What You Need to Know About Accessory Dwelling Units In California
Photography: Carlos Rafael
Architect: Propel Studio

Known by various names such as granny flats, backyard cottages, in-law units, secondary units, guest houses, and so forth, an accessory dwelling unit is essentially a second dwelling on the same grounds as the main home. In California, it can be attached or detached. It can also be in the form of an apartment located on top of the garage, a smaller second home in the backyard of a home, or a small basement apartment.

Historically, these second homes were trendy before the 20th Century. And while they fell out of favor of homeowners in the 20th Century, they are currently making a comeback. Planners and developers throughout California now commonly refer to them as accessory dwelling units.

Accessory dwelling units are a fantastic option for Southern California homeowners to increase the affordable housing supply in the area. In the last ten years, ADUs and JADUs have become a popular way for homeowners across areas like Los Angeles, Orange County and San Diego to increase their property values, generate rental income, and providing additional housing for friends and family members.

What Exactly Are Junior Accessory Dwelling Units?

In the conversation surrounding accessory dwelling units, you may have heard about Junior Accessory Dwelling Units or JADUs, as these units offer additional housing options as well and are permitted under California law. Specifically, they are constructed within the perimeters of an existing single-family home (or proposed one) and are not allowed to be bigger than 500 square feet. Typically, JADUs share the central systems with the main unit. They may also share a bathroom or kitchen with the main dwelling. Therefore, JADUs is financially beneficial because they reduce development expenses and fees.

Overall, the main benefit of building JADUs is that there is no additional strain on the current infrastructure or utilities because the new structure utilizes the current space within the residence and does not expand the planned occupancy of the dwelling.

Why Do People Build Accessory Dwelling Units?

There are a lot of reasons that homeowners and developers build accessory dwelling units, some of which we will discuss below.

Additional income source. Individuals and families can generate additional income by renting the accessory dwelling unit to a family member or a third-party renter. In areas like Orange County, Los Angeles, and San Diego where buying a rental home could be out of reach for many, an ADU is much more affordable and could provide the rental income people are looking for in a real estate investment.   

Affordable option to build a second home. Compared with building other types of property in Southern California, building an ADU is very affordable. Specifically, you are not responsible for paying for additional land when you build an ADU. With land prices at an all time high across Southern California and especially in Los Angeles and Orange County, an ADU an be a much more affordable option.

Privacy. An ADU allows privacy for guests and extended families when they are visiting.

Flexibility and lifestyle. When people buy homes and live in them for long periods, their needs may change. Sometimes homes become too big for a couple as their children grow up and subsequently move out of their home. A well-sized, properly built accessory dwelling unit could be an option for an aging couple to meet their needs without having to move out entirely from their home.

Assuming that both your accessory dwelling unit and main home are of a good size, you can also enjoy the great social benefits of having ample space to entertain.

Legal Implications

Legally an accessory dwelling unit is a part of the same property as the primary home. This means that it cannot be sold or bought separately from the primary home. Overall the owner of the accessory dwelling unit is the same person who owns the primary home.

In most jurisdictions, you can legally rent out your accessory dwelling unit and generate rental income. You can also do the opposite. Notably, you can live in your accessory dwelling unit and rent out your primary home if this arrangement better suits your needs.

New ADU Rule Changes In California

In 2018, ADUs were part of 20% of all plans that received permits in the Los Angeles area. However, with the new rule changes for ADUs implemented in 2020, this percentage is expected to double over the next couple of years.

Specifically, in 2019,  Governor Newsom implemented AB68, a law that makes it more affordable and easier to build ADUs in California homes. Below is a summary of some of the changes the law implements.

  1. Faster Approval Timeframes– Before the new law become effective, the approval timeframe to receive a permit for most ADUs was roughly 120 days. Now, all cities across the state must approve or deny all applications within 60 days after receiving the application. 
  2. Prohibits Impact Fees – With the new law, cities cannot charge impact fees on ADUs that are smaller than 750 square feet. Impact fees for those ADUs that are larger than 750 square feet. They are still permitted, but they are proportional to the ADU’s size compared with the size of the main dwelling unit.
  3. Local Agencies Can’t Impose Stricter Requirements. Another part of the rule changes is that local governments or agencies can’t impose stricter requirements beyond the state’s requirements for ADUs.
  4. You Can Add Both a Regular ADU As Well As A Junior ADU on the Same Property –  With the new law, homeowners can add two separate ADUs, on a single-family property. Specifically, one must be a full-sized ADU, and the other can be a JADU. The JADU must be 500 sq. ft. or less. The homeowner can rent either one or both the ADU and the JADU as they deem fit.  In any event, keep in mind that neither unit may be sold or bought separately from the main residence. 
  5. Easier Process to Legalize ADUs – The new law now allows homeowners to bring ADUs that they do not have a valid permit up to the legal code within five years.
  6. Can Build ADUs on Multifamily Units and Duplexes – Homeowners Associations nor the Covenants, Conditions, and Restrictions of properties can unreasonably prohibit the construction of ADUs or JADUs in the unit. 
  7. More Flexible Setback  Requirements – The new law also reduced setbacks for ADUs to just 4′ of the rear yards and sides.
  8. Additional Parking Exceptions – Before the new law was implemented,  it was required that ADUs have at least one parking space per bedroom or unit if they were located more than a ½ mile away from public transportation. However, homeowners are no longer required to plan for a parking space in the ADU house plan as long as the ADU is created using an accessory structure (i.e., a carport, etc.). Additionally, replacement parking is not necessary for the main residence if the ADU is constructed using a garage or carport. 

Lastly, effective January 1, 2021, the state implemented new ADU funding laws in California. Specifically, Section 65583(c)(7) of the California Health and Safety Code (HSC) requires that all counties and cities develop a plan that promotes and incentivizes the development of ADUs that can be used to offer families affordable housing for low to moderate-income households.

Looking to Make Your Best Investment? Give AllView a Call!

AllView Real Estate Management is Orange County’s premier property management and investment firm. We offer not only exceptional property management, but also real estate investment consulting and management. Call us at (949) 400-4275 or send us an email at info@allviewrealestate.com for real estate investment expertise.

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