California Gov. Signs Landmark Duplex and Lot-Split Legislation into Law

California Gov. Gavin Newsom, on Sept. 16, 2021, signed into law Senate Bill (SB) 9, a landmark law that would allow for the ministerial approval of certain housing development projects containing up to two dwelling units (i.e., duplexes) on a single-family zoned parcel. The legislation, which was passed by the California Legislature on Sept. 1 and takes effect Jan. 1, 2022, would also allow for the ministerial approval of certain lot splits to allow property owners to construct up to two units on the newly created lots. Below are some steps that single-family homeowners and developers can take to understand SB 9, its qualifying criteria, and implication on future projects.

Qualifying Projects

SB 9 would allow housing development projects containing no more than two dwelling units on a single-family zoned parcel to be permitted on a ministerial basis, upon satisfaction of a number of qualifying criteria that include the following:

• The project site is in a city or urbanized portion of an unincorporated county.
• The project site is not located on or in any of the following: 1) prime farmland, or farmland of statewide importance, 2) wetlands, 3) within a very high fire severity zone, 4) a hazardous waste or hazardous list site, 5) within a delineated earthquake fault zone, 6) within a 100-year flood zone, 7) within a floodway, 8) identified for conservation in an adopted natural community conservation plan, 9) habitat for protected species or 10) lands under conservation easement.
• The project site also cannot require demolition or alteration of any housing if 1) housing is restricted affordable housing, 2) subject to rent control, or 3) contains tenant occupied housing in the last three years.
• The project site cannot be withdrawn from the rental market (i.e., under the Ellis Act) within the past 15 years.
• The project does not propose demolition of more than 25 percent of the existing exterior walls unless either 1) the local ordinance allows more demolition, or 2) the site has not been occupied by a tenant in the past three years.
• The project site is not within a historic district or property included on the California Historical Resources Inventory or within a site that is designated or listed as a city or county landmark or historic property or district pursuant to a city or county ordinance.
• A local agency may impose objective zoning, subdivision and design review standards, providing such objective standards do not preclude the construction of either of the two units being less than 800 square feet in floor area.
• No setbacks are required for an existing structure or a structure constructed in the same location and to the same dimensions as an existing structure. In other circumstances, the local agency may require four-foot side and rear yard setbacks.
• Parking of no more than one space per dwelling unit is allowed, except no parking required for projects a) within a half-mile walking distance of a high-quality transit corridor or a major transit stop or b) within one block of car share.
• A local agency may deny such a housing development project if there is a written finding that the project would create a specific adverse impact upon public health and safety or the physical environment that there is no way to mitigate.
• The rental of any unit created must be for a term longer than 30 days.
• The California Coastal Act still applies, except that no public hearing is required for Coastal Development Permits for housing developments pursuant to this legislation.
• A local agency may not be required to permit an accessory dwelling unit (ADU) or Junior ADU (JADU) in addition to the second unit if there is a lot split (described below).
• A local agency may not reject housing solely on the basis that a project proposes adjacent or connected structures provided that the structures meet building code safety standards and are sufficient to allow separate conveyance.

If these criteria are satisfied, the local agency must approve the project ministerially (i.e., without discretionary review or hearings). Projects approved ministerially are not subject to the California Environmental Quality Act (CEQA).

Lot Splits

In addition to permitting two units on a single family lot, the proposed legislation would allow qualifying lot splits to be approved ministerially pursuant to a parcel map, upon meeting a number of criteria, including many of the same criteria for the two units described above. Additional criteria include the following:

• Each parcel must be at least 40 percent of the original parcel's size.
• Each parcel must be at least 1,200 square feet in lot size unless the local agency permits smaller lot size per ordinance.
• There cannot be a sequential lot split on the same parcel, nor can there be a lot split if the owner of the parcel being subdivided (or someone working in concert with that owner) has subdivided an adjacent parcel pursuant to this lot split legislation.
• No right-of-way dedication or off-site improvement may be required.
• The parcel must be limited to residential use.
• An affidavit that the applicant intends to use one of the housing units as a principal residence for at least three years from the date of approval is required.
• The local agency shall not require a condition that requires correction of nonconforming zoning conditions.
• For each parcel created through this legislation, a local agency is not required to permit more than two dwelling units on a parcel.

A local agency may require, as conditions of approval:

• Easements for public services and facilities
• Access to the public right-of-way

In addition to the increase in density in single-family zones and lot splits in single-family zones, SB 9 would increase the extension of a map life from 12 months to 24 months and would allow four years of extensions in lieu of three years for subdivision maps with off-site improvements above qualifying costs (Gov't Code Sec. 66452.6).

Conclusion and Considerations

SB 9 is designed to increase the housing stock in single-family residential zones, as it allows not only two dwelling units per parcel, but also certain lot splits with two housing units on each. SB 9 builds upon prior state legislation that has proven successful in expediting the permitting and construction of ADUs and JADUs. SB 9 offers an alternative path for homeowners to add up to three more dwelling units on their property with minimal regulatory hurdles.

Although the legislation has been heralded for its potential to address the state's housing crisis, others predict a more limited potential. For example, the Terner Center for Housing Innovation at the University of California produced a study indicating that, due to qualifying conditions, physical capacity and financial feasibility, less than 2 percent of single-family lots are likely to be able to use SB 9 for up to the four-unit maximum.¹

In addition, local jurisdictions that have been less than acquiescent in adapting to amended state ADU laws may continue to languish in adopting ordinances, checklists and internal practices that comply with the new legal requirements.

Other practical questions may arise now that SB 9 has been enacted. One such area is how SB 9 will intersect with the rights of lenders/mortgagees of existing single-family properties. If an existing lot is split into two, the newly created second lot would presumably remain encumbered by the existing mortgage(s). Questions have arisen whether lenders would consent to a lot split that might result in the release of security, or whether subordination and non-disturbance agreements are needed between existing and new lender(s)/mortgagee(s), if different regarding the financing the construction of units on the newly created second lot. Other questions have arisen about the extent to which the provisions of SB 9 prevail over the rules governing common interest communities.

Although the extent of SB 9's potential remains to be seen, one thing is for certain: The California Legislature is committed to addressing the state's dire housing crisis, and it views by-right duplexes and lot splits as one weapon to do so.

Notes

¹ See "Will Allowing Duplexes and Lot Splits on Parcels Zoned for Single-Family Create New Homes? Assessing the Viability of New Housing Supply Under California's Senate Bill 9," Ben Metcalf, David Garcia, Ian Carlton and Kate Macfarlane, Terner Center, July 2021. The low projection of single-family lots utilizing SB 9 was before subsequent amendments to SB 9 were made, among others, to add owner occupancy and a three-year attestation.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.