SB9: Sell? Develop?

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Submitted by OnPoint on September 9, 2021 - 9:16am

https://www.latimes.com/opinion/story/20...

SB9 will allow:
Enforced at state level (County/City cannot overrule);
SFH lot splits;
1 Duplex per new lot;
+ ADU.

So current SFH's can go to 6 units.

SB10 would allow up to 10 units near transit zones.

Without taking a side on this (I see benefits to both), I'm curious to hear Pigg projections on impact to existing SFH values?

Will SFH prices go UP because rental income potential goes up 6x-10x for a given property?

Will SFH prices go DOWN because suburbia will now become a parkingless rabbit warren?

Kinda weighing this against likely pending increase in capital gains rates.

Sell now? Hold & develop?

Submitted by gzz on September 9, 2021 - 12:00pm.

I think people overestimate the degree zoning rules have held back new construction.

Construction costs are really high. And the legal costs still include lots of crazy environmental reviews, Indian artifact checks, variances getting approved.

To take one example, does this new law do anything about the rule that no more than 50% of the street-facing ground level of a development can be parking?

While parking requirements are getting eliminated and relaxed, some parking is still generally needed, especially for new mid to high end construction. Having them in the back of the lot means wasted space going to long driveways.

This is just a single example.

Here in 92107, we just have vast areas that have long been zoned multifamily but 75% or more of the lots remain single family. And even new construction tearing down old single family is about 2/3 replaced with larger single family, with most of the rest being two detached houses on 1 lot.

In other words, there just isn't a lot of evidence people are maxxing out their lots now, and will go even denser if permitted. Parts of SF and LA are of course different where no-parking new construction condos will sell for $1200/sqft easy, so even with high construction costs developers want to max out.

San Diego just isn't that expensive yet.

The only place where higher maxes would really come into play is oceanfront or within a 2 blocks. But these areas are limited by the height limit, not unit limits.

Submitted by gzz on September 9, 2021 - 12:08pm.

I have developable beach lots with teardowns, so I have given the question of zoning changes some thought.

As I said above, in general I think the average effect is going to be small.

But here's how I think about it.

The worst effected will be recently built and renovated places that would have liked to take advantage of the new changes.

The best effected are those like mine that are ripe for development and probably would take advantage of the changes.

For the typical single family, they suffer from additional density and more supply. However, they benefit from the density too, and over time it is dense areas that are worth the most.

One way to look at it is that having a big condo complex go up next door is bad, but having ten of them going up two blocks away is good, because the untapped demand for walkable neighborhoods is gigantic, and that density creates a virtuous circle by encouraging amenities.

Submitted by sdrealtor on September 9, 2021 - 12:11pm.

I think the beach areas where there is plenty of multi family zoning and lots are small is less of an issue. The bigger issue is in suburbia in SFR neighborhoods with 10K sq ft lots. If I built 2 duplexes and 2 ADU's on my lot we are talking over $20K a month in rents today and six or more cars

Submitted by XBoxBoy on September 9, 2021 - 1:16pm.

First take note that SB9 has not yet passed and been signed into law.

I too wonder what will happen. I live in an area of LJ that is all single family homes. If this passes and someone decides to split the lot and build multiple units on a single lot I can only imagine the crazy level of outrage that will generate. So, I find it hard to believe that if passes and it seriously allows that, it won't be overturned.

But I guess we will see.

Submitted by sdrealtor on September 9, 2021 - 1:29pm.

XBoxBoy wrote:
First take note that SB9 has not yet passed and been signed into law.

I too wonder what will happen. I live in an area of LJ that is all single family homes. If this passes and someone decides to split the lot and build multiple units on a single lot I can only imagine the crazy level of outrage that will generate. So, I find it hard to believe that if passes and it seriously allows that, it won't be overturned.

But I guess we will see.

agree. It would be a mess in top school districts that could get overrun with students they dont have the capacity for

Submitted by flyer on September 9, 2021 - 4:20pm.

Interesting you should mention this. Just talking to some people about it today. We're definitely watching this closely also, especially wrt some of our properties and land.

Submitted by an on September 9, 2021 - 4:52pm.

I hope it passes and get cemented into law permanently. This, along w/ the relax ADU law will make it much more profitable to buy SFR and add a few ADU. I'm watching this intently as well.

Submitted by Myriad on September 10, 2021 - 11:34am.

Just saw the changes the SD made regarding ADU at a recent presentation.
SD CC basically allows for unlimited ADUs on a SFR near a TPA. This passed in 2020.
The changes are so ridiculous - in theory, someone can build an ADU apartment complex on what was a SFR lot. So it won't be small investors that are buying these lots, it will be private equity and REITs.

https://www.neighborsforabettersandiego....

I'm not opposed to ADUs, I just don't want to see SD turn into the shitty LA neighborhoods where you have a SFR next to a 20 units apartment complex (with the same front lot width) on a small residential street.

Submitted by gzz on September 10, 2021 - 1:38pm.

SDR: we already debated how practical it is to add backyard units to an existing suburban style property.

I think it can make economic sense, but rarely will be a slam dunk.

Here's the first result I saw looking for encinitas adu and jadu construction. I note it is a complete teardown and gigantic .27ac lot less than a full block to the beach.

https://www.zillow.com/homedetails/128-W...

Submitted by gzz on September 10, 2021 - 1:40pm.

"unlimited ADUs"

My backyard in 5 years:

Submitted by sdrealtor on September 10, 2021 - 3:05pm.

gzz wrote:
SDR: we already debated how practical it is to add backyard units to an existing suburban style property.

I think it can make economic sense, but rarely will be a slam dunk.

Here's the first result I saw looking for encinitas adu and jadu construction. I note it is a complete teardown and gigantic .27ac lot less than a full block to the beach.

https://www.zillow.com/homedetails/128-W-Glaucus-St-Encinitas-CA-92024/295343142_zpid/

A 1 br around me is over $400k plus taxes and HOA of approaching $1000/ month. I can build a luxurious 2br /2ba for around $300k I could easily rent monthly furnished for as much as $5000 and at least $4000 or more's I could easily get at least 3k on yearly lease. Tax increase will be minimal and no HOA fee. That 1br rents just over $2k.

Please explain how this is not as much of a slam dunk as exists anywhere?

Btw that house is nowhere close to a block from the beach unless you cut through someone's property and jump off a 100'+ cliff

Submitted by Hobie on September 17, 2021 - 5:27am.

SB9 is now law. Newsom signed it.
https://www.gov.ca.gov/2021/09/16/govern...

Submitted by an on September 17, 2021 - 8:55am.

Hobie wrote:
SB9 is now law. Newsom signed it.
https://www.gov.ca.gov/2021/09/16/governor-newsom-signs-historic-legislation-to-boost-californias-housing-supply-and-fight-the-housing-crisis/

Yay!!! Between this and the environmentalist (CEQA) prevent any new major development, econ 101 (supply vs demand), I'm expecting SFR lot to continue to outpace condo in value appreciation. Time to buy more SFR.

Actually, it's not just SB9 that was signed. SB8 and B10 was also signed into law.

Submitted by teaboy on September 17, 2021 - 9:44am.

SFR means what here..?
tb

SFRSFR

Submitted by an on September 17, 2021 - 10:35am.

SFR = Single Family Residence

Submitted by flyer on September 17, 2021 - 12:23pm.

I may be wrong, but I don't think the result of these bills will result in more affordable housing opportunities as intended. I think it will be quite the opposite.

I think the true beneficiaries of this legislation will be individuals, as well as developers large and small who will, most likely, seek to maximize their returns by developing high-end units on their appropriate properties or land, as we will, and that does not bode well for those whom the bills were designed to benefit. Guess the brilliant legislators didn't think of that aspect.

As far as the density issue that so many people are concerned about. Yes, it seems that could become a real issue over time, as some neighborhoods change from exclusively single family housing, to becoming intermingled with multi-family housing. Only time will tell if and how that will play out.

Many people in my hood of RSF are livid about this, but since most of us have multiple acre lots, you'll really never know if your neighbor decides to build a small apartment house on their property or not, so, I'm not really worried about it, even if it does reduce property values to some degree in this particular setting. I don't think many in this neighborhood will be taking advantage of these upzoning opportunities--but, if they do, it's OK with me. We plan to take advantage of these opportunities, just not in this particular area.

Submitted by Hobie on September 17, 2021 - 7:23pm.

Yes, this will change the flavor of neighborhoods. While I am against this in principal, I too will take advantage of this opportunity.

It was quite shortsighted to expect these new apartments, ADU's, duplexes to be low income housing at least in the coastal zone. It is just the opposite and a windfall for owners with large lots.

Nobody is going to offer Section 8 housing in these areas.

Submitted by flyer on September 18, 2021 - 1:09am.

Agree, Hobie. There are lots of options for development in this suite of bills far beyond the original intentions.
We're also looking forward to the opportunities.

Submitted by OnPoint on September 20, 2021 - 10:18am.

A quick search indicates the resulting lot splits must have a minimum size of 1200 sq ft.

Submitted by Hobie on September 20, 2021 - 11:56am.

I am thinking there is plenty of lots who will build multiple junior ADU's and create 2,4,or 6 unit apts and not split the lot. Especially in the coastal and close to tech jobs areas.

Submitted by XBoxBoy on September 24, 2021 - 1:32pm.

Not too surprisingly, these two bills are starting to have blowback.

Quote:
Opponents of the two bills and similar measures have already begun an effort to put an initiative on the November 2022 ballot that could negate them. The Californians for Community Planning Initiative would amend the California Constitution “to make zoning and land use local affairs and bring a halt to the centralized zoning and land-use directives coming out of Sacramento,” according to its website.

I would guess that a proposition like that would pass. There will be strong support from anyone with libertarian inklings, as well as support from any who fear that low income housing will be built next door.

I'm starting to think SB9 and SB10 are going to backfire on the politicians that created and supported them.

Submitted by Hobie on September 25, 2021 - 5:19am.

XBB: I agree in principle with the pushback, but look how the Governor survived the recall with policies that dinged many people across the board.

The general public hardly even knows about these 2 bills. Add, that many residential lots just don't have the space to build which means fewer potential people who will care.

However, I do think these bills are not constitutional and I'll bet we will see them overturned on legal grounds.

And the politicians go on their merry way with little political costs incurred.

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