Copyright 2021 Terner Center for Housing Innovation
For more information on the Terner Center , see our website at www.ternercenter .berkeley.edu
A TERNER CENTER REPORT - JULY 2021
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
AUTHORS:
BEN METCALF, MANAGING DIRECTOR, TERNER CENTER
DAVID GARCIA, POLICY DIRECTOR, TERNER CENTER
IAN CARLTON, CO-FOUNDER AND CEO, MAPCRAFT LABS
KATE MACFARLANE, PRODUCT MANAGER, MAPCRAFT LABS
A TERNER CENTER REPORT - JULY 2021
2 Introduction
In recent years, California lawmakers have
proposed a number of legislative changes
to address the state’s ongoing housing
shortage and affordability crisis. While the
most ambitious of these efforts have not
passed, momentum has increased around
one solution in particular: legislation to
allow modest increases in smaller-sized
units in existing single-family neighbor -
hoods. In 2020, Senate Bill 1120—which
would have allowed for up to four new
homes on existing single-family parcels—
passed both the California Assembly and
Senate, but fell short of becoming law as
time ran out at the end of the session. This
year, Senate President Pro Tempore Toni
Atkins has introduced Senate Bill 9 (SB
9), which proposes a similar policy shift.
SB 9 has now passed through the State
Senate and is under discussion in the State
Assembly; if approved by the Assembly, it
may be poised to be the most significant
housing bill coming out of California’s
current legislative session.
SB 9 has potential to expand the supply
of smaller-scaled housing, particularly in
higher-resourced, single-family neighbor -
hoods. In this way, SB 9 builds on recent
state legislation that opened up access to
accessory dwelling units (ADUs) for virtu-
ally all California single-family parcels.
What distinguishes SB 9 is that it allows
for the development of new, for-sale
homes, either on a newly subdivided lot or
through the conversion of existing single-
family homes into multiple units. This
ability to create duplexes and/or split the
lot and convey new units with a distinct
title would allow property owners to
pursue a wider range of financing options
than are available for ADU construction to
build these new homes.1 In so doing, SB 9
could open up new homeownership oppor-
tunities at more attainable price points
for prospective purchasers, who would be
able to apply for a traditional mortgage to
buy the home.
Yet, the likelihood of creating new housing
and homeownership opportunities as
a result of SB 9 largely depends on local
context. While Senate Bill 9 does not
apply to single-family parcels in historic
districts, fire hazard zones, and rural
areas, local market prices and develop -
ment costs play a large role in determining
where there is financial viability for the
addition of new homes. Moreover, phys -
ical constraints, such as small lot sizes
and other local regulations, can limit the
number of new homes built as a result of
this bill. To assess the potential impact
of SB 9 on new housing supply, this anal -
ysis assesses the market feasibility of new
homes as allowed by the current version of
the Bill (as of July 2021).2
This analysis finds that SB 9’s primary
impact will be to unlock incrementally
more units on parcels that are already
financially feasible under existing law,
typically through the simple subdivision
of an existing structure. Relatively few
new single-family parcels are expected
to become financially feasible for added
units as a direct consequence of this bill.
While this analysis does not attempt to
measure the actual rate of uptake for
adding new units to single-family parcels,
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.
A TERNER CENTER REPORT - JULY 2021
3 Background
California’s recent housing laws have
largely failed to unlock significant housing
production changes that would ease
the ongoing housing and homelessness
crisis. One of the state’s more effective
housing solutions has been recent laws
removing barriers to the construction and
financing of ADUs. In 2016, Senate Bill
1069 and Assembly Bill 2299 expanded
the ability of homeowners to build ADUs
and Junior ADUs (JADUs). Subsequent
legislation (Assembly Bill 68, Assembly
Bill 881, Senate Bill 13) removed other
barriers to ADU development, including
lowering impact fees and removing owner
occupancy requirements. The impacts
of this legislation are already apparent
throughout the state. Published state data
demonstrates that the initial 2017 ADU
law had immediate impacts: California
jurisdictions went from issuing 5,911
ADU permits in 2018 to 15,571 in 2019,
with ADU completions following a similar
upward trend, more than tripling over the
same period (from 1,984 to 6,668 units)
(Figure 1).3 The ADU laws that took effect in
2019 allowing two ADUs on single-family
parcels and more on multi-family parcels
are already having a significant impact
on gently adding density across the state
in single- and multi-family properties. In
early 2021, the City of Los Angeles reports
processing upwards of 20,000 ADUs
where ADUs make up nearly 40 percent of
all housing building permits, and the City
of San Jose reports that ADUs make up 38
percent of all housing building permits. 4
This progress signals the significance of
easing approvals and barriers to smaller-
scale, infill development in low-density
areas.
Figure 1. ADU Permits and Completions in California, 2018 and 2019 0 2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
Permits Completions
2018 2019
Source: Chapple, K., et. al. (2020). “Reaching California’s ADU Potential: Progress to Date and the Need for ADU Finance.” Retrieved from: https:// ternercenter .berkeley.edu/wp-content/uploads/2020/12/ADU-Brief-2020.pdf.
A TERNER CENTER REPORT - JULY 2021
4 The early success of recent ADU legisla -
tion has prompted lawmakers to examine
similar policies that would incrementally
unlock more homes in low-density urban
infill neighborhoods where the housing
crisis is particularly acute. Such poli -
cies would also align with state climate
change policies encouraging additional
homes near jobs and services to reduce
vehicle miles travelled. Last year, SB 1120
proposed allowing up to four units in
single-family-zoned parcels throughout
the state. Analysis by the Terner Center
of SB 1120 found that nearly six million
single-family parcels statewide would
theoretically be eligible, a significant
expansion of buildable area in Califor -
nia.5 For example, if just 5 percent of those
parcels created new two-unit structures
as a result of SB 1120, that would have
resulted in 597,706 new homes. That’s
more than five times the number of new
homes that have been built in California
annually since 2015. 6 However, in a
session marked by the disruptions related
to the COVID-19 pandemic, SB1120 ran
out of time to be sent to the governor’s
desk, despite passing both the Assembly
and the Senate.
SB 9 was introduced with nearly identical
language to its predecessor, SB 1120, but as
the bill has progressed through the legisla-
tive process, some important changes have
been made. Most notably, properties that
have developed an ADU are not eligible for
the density or lot split provisions of SB 9,
and jurisdictions would have the option of
imposing owner-occupancy requirements
for lot split applicants, where the applicant
would have to make one of the units on
the site their primary residence for at least
one year. This owner-occupancy provision
has been added to address concerns that
current homeowners could be incentiv -
ized to sell to private entities interested in
speculative investment on single-family
parcels and to encourage use of the law to
create more opportunities for California
families to buy a home. The provisions also
ensure the law cannot be used to divide
homes occupied by renters as a measure
to prevent displacement. Other new provi-
sions have made the legislation potentially
more impactful. For example, SB 9 allows
more flexibility in how the lot is split.
SB1120 required that both newly created
lots be of equal size, potentially limiting
the number of instances where new homes
would be feasible. New language in SB 9
requires that one of the newly created
parcels only needs to be more than 40
percent of the original parcel size. Table 1
summarizes the key provisions of SB 9 as
of July 2021.
A TERNER CENTER REPORT - JULY 2021
5 Location
• The parcel, lot, or development must be located in a single-family residential zone. • The parcel cannot not be located in a historic district or be a historic property itself (as defined by the state or local county or city).
• The parcel cannot be located in a high fire zone area. • The parcel must be in a city whose boundaries include some portion of an urbanized area or urban cluster as designated by the U.S. Census Bureau.
• If the parcel lies in an unincorporated area, then the parcel at stake must be a legal parcel wholly within the boundaries of an urbanized area/cluster .
Parcel Size
• The parcel must be a minimum of 2,400 square feet in size. • The newly created parcel as a result of a lot split may not be smaller than 40 percent of the lot area of the original parcel.
• A locality cannot impose any standards that would preclude the construction of up to two units or physically precluding either of the two units from being at least 800 square feet in floor area. • A side and rear setback of up to four feet is allowed.
Anti-Displacement
• The lot split cannot require the demolition or alteration of a housing unit currently serving moderate-, low- or very-low income household(s) or a rent-controlled unit. • The lot split cannot result in the demolition or alteration of housing that has been occupied by a tenant in the last three years or where an owner has used the Ellis Act to remove a rental unit from the market within the last 15 years.
• A jurisdiction may impose an owner-occupancy restriction for lot splits, where the applicant must intend to occupy one of the housing units as their principal residence for a minimum of one year from the date of the approval of the urban lot split.
Other
• The parcel cannot have been created from a previous lot split as provided by this policy. • The same person (or another party acting on their behalf) cannot perform a lot split on adjacent lots.
Table 1: Eligibility Criteria Proposed for Split Lots Under SB 9 A TERNER CENTER REPORT - JULY 2021
6 To inform our model, several assump -
tions were made about market conditions
and trends. For example, all properties
with single-family detached land uses
were assumed to conform to zoning and
currently have exactly one existing unit
(e.g., no ADUs). In combination with tax
assessor data, we estimated the value of
each existing single-family property on
those parcels. MapCraft calculates stan -
dard development “pencil out” models
to compute snapshots of market feasi -
bility on every relevant parcel, both under
current policies and as proposed in SB 9.
These models are based on the financial
evaluations conducted by developers to
assess an investment’s viability early in
the development process by balancing the
cost of developing the site with expected
rental or sale income.8 MapCraft’s models
of small-scale development look at finan -
cial feasibility from the perspectives of
owner-occupants, owner-occupant land -
lords, small-scale investors, and commer -
cial investors, with market-feasible unit
potential based on a probabilistic blend of
all possible development options. Finan -
cial expectations of investors and lending
terms are based on conversations with
industry professionals and are updated by
MapCraft regularly.
MapCraft’s calculations incorporate data
and assumptions about current rents, sales
prices, construction costs, and investors’
expected return on investment rates, and
are validated by ECONorthwest, a West
Coast economics consultancy. MapCraft’s
market demand information relies on
multiple sources, including CoStar, Zillow,
tax assessors, U.S. Census, and transaction
records. MapCraft’s construction cost
information is based on interviews and
RS Means. Finally, the modeling relies on
Methodology
It is unrealistic to assume that under SB
9, every single-family lot would be split,
or that every existing single-family home
would be demolished and replaced with
four new units. For example, some lots
may be too small, have other existing
structures or ADUs, have a history of
being rented, or other physical conditions
that prevent changes. Some owners may
have no interest in developing their prop -
erty. And finally, even if a property owner
is interested in pursuing new development
on their land, trying to recoup this invest -
ment with market-rate rental or sales
will prove financially infeasible in many
instances. To develop a better estimate
of the potential impact of SB 9 on new
supply, we conducted an analysis of how
many new homes would be both physically
eligible and financially feasible as a result
of SB 9, as well as what types of develop -
ment would be most likely, taking into
account on-the-ground market dynamics.
We partnered with MapCraft Labs, which
developed a financial feasibility model to
assess market-feasible housing capacity
on existing parcels with detached single-
family homes. The base layer for the
analysis is a parcel dataset from Urban -
Footprint which includes all counties in
California with populations greater than
45,000 people, and covers homes built
prior to 2020. 7 This dataset includes
roughly 7.5 million single-family parcels
across the state. We used MapCraft’s Lab
analysis tool to determine what types and
scales of housing development would be
feasible with an approach that considers
construction costs, market demand,
financing, land use policies, and individual
parcel characteristics.
A TERNER CENTER REPORT - JULY 2021
7 assumptions about parking requirements
based on previous Terner Center research,
typical unit sizes, and other factors that
inform development.9
The provisions of SB 9 would allow for a
variety of development options. For this
analysis we examined the most likely devel-
opment scenarios as shown in Appendix B.
Our business-as-usual scenario evaluates
development feasibility for housing supply
changes currently permissible under
single-family zoning, while the alternative
policy scenario considers the additional
set of development options allowed under
SB 9. For example, under the business-as-
usual scenario, a homeowner may decide
to build an ADU but would only be able
to split the parcel into two lots, each with
two homes, under the alternative policy
scenario allowed under SB 9.
Our estimates also account for the fact that
SB 9 includes anti-displacement language
that prohibits alteration or demolition of
renter-occupied homes. To approximate
this, we used the percentage of single-
family home rentals in each census tract
(as determined by ACS data) to discount
results for development outcomes that
alter or demolish the existing structure.
We also examined the potential impacts
of owner-occupancy requirements by
removing financial scenarios that assume
all the new units are rentals, as well as
development scenarios that require demo-
lition of an existing structure. In addition,
we assumed that owners received a 25
percent discount for the unit they occu -
pied in split lot development scenarios.
Market-feasible capacity is not a
forecast of future production.
While this analysis identifies the number
of market-feasible units, in most cases
these market-feasible units will take years
to be developed, and some may never get
built. This analysis considers the market
feasibility of redevelopment on each
eligible single-family parcel in isolation,
and assumes that every property owner
is maximizing the economic potential of
their lot. However, that is not the case for
several reasons.
First, the most economically feasible use
does not consider the motivations and
preferences of individual property owners.
Any change in use requires the coopera -
tion of the owner, either to sell the site or
to redevelop it themselves. The economics
All Single-Family Parcels
Eligible Parcels
Market-Feasible
Parcels
Developed
Parcels
TBD
Figure 2: Production Funnel
A TERNER CENTER REPORT - JULY 2021
8 may suggest that the highest value of a
house may be to tear it down and rebuild
it into a much larger house, but if a home-
owner prefers a small house or the existing
architecture, they’re not going to rebuild.
Converting a house to a duplex and renting
out half may be most profitable for a home-
owner, but that will not happen if that
homeowner is uninterested in living more
closely with others in what was formerly
“their” space or in becoming a landlord or
homeseller. Even when a property owner
does wish to redevelop their site, they may
lack the upfront capital and sophistica -
tion to initiate the process; and then may
be unable to access financing due to a low
credit score or other underwriting barrier.
In addition, redevelopment does not
happen instantaneously; it requires home-
owner awareness and interest, available
construction industry capacity, a suitable
financing ecosystem and viable routinized
business models for development in order
to proceed. State ADU laws, for example,
have taken several years to ramp up as
awareness, delivery models, industry and
local agency capacity have adapted to law
changes. It is reasonable to assume that
it may take years for that capacity to fully
emerge in California if SB 9 becomes law.
Findings
SB 9 could enable the creation of
over 700,000 new homes that would
otherwise not be market feasible.
Under our business-as-usual scenario, we
estimate 1,800,000 new ADUS/JADUS
are currently market-feasible and could be
built under today’s zoning laws across Cali-
fornia’s 7,500,000 existing single-family
housing parcels. With SB 9, we estimate
that approximately 700,000 additional
new units would become market-feasible,
representing a 40 percent percent increase
in existing development potential across
California’s single-family housing parcels.
All Single-Family Parcels
7.5 million
Eligible Parcels
6.1 million
Market-Feasible Parcels
~410,000
(including 110,000
newly feasible parcels)
Developed
Parcels
TBD
Figure 3: Parcel Development Funnel (Total Numbers)
A TERNER CENTER REPORT - JULY 2021
9 SB 9 would enable the development
of more units on 410,000 single-
family parcels, of which only 110,000
parcels would become newly feasible.
Overall, SB 9 would change the
development feasibility of a relatively small
number of parcels. First, the conditions
stipulated by the legislation limit the
number of parcels that can utilize the bill’s
provisions, as illustrated in Figure 3. For
example, the bill’s current limitations
on new development in high fire hazard
areas, historic districts, non-urbanized
areas, and existing renter homes removes
approximately 1.4 million existing single-
family homes from consideration. 10 Of
the 6.1 million remaining parcels, the
majority would not be affected because
of an absence of physical capacity or
financial feasibility. However, on 5.4
percent of current single-family parcels,
SB 9 would enable new development. For
110,000 single-family parcels (1.5 percent
of total single-family parcels), SB 9 would
enable new development where none was
financially feasible before, and for another
300,000 parcels, SB 9 would allow for
more units than under our business-as-
usual scenario.
For the majority of single-family proper -
ties, we find the most financially viable
outcome is not to pursue any develop -
ment whatsoever, both under our busi -
ness-as-usual scenario and under our SB
9 scenario.
Under our assumptions about today’s
regulations, market conditions, and devel-
opment alternatives, we found that doing
nothing was the most likely option for
California’s single-family parcels: devel -
opment is not feasible for 80 percent
of parcels (Figure 4). If SB 9 passed,
110,000 parcels would be newly devel -
opable, causing the share of infeasible
parcels to tick down slightly to 78 percent.
The primary benefit of SB 9 comes from
allowing slightly more units on parcels
where development already makes sense
and in opening up any added units to
homeownership opportunities through the
ability to legally subdivide those parcels.
Figure 4. Likely Parcel Feasibility By Number of Feasible Units 78%
80%
1%
1%
12%
16%
7%
4%
2%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Under SB 9
Business-As-Usual
No feasibility 1 New Unit 2 New Units 3 New Units 4 New Units A TERNER CENTER REPORT - JULY 2021
10 SB 9 is unlikely to lead to significant
demolition of the existing stock.
We found that nearly 97 percent of single-
family homes would be retained under SB
9’s provisions, either without any modifi -
cation or with less intensive development
(e.g., subdividing the existing structure
to enable a duplex conversion). In many
places, existing zoning allows homes to
be demolished and replaced with larger
single-family homes, which we found was
the most financially attractive scenario on
1 percent of all single-family parcels under
our business-as-usual scenario. Under SB
9, the likelihood of tearing down a single-
family home and replacing it with a larger
single-family home falls by half to 0.5
percent due to other viable development
opportunities.
While SB 9 would provide a boost
in three- and four-unit feasibility,
duplexes would be the most domi-
nant form of financially-feasible
development.
The majority of viable development oppor-
tunities should SB 9 be enacted would
result in two units per existing lot (Figure
5). Duplexes comprise an important block
of this new capacity, accounting for 35
percent of all new units, two thirds of
which would be in converted existing
single-family homes. SB 9 would also
enable a somewhat higher total number of
feasible units by allowing greater uptake
of three- and four-unit development.
Figure 5. Estimates of Parcels with Feasible Capacity Under SB 9 0 100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
1,000,000
1 Unit (1 for 1
replacement of existing
home)
2 Units 3 Units 4 Units
A TERNER CENTER REPORT - JULY 2021
11 There is wide regional variation in
market-feasible units.
The amount of new market-feasible units
varies by region. Los Angeles County
resulted in the most new market-feasible
units under SB 9 with approximately
126,000 new homes. While significant,
Los Angeles County also comprises both
the most single-family parcels and SB 9
eligible parcels (Table 2). Analyzing new
market-feasible units per eligible single-
family parcel finds that Yuba, El Dorado,
Sutter, and Nevada counties would see
the most new market-feasible potential
per parcel, although the overall number
of new feasible units is relatively low
compared to larger counties. Many coastal
California counties exhibited higher than
average per parcel unit ratios, such as
Marin, Santa Cruz, San Luis Obispo, and
Santa Barbara counties, signaling that
rents and sales prices there could support
new homes resulting from SB 9. Mean -
while, most Central Valley counties, such
as Fresno, Merced, Kern, and Stanislaus,
showed below average potential for new
homes per parcel, reflecting lower finan -
cial feasibility. For a list of all county
results, see Appendix A. At the city level,
the state’s most populous jurisdictions
were all below average for market-feasible
units per parcel, as shown in Table 3.
Owner-occupancy requirements
would have a limited negative impact
on the market feasibility of devel-
opment pursuant to SB 9, but they
could have a much larger impact on
actual delivery of units under SB 9.
SB 9, as currently written, allows juris -
dictions to impose owner-occupancy
requirements for lot split applicants, but
not for duplex conversions. Our analysis
finds that, if every jurisdiction imposed
owner-occupancy requirements, the total
financially feasible units enabled by SB 9
would decrease by roughly 6 percent, or
approximately 40,000 units. This limited
impact reflects the fact that our model
indicates only 10 percent of new units
under SB 9 would be attributable to lot
splits.
While the owner-occupancy requirement
would have only a modest impact on the
financial viability of new units, it may have
a significant effect on the number of owners
willing to actually pursue new develop -
ment on their properties. By preventing
owners from splitting a lot unless they
plan to live there themselves for at least
a year, or from allowing a developer to
take on development involving a lot-split
pursuant to SB 9, the owner-occupancy
requirement may reduce the number of
homes that will result from SB 9.
Shifts in construction costs and
rental and sales prices could change
development feasibility.
In addition to assessing the potential
impact of SB 9 using current market
conditions, we also ran a sensitivity anal -
ysis to examine the potential impact of SB
9 under different market scenarios. Our
analysis found that a 10 percent decrease
in construction costs could increase the
amount of market-feasible units by 5
percent, or roughly 36,000 more units
than the 700,000 baseline impact of SB
9. Local and state policymakers should
therefore also consider policies that could
help reduce the costs of production to
enable policies such as SB 9 to work more
effectively in more places. In the oppo -
site direction, we found that a 10 percent
increase in construction costs lowers
development feasibility by 4.5 percent,
or by approximately 32,000 units. Our
A TERNER CENTER REPORT - JULY 2021
12 County
Total single-
family
parcels
SB 9-eligible
parcels
Parcels
where SB
9 would
increase
the number
of market-
feasible
units
Parcels
where SB
9 changes
feasible
outcome
from no net
new units to
1+ net new
units*
Total
market-
feasible new
units if SB 9
is enacted**
Total
market-
feasible new
units divided
by SB 9
eligible lots
Los Angeles 1,441,000 1,210,500 79,500 18,000 127,000 0.10 San Diego 554,500 398,500 28,500 9,000 54,500 0.14
Orange 557,000 486,000 26,500 8,500 47,000 0.10
Riverside 563,000 483,000 36,500 10,000 62,500 0.13
San
Bernardino 493,000 385,000 32,000 8,000 56,500 0.15
Santa Clara 331,000 319,500 22,000 8,500 40,000 0.13
Alameda 306,500 277,000 16,000 3,500 25,000 0.09
Sacramento 369,500 360,500 25,000 5,000 40,500 0.11
Contra Costa 263,500 239,000 20,000 7,500 38,000 0.16
Fresno 203,500 186,000 5,500 500 10,500 0.06
Statewide
totals
(excluding
counties
with pop.
under
45,000)
7,470,500 6,182,500 410,000 111,500 714,000 0.12 Table 2. SB 9-Eligible Parcels and Market-Feasible New Units by Largest Counties *Note: This is a subset of the parcels where SB 9 would increase the number of market-feasible units. **Note: Market-feasible new units are rounded.
A TERNER CENTER REPORT - JULY 2021
13 City
Total single-
family
parcels
SB 9-eligible
parcels
Parcels
where SB
9 would
increase
the number
of market-
feasible
units
Parcels
where SB
9 changes
feasible
outcome
from no net
new units to
1+ net new
units**
Total
market-
feasible new
units if SB 9
is enacted
Total market
feasible new
units divided
by SB 9
eligible lots
Los Angeles 447,500 355,000 23,000 6,000 37,500 0.11
San Diego 203,500 133,000 7,000 3,000 13,000 0.10
San Jose 168,500 168,000 10,500 2,500 16,000 0.10
San Fran-
cisco 94,500 93,500 6,500 500 8,500 0.09
Fresno 104,000 104,000 2,000 100 4,000 0.04
Sacramento 116,500 116,000 6,500 800 9,500 0.08
Long Beach 59,500 58,500 3,000 200 3,500 0.06
Oakland 66,500 51,000 3,000 100 3,500 0.07
Bakersfield 87,500 87,500 5,000 2,000 9,000 0.10
Anaheim 43,000 36,000 2,500 1,000 4,000 0.11
Table 3. SB 9-Eligible Parcels and Market-Feasible New Units by Most Populous California Cities*
*Note: This is a subset of the parcels where SB 9 would increase the number of market-feasible units. **Note: Market-feasible new units are rounded.
A TERNER CENTER REPORT - JULY 2021
14 model also analyzed sensitivity to changes
in rental and sales prices. We found that
a 10 percent increase in prices resulted in
an 8 percent increase in market-feasible
units, or roughly 57,000 more units.
Policy Implications
A significant amount of land in California
has historically been designated for single-
family homes, limiting the development of
a greater diversity of urban infill housing
options in jurisdictions across the state.
Solving California’s housing crisis—let
alone tackling the challenges of climate
change and residential segregation—
requires policies that intensify land use in
these communities. California’s statewide
ADU laws were a step in the direction of
gently adding more density to simulta -
neously address the housing, climate,
and equity challenges faced by the state.
But, in other ways, California lags behind
other states in its land use regulations
and dogged resistance to changing single-
family zoning. For example, the state of
Oregon recently required jurisdictions to
allow multifamily housing—either two or
three units—on all single-family parcels.
Some cities have gone even further, such
as Portland and Minneapolis, both of
which have voted to loosen allowable
homebuilding on single-family parcels.
While many cities in California—including
Los Angeles, San Diego, San Jose, Sacra -
mento, Berkeley, and Oakland—are
exploring similar options, SB 9 could play
an important role in enabling the construc-
tion of a significant amount of new house
options that are smaller-scale, more
cost-effective, more varied, and inclusive
across the urban areas of the state.
Our analysis shows that approximately
700,000 new, market-feasible homes
would be enabled under SB 9. But despite
the concerns of some of its detractors,
SB 9 will not lead to the overnight trans -
formation of residential neighborhoods.
Differential owner preferences and limited
applicability means that only a share of
that potential is likely to be developed,
particularly in the near term as aware -
ness and capacity expands. As such, while
important, the new units unlocked by SB
9 would represent a fraction of the overall
supply needed to fully address the state’s
housing shortage.
Policymakers should consider comple -
mentary strategies to ensure that this
legislation is effective. These strategies
could include outreach to make sure that
homeowners are aware of and understand
the opportunities allowed by recent policy
changes, either through SB 9 or existing
ADU laws, and the expansion of more
robust financing options to moderate- and
low-income owners who wish to add new
units to their parcels. Increasing housing
production in single-family zoned areas
is also not the only policy shift that is
needed. Policymakers should add addi -
tional tools to boost supply overall,
including by expanding permissible
residential development on commercial
property and by further reducing local
barriers to new housing through expe -
dited approval processes for conforming
projects and reform of the local regula -
tory barriers and fees.
APPENDIX A
County Name Existing SFR
Lots
SFR Lots
Eligible for
SB 9
Additional Lots
with 1+ Unit
Capacity Under
SB 9
SB 9 Net
Change in
Market-
Feasible Units*
SB 9 Net Units
Per Eligible Lot
Alameda 306,306 276,795 3,633 25,000 0.09
Butte 65,020 32,720 47 3,000 0.09
Contra Costa 263,303 238,957 7,438 38,000 0.16
El Dorado 57,386 19,133 583 4,500 0.24
Fresno 203,474 185,908 564 10,500 0.06
Humboldt 35,672 22,560 93 2,500 0.11
Imperial 33,036 27,002 76 1,500 0.06
Kern 216,321 174,219 2,226 14,500 0.08
Kings 29,045 26,784 87 1,500 0.06
Lake 27,095 10,257 60 1,000 0.10
Los Angeles 1,441,148 1,210,729 18,130 127,000 0.10
Madera 35,785 22,474 1,196 4,500 0.20
Marin 60,998 46,841 2,163 9,500 0.20
Mendocino 19,350 8,949 90 1,500 0.17
Merced 55,676 51,972 106 2,500 0.05
Monterey 75,348 55,097 845 6,000 0.11
Napa 31,248 25,890 1,108 5,000 0.19
Nevada 43,090 5,618 199 1,500 0.27
Orange 557,820 485,756 8,730 47,000 0.10
Placer 125,458 94,273 1,448 13,000 0.14
Riverside 562,935 482,821 10,149 62,500 0.13
Appendix Table 1. County-Level Results
APPENDIX A
County Name Existing SFR
Lots
SFR Lots
Eligible for
SB 9
Additional Lots
with 1+ Unit
Capacity Under
SB 9
SB 9 Net
Change in
Market-
Feasible Units*
SB 9 Net Units
Per Eligible Lot
Sacramento 369,605 360,485 5,006 40,500 0.11
San Benito 12,747 9,940 740 2,500 0.25
San Bernardino 492,806 385,243 7,848 56,500 0.15
San Diego 554,502 398,386 9,015 54,500 0.14
San Francisco 94,400 93,514 486 8,500 0.09
San Joaquin 164,796 147,577 2,159 14,000 0.09
San Luis Obispo 75,016 53,068 1,229 8,500 0.16
San Mateo 151,508 134,531 3,112 17,000 0.13
Santa Barbara 91,540 75,399 1,506 10,000 0.13
Santa Clara 331,232 319,319 8,527 40,000 0.13
Santa Cruz 54,817 43,522 1,422 8,000 0.18
Shasta 55,366 25,997 402 3,500 0.13
Solano 110,592 105,962 684 8,500 0.08
Sonoma 124,610 103,452 2,688 16,500 0.16
Stanislaus 123,922 116,754 1,542 9,500 0.08
Sutter 24,707 19,357 1,111 4,000 0.21
Tehama 18,504 7,903 35 500 0.06
Tulare 104,235 86,679 1,096 6,000 0.07
Tuolumne 25,386 995 1 100 0.10
Ventura 184,033 135,836 1,604 14,500 0.11
Yolo 43,761 40,940 550 4,500 0.11
Yuba 16,743 13,064 2,016 4,500 0.34
Statewide Total 7,470,342 6,182,678 111,746 714,100 0.12 Appendix Table 1. County-Level Results (Continued)
+Note: Parcels that could have feasibly built ADUs or JADUs in a pre-SB 9 scenario are not included in the “New Market-Feasible Lots Under SB 9” category in this table, even if our analysis found that under SB 9, they could now feasibly build three or four units. As a result, per lot averages of new feasible units will yield results higher than four units per lot. *Note: Market-feasible new units are rounded
APPENDIX B
Specific Modeling Assumptions
The following assumptions were incorporated into MapCraft’s analysis of SB 9.
Allowed Prototypes
The prototypes in the following tables were evaluated on each site.
Keep Existing Structure Demo Existing Structure
Do nothing Build new single-family residence (SFR)
Add detached ADU (DADU) Build new SFR + detached ADU (DADU) JADU conversion + DADU Build new SFR + DADU + JADU
Convert to duplex Build duplex
Convert to duplex + DADU Build duplex + DADU
Convert to duplex + DADU + JADU Build duplex + DADU + JADU Appendix Table 2. Prototype Options When SB 9’s Lot Split Provision Is NOT Used Italicized indicates outcomes that are possible in the business-as-usual scenario under current single-family zoning, without SB 9.
Keep Existing Structure Demo Existing Structure and
Create Two Lots
Subdivided Lot with Existing
Structure New Lot Build two new SFR
Do nothing SFR Build two new SFR + ADU
Add detached ADU (DADU) SFR Build two new SFR + JADU + ADU JADU conversion SFR Build two new duplexes
JADU conversion + DADU SFR
Duplex conversion SFR
Do Nothing SFR + ADU
Add detached ADU (DADU) SFR + ADU
JADU conversion SFR + ADU
JADU conversion + DADU SFR + ADU
Duplex conversion SFR + ADU
Do nothing SFR + JADU + ADU
Add detached ADU (DADU) SFR + JADU + ADU
JADU conversion SFR + JADU + ADU
JADU conversion + DADU SFR + JADU + ADU
Duplex conversion SFR + JADU + ADU
Do nothing Duplex
Add detached ADU (DADU) Duplex
JADU conversion Duplex
JADU conversion + DADU Duplex
Duplex conversion Duplex
Appendix Table 3. Prototype Options When Using SB 9’s Lot Split Provision For new-built duplex prototypes, MapCraft evaluated both stacked and side-by-side vari- ations at a variety of scales. Also, four scales of single-family prototypes were tested. In total, 652 pro formas were evaluated on each parcel.
Data Inputs
The parcel data for this analysis was provided by UrbanFootprint and includes approxi - mately 7.5 million parcels: all parcels with single-family dwellings in California counties with populations greater than 45,000 people.
For the purposes of this work, all properties with single-family detached land use were assumed to currently have one existing unit (i.e., no ADUs) and single-family zoning that limited development of multiple primary units. To support the assumption, UrbanFoot - print scanned zoning in a sample of cities, finding that the vast majority of parcels with single-family homes are zoned for single-family. UrbanFootprint’s parcel data included information on each lot and the single-family homes on those lots. In combination with tax assessor data, the value of each existing single-family property was estimated in the second quarter of 2020.
To be realistic about the policy constraints that limit development under current policies and SB9, MapCraft relied on coarse zoning-like limitations interpolated from homes built in each tract between 2005 and 2020. MapCraft assumed that developments on a parcel would need to conform to the 90th percentile of height, FAR, and lot coverage of other recently built homes in the same census tract. In other words, MapCraft assumed that plexes would be held to the same bulk restrictions as newer single-family homes.
MapCraft’s financial calculations incorporated data and assumptions about early 2020 rents, sales prices, construction costs, and investors’ expected return rates, which were validated by ECONorthwest and Economic & Planning Systems, two West Coast economics consultancies. Early 2020 data was used given the volatility of both the rental and for-sale prices during the COVID-19 pandemic. MapCraft’s market demand informa- tion relied on multiple sources, including CoStar, Zillow, tax assessors, U.S. Census, and transaction records. MapCraft’s construction cost information was based on interviews with cost observations localized based on RS Means. Financial expectations of investors and lending terms were based on MapCraft’s conversations with industry professionals.
Finally, the modeling relied on assumptions about parking requirements, typical unit sizes, development fees, and other factors that inform development. The Terner Center provided input on parking and fees that were incorporated into the analysis.
Tenancy-Based Eligibility Restrictions
SB 9 prohibits demolition or alteration of renter-occupied housing. To address this, Mapcraft used the percentage of single-family rentals in each tract (per the U.S. Census) to discount results for outcomes that require demolition of the existing structure.
SB 9 also allows jurisdictions to impose certain owner-occupancy requirements. Mapcraft tested the impact of this provision by running bookend scenarios at two extremes: 1) no jurisdictions impose owner-occupancy restrictions, and 2) all jurisdictions impose owner-occupancy restrictions. To model the owner-occupancy requirement, Mapcraft disallowed all-rental valuation options and prototype options that required demolition of the existing structure. Mapcraft also tested the imposition of a risk premium threshold that eliminates any second split lot prototypes that do not generate residual land values that exceed the reduced value of the original property by 25 percent.
Notably, the results do not estimate the number of owner-occupants that may pursue development given an owner-occupancy requirement.
Lot Splitting Limitations
MapCraft used the following assumptions in modeling the ability of a parcel to split into two lots:
• Lots smaller than 2,400 square feet cannot be split.
• In cases where the existing structure is retained, the lot must have at least 4,000 sq ft of unbuilt area (after deducting the footprint of the existing structure from the lot size).
Parking Provision
MapCraft used Terner Center’s California Residential Land Use Survey to help define parking delivery minimums. Even if a jurisdiction’s code or SB 9 eliminates parking requirements, demand for parking may still exist, and developers will still provide parking. MapCraft assumed that developers will provide at least the parking ratios shown in Appendix Table 4.
Within ½ Mile of High-Capacity
Transit Not Near High-Capacity Transit
Small Units (2 Bedrooms or
Fewer) 0.5 stalls/unit 1 stall/unit
Large Units (3+ Bedrooms) 1 stall/unit 2 stalls/unit
Appendix Table 4. Assumptions of Minimum Demanded Parking for New Construction In prototypes where a small unit is added without a lot split or demolition of the existing structure, MapCraft assumed that no new parking spaces will be added.
Relaxed Zoning Restrictions
SB 9 prohibits local jurisdictions from imposing zoning standards on two-unit develop - ments or newly split lots that would physically preclude the construction of up to two units, or that would preclude units from being at least 800 square feet. To reflect this, MapCraft increased the existing zoning restrictions on FAR, lot coverage, and impervious coverage. FAR was relaxed by increasing the allowed FAR by one quarter, lot coverage was relaxed by one quarter up to 75 percent coverage, and impervious coverage was increased one quarter up to 90 percent coverage.
ENDNOTES
1. It is often difficult for a homeowner to finance an ADU. Few loan products exist to finance ADU construction, and those that are available often do not go far enough to cover the costs of development. See https://ternercenter.berkeley.edu/research-and-policy/ reaching-californias-adu-potential-progress-to-date-and-the-need-for-adu-finance/.
2. Senate Bill 9: Housing development approvals, April 27, 2021. https://leginfo.legis - lature.ca.gov/faces/billVersionsCompareClient.xhtml?bill_id=202120220SB9
3. Chapple, K., et. al. (2020). “Reaching California’s ADU Potential: Progress to Date and the Need for ADU Finance.” Retrieved from: https://ternercenter.berkeley.edu/wp-con - tent/uploads/2020/12/ADU-Brief-2020.pdf.
4. 2021 Casita Coalition Best Practices Webinar Series. https://www.youtube.com/ playlist?list=PLRPPog7f6IzVUuadN9ED5HztZGU_tgY32
5. Garcia, D., Tucker, J. & Schmidt, I. (2020). “Single-Family Zoning Reform: An Analysis of SB 1120.” Terner Center for Housing Innovation, UC Berkeley. Retrieved from: https://ternercenter.berkeley.edu/wp-content/uploads/2020/12/Single-Family_ Zoning_Reform_An_Analysis_of_SB_1120.pdf.
6. On average, California added roughly 100,000 new homes each year between 2015 and 2019. California Industry Research Board, “Housing Production in California, 2005- 2019”.
7. The following counties are not included: Calaveras, Siskiyou, Amador, Lassen, Glenn Del Norte, Colusa, Plumas, Inyo, Mariposa, Mono, Trinity, Modoc, Sierra, and Alpine.
8. For more information on the financial dynamics of development decisions, see our 2019 brief “Making it Pencil: The Math Behind Housing Development”.
9. Mawhorter, S. & Reid, C. (2018). Terner California Residential Land Use Survey.
Berkeley, CA: University of California, Berkeley. Retrieved from: https://californialan - duse.org/.
10. Historic areas were determined using National Park Service data, which does not include local or state historic designations.
ACKNOWLEDGMENTS
Thank you to the Terner Center team including Issi Romem, Carolina Reid, and Elizabeth Kneebone for their review and expertise as well as Paavo Monkkonen and Denise Pink - ston for their input and feedback. Also, thank you to UrbanFootprint for the use of their statewide parcel dataset.
This research does not represent the institutional views of UC Berkeley or of Terner Center’s funders. Funders do not determine research findings or recommendations in Terner Center’s research and policy reports.
ABOUT THE TERNER CENTER
The Terner Center formulates bold strategies to house families from all walks of life in vibrant, sustainable, and affordable homes and communities. Our focus is on generating constructive, practical strategies for public policy makers and innovative tools for private sector partners to achieve better results for families and communities.
For more information visit: www.ternercenter.berkeley.edu