Newsom ends single-family zoning in California | California Senate Bill 8, 9, and 10

“That’s it. It’s over. From today onwards, there will be no more single-family houses allowed in California.” Well, that’s not exactly true. There was Senate Bill 9, specifically, signed by Gavin Newsom earlier this year. And this bill severely changed the distinction between what you can and can’t do on a single-family zone lot here in California. So, today, we will talk about Senate Bills 8, 9, and 10 that Gavin Newsom recently signed into law. We will also talk about what it means for our market broadly in California and also here locally. So let’s get into this thing.

Senate Bill 9

So let’s begin with Senate Bill 9. Effectively, this means that, at a state level, homeowners who have single-family residents that are zoned for single-family residents can add up to four units on their property. Or, it allows them to subdivide that property so that it can then be sold for single-family use. It’s really, really interesting when you think about it. It’s because neighborhoods that have traditionally been just single-family homes can now create potentially three more dwelling units. They could build out the basement and create a flat there. Or, they could add a separate structure. They could tear their house down and rebuild it as a duplex or a three-unit or something. As a result, that, on paper, should create more opportunities for people to move in. People will have more access to units and affordable housing because the supply will grow.

 

But obviously, there’s this counterpoint, which is density. What will it do to the values, livability, and lifestyle that occur in these neighborhoods? In other words, what would its effect be on the things that make these neighborhoods relatively valuable or not? Depending on the situation, it’s a gigantic question mark as to what will happen. Furthermore, when you consider where you’re putting the onus as far as who’s going to build these, these are homeowners allowing people who own these properties to build, redevelop, and create these extra units.

Who is actually going to be able to pay to do these units?

The whole point of the bill was to combat housing affordability. Also, it aims to address the homelessness crisis by allowing people to create more units, more density per parcel, right? But who are the people who are actually going to be able to pay to do that? Well, it’s the homeowners who have the money to invest back into their homes, specifically. However, it is expensive to build homes right now because of the cost of construction, permits, and labor. In other videos, I have talked about this particular issue of costly construction. It is unbelievable how much it costs to build something new on your property.

I have an architect friend with whom I had a conversation about that here in the city of Alameda, specifically. According to him, if you want to do an addition at the back of your home, not going up or vertical or whatever, you’re looking at something like $550 a square foot. Now, that’s, of course, when lumber was a little more expensive. So it may have edged down closer to $500. Nonetheless, that’s a lot of money that someone has to put in to build something that wasn’t there before. And if you’re talking about completely redeveloping a lot–tearing something down, and then building something brand new–it gets more expensive.

In addition, the people putting that amount in are going to want a return on their money.

Whether they rent or sell their property, the people investing a given amount of money aren’t necessarily just doing it out of the kindness of their hearts. They’re most likely going to want to make sure that, at the very least, their money comes back to them. 

So, on its face, it doesn’t really address homelessness and the housing shortage or supply. That’s because the owners of those units will want a premium. These units are brand new, fancy, nice, and cost a lot of money to build. Therefore, it’s most likely that they’re going to want to recoup their investment. It’ll be really interesting to see if that actually plays out in that direction. 

What is going to happen to the supply component?

However, one other thing to consider is when people take this en masse and move forward. Suppose they actually redevelop their basement or add an ADU in the back. What is going to happen then to the supply component? Will rental supply boom in a big way? Will resale numbers increase substantially? That’s really hard to say in the short term. We’ll have to keep an eye on that one.

Senate Bill 10

In contrast to Senate Bill 9, the other two bills, 8 and 10, were a little less the subject of headlines. That’s because they don’t talk about changing single-family zoning. However, Senate Bill 10 does give cities the ability to rezone properties for up to 10 units of density per parcel near transit hubs. So a lot of the places where the BART runs, or where the bus lines are, or any of those kinds of major transit areas, may be able to change their zoning more effectively to allow for more density around those transit hubs. So what I’ve read about it is that it will be a tool to be used on behalf of the city to rezone and facilitate that change relatively quickly compared to how it is at present.

Senate Bill 8

Lastly, Senate Bill 8 extends the Housing Crisis Act of 2019 for another ten years. That is to help jumpstart and facilitate a lot of these projects that have been stalled, put on pause, or put on the back-burner because of COVID, lumber prices going up, etc., to create actual affordable units. In addition, the number of these projects is somewhere in the 40,000–45,000 unit range across the state. Additionally, money is being plunged back into those projects, and it’s also extending that relief act as well.

 

The question then is, what is this going to do for us locally and as a state? Well, it should create more density and more units in the supply. That’s something we’ve talked about a lot on this channel—the supply and demand imbalance. It’s worth noting that, for the first time in California’s history, the population shrank last year. However, even though that happened, we still have a housing shortage. That’s to say, the number of units available versus the number of people who want them is still at an imbalance. More people want those units than there are units available. Therefore, in principle, this Senate Bill should bring the supply up.

 

Of course, however, construction takes a long time. It is not like magic that just because you wished for it, and poof, “You’re going to have new units.” No, it’s effect is definitely not going to be felt in an instant.

Ultimately, what you will see, hopefully, is new units being released to the marketplace over time.

That is, regardless of whether those units are being sold, rented, traded, or resold, they should all help alleviate some of the problems that we’re seeing today.

However, no controversial bill or situation like this will go unchallenged. I’m sure there certainly will be pushback and fighting and a lot of that sort of thing that happens at various city and county levels. So it’ll be really interesting to watch how this unfolds through the rest of the year. More importantly, especially with the single-family rezoning situation, I’m really interested in what’s going to happen in Oakland, Alameda, and Berkeley, which are traditionally very single-family neighborhoods.

Will people actually go forward with this? Will people really build out basements? And will there be enough room to allow them to actually build something that someone could live in? Does their street allow for parking? What will the city say about some of these things?

Lastly, the ADU laws have been relaxed to allow people to do this here locally.

While that is happening, will this distinction massively change the neighborhoods’ look and feel? It’s difficult to say. That’s going to be a really interesting one to watch as well. Because if you’re going to buy into a neighborhood that has a lot of large lots where people can subdivide or build a separate structure and finish out a basement in five to 10 years, it might drastically change the vibe, the feel, the priceeverythingin that neighborhood. So be really aware of what’s around you when you’re buying or considering buying. Think about what that neighborhood might look like too in the next five to 10 years.

I hope my blog on California Senate Bill 8, 9, and 10 has helped you.

If I can give you more context on the process of buying or selling your home, please do not hesitate to reach out. My information is below. 

Here’s to all your success!

 

Need more tips to help you succeed in the East Bay Real Estate Market?

Sign up for Two Minute Tuesday–market updates and stories about East Bay real estate (with the occasional puppy picture) from Hans and Kristin in two minutes, once a month.

California Senate Bill 8, 9, and 10