The California housing market could see a marked increase in supply thanks to a package of bills recently signed into law.
Most notable is the California Housing Opportunity & More Efficiency (HOME) Act, which may effectively put an end to long-standing single-family-zoning laws that allowed for just one single-family home per lot of land.
The new laws seek to address California’s ongoing housing affordability crisis which is fueled by a massive housing shortage. Increasing supply through housing density could tie a weight on soaring home prices and expand homeownership opportunities in the Golden State.
The housing package included four bills that Governor Gavin Newsom signed into law — SB 8, SB 9, SB 10, and AB 1174.
SB 8 extends provisions in the Housing Crisis Act of 2019 for five years, moving the sunset date to 2030. The Housing Crisis Act of 2019 requires local governments to streamline the housing permit process by reducing red tape.
SB 8 also clarifies that developers cannot demolish multiple units and replace them with a single-family home.
Also known as the California Housing Opportunity & More Efficiency (HOME) Act, SB 9 creates paths for homeowners to convert a single-family home into a duplex and subdivide an existing lot and build a duplex on each. Only four units are allowed on a single-family parcel and there are provisions to protect historical districts.
A 2021 UC Berkeley Terner Center for Housing Innovation report estimated that up to 700,000 new homes could be created by SB 9.
The new law does not outlaw or restrict the construction of single-family homes — it simply makes it easier to repurpose single-family lots for multi-family use in much of the state.
SB 10 removes laws that prevented local governments from upzoning lots to allow for up to ten units. It’s designed specifically for urban areas close to transit and job centers and makes it easier for cities to build affordable housing.
This assembly bill amends existing processes meant to streamline housing development in regions that have not made sufficient progress on existing housing goals.
California has become the poster child for urban sprawl, long commutes, and high home prices. This is due to a variety of factors, including nearly a century of single-family zoning that limited housing supply. This lack of inventory is a primary contributor to high home prices, which were only pushed higher during the pandemic.
The latest housing package is just the crest of a larger wave of housing legislation seeking to bolster housing production. Including the recent package, 37 housing bills have been signed into law in the last four years — 15 by former Governor Jerry Brown and now 22 by Newsom.
One recent success story is a 2017 law that allowed for accessory dwelling units (ADUs), which has already created more than 20,000 new homes.
But even 20,000 new homes is just a fraction of the units California needs to meet demand. It’s estimated that 1.8 million new homes are needed by 2025, but just 80,000 are being built per year. That leaves a 1.56 million-home deficit to fill.
After 30+ years of under-producing, it’s clear single-family homes simply can’t be built fast enough to keep up. The new wave of housing legislation changes the strategy by increasing the number of units that can be built per lot, and decreasing the amount of time it takes to build them.
California’s housing crisis wasn’t created in a day, and it won’t be quickly solved. However, the 2021 Terner Center report suggests that SB 9 alone has potential to make an impact.
“It is reasonable to assume that SB 9 will modestly accelerate the addition of new units relative to the status quo by facilitating access to conventional mortgage products for multiple households able to purchase homes on newly subdivided single-family parcels.”
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