Report: Will Allowing Duplexes and Lot Splits Create More Housing?

By David M. Greenwald
Executive Editor

Berkeley, CA – One of the more controversial bills this term is SB 9 which, if passed, would likely produce an increase in the state’s housing supply—which has been the subject of concern for some time.  That said a report out of Berkeley finds that the new law, if passed, would not be likely to create large-scale redevelopment (a key fear that many opponents have).

The study was conducted by the Terner Center for Housing Innovation at UC Berkeley and was released last week.

SB 9 is just one of many bills that have been aimed at allowing “modest increases in smaller-sized units in existing single-family neighborhoods” as a way to address the current housing crises—to date, “the most ambitious of these efforts have not passed.”

SB 9 was introduced by Senate President Pro Tem Toni Atkins and, if approved by the Assembly, “it may be poised to be the most significant housing bill coming out of California’s current legislative session.”

In their analysis, Ben Metcalf, David Garcia, Ian Carlonton and Kate MacFarlane write: “SB 9 has potential to expand the supply of smaller-scaled housing, particularly in higher-resourced, single-family neighborhoods. In this way, SB 9 builds on recent state legislation that opened up access to accessory dwelling units (ADUs) for virtually 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.”

This creates the possibility of SB 9 opening up new homeownership opportunities at price points that are in reach of middle-class purchasers.

“Yet, the likelihood of creating new housing and homeownership opportunities as a result of SB 9 largely depends on local context,” they write.  “While Senate Bill 9 does not apply to single-family parcels in historic districts, fire hazard zones, and rural areas, local market prices and development costs play a large role in determining where there is financial viability for the addition of new homes.”

So, what is the impact?

This analysis, the most detailed one yet on the impact of SB 9, “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.”

However, in contrast to fears by many homeowners: “Relatively few new single-family parcels are expected to become financially feasible for added units as a direct consequence of this bill.”

Thus they conclude: “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.”

The study found that “the vast amount of single-family parcels across the state would not see any new development,” said David Garcia, policy director at the Terner Center, which supports the bill.

Their analysis found that, under the bill, a total of 714,000 new homes would become “market-feasible” if SB 9 is enacted.  That’s analyzing the state-wide impact excluding counties with less than 45,000 people.

In Sacramento County, for instance, it would add 40,500 projected new units.

Contrary to the fear that opponents have spread—that this is going to lead to speculative buying and the death of single-family neighborhoods, the impact projected here is likely to be much more modest.

Garcia called the bill “a modest reform” and said, “It will make a modest but important impact [on supply] over time.”

“Under our assumptions about today’s regulations, market conditions, and development alternatives, we found that doing nothing was the most likely option for California’s single-family parcels: development is not feasible for 80 percent of parcels,” the study finds.  “If SB 9 passed, 110,000 parcels would be newly developable, causing the share of infeasible parcels to tick down slightly to 78 percent.”

They find that “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.”

Most importantly: “For the majority of single-family properties, we find the most financially viable outcome is not to pursue any development whatsoever, both under our business-as-usual scenario and under our SB 9 scenario.”

In contrast, Livable California has called SB 9 a “bulldozer bill” that’s “the beginning of the end of homeownership in California.”

They worry that the upzoning would raise the land value of those homes, making it more difficult for first-time buys and that developers would target Black and Brown communities where land is cheaper, and demolish houses to build high-cost rentals.

“I see very expensive … rental units coming from this bill,” said Isaiah Madison, a board member with Livable California.  “If this is happening in affluent communities, the affordability isn’t going to be as far off.”