations.

CA wants you to build Accessory Dwelling Units and ensure local jurisdictions make it easier to build. That's why we see yet another handbook update because not everyone is on board yet.

5 things you must know about the ADU laws

1. CA wants you to build housing

California has a long way to go before solving our housing crisis but they also understand where to start. It's by allowing more housing to be built. Hence the new ADU updates.

Handbook updates are to further address barriers to the development of ADUs and JADUs. CA wants every city on board but plenty is not cooperating.

Based on the data CA acknowledges; "Shortage of affordable units and the units that are available can be out of reach for many people. To address our state’s needs, homeowners can construct an ADU on their lot or convert an underutilized part of their home into a JADU. This flexibility benefits both renters and homeowners who can receive extra monthly rent income. "

State law is one thing but local application of the law is another. HOA's cannot say NO to your ADU proposal. They may and will fight you on it but state law allows it.

2. Streamline Approval Process

Once a "completed" application is submitted, the local jurisdiction has 60 days to decision the permit application.

Every city is calling bluff on this one. Not many are enforcing or complying with the 60 day approval requirement. Some are using the covid excuse others are confident citizens won't fight back or challenge them.

"Biggest sticking point here is what is actually a completed application. Everyone has their own definition." @theadudude

3. Size does Matter

There's a difference between what you can do and what you should do. ADUs are meant to cost you sell than building an entirely brand new home from the ground up. In order to avoid most traditional impact fees the size of your ADU should be below 750 square feet. That's the sweet spot.

"ADUs converted from existing space and JADUs shall not be considered by a local agency, special district or water corporation to be a new residential use for purposes of calculating connection fees or capacity charges for utilities, unless constructed with a new single-family dwelling. The connection fee or capacity charge shall be proportionate to the burden of the proposed ADU, based on its square footage or plumbing fixtures as compared to the primary dwelling. State ADU law does not cover monthly charge fees."

Here is where to start to engage with local utility companies and engage with the city to get a full list of fees. 5 steps to take in order to get started on your ADU project. (link to additional ADU blog)

4. Owner occupancy requirements

At some point you had to be living on site in order to qualify for the new ADU laws. But that is not the case anymore. Every California home can have up to 2 ADUs regardless of where the property owner actually lives.

Now some cities may fight you on it but as you can see there's a fight along each step of the ADU build-out process.

5. Legalizing existing non permitted ADUs

This might be the best law change to come out of the December 2020 ADU updates. Local agencies must delay enforcement against a qualifying substandard ADU for 5 years! As long as the Violation is not a health and safety issue. Get that ADU legalized.

To learn more about the BEST ADU financing options check out my previous articles.