About half of all housing in San Diego is traditional, single-family homes but the governor’s action in mid-September could alter that. There are nearly 400,000 single-family lots in San Diego County that could be transformed into a property with up to four homes based on the law, according to University of California Berkeley research.
Senate Bill 9 allows a property owner to take their single-family property, split it in two and put up three additional homes. This has the potential to change the look of many San Diego communities — from Chula Vista to Scripps Ranch — to much denser neighborhoods and provide much-needed housing.
The bill’s author, Senate President Pro Tempore Toni Atkins, D-San Diego, is confident the legislation will create housing in the state, which has faced severe shortages and skyrocketing prices. Some housing analysts caution it might not be as impactful as people think. The law assumes a homeowner wants to split their lot, which might require a demolition of their home and a lot of money to build new structures.
It’s hard to predict how homeowners will react, but Nathan Moeder, principal with San Diego real estate analysts London Moeder Advisors, said the new law is unlikely to put a noticeable dent in housing supply. The biggest reason? The law requires a homeowner to make the changes, not a developer, making it unlikely your average San Diegan is ready to spend half a million dollars — or likely more — to split a lot and build new housing.
Many homeowners across San Diego County, many of whom have owned single-family homes for decades, are furious that their neighborhoods could be jammed up with a bunch of new housing. Some critics have called it “the death of the suburbs.”
“The idea that single-family neighborhoods will disappear from California as a result of this bill is just not true,” Atkins said. “This is homeowner-driven. This isn’t development of density where someone else is coming in and doing it.”
What the New Law Says and How It Works
There are a lot of options for homeowners under the bill that are all designed to increase housing supply. Take for example insurance agent Bradley Sund, who owns a 2,800-square-foot single-family home in Mount Helix on a nearly half-acre lot. At the moment, he likes the idea of putting in a granny flat but is not sold on a lot split.
Regardless of what he decides, these are his options under Senate Bill 9:
—Split the lot in two and just put up another single-family home. This would create two homes on a lot that just had one.
—Split the lot in two and keep his single-family house and put up a duplex. This gets the lot up to three homes.
—Split the lot in two, demolish his home and build two duplexes. This would maximize the law, allowing for four homes.
—Split the lot in two, each with a single-family home and a granny flat in back. This would also create four units.
Sund would have to live in one of the units for three years. That part of the law was designed to stop developers from buying up all of the single-family homes. However, that compromise is also why some analysts think the law won’t do anything — it assumes homeowners like Sund are ready to take on a massive cost themselves.
He can’t just start building. Sund would need to take his plans to a local planning commission to get them approved with permits and everything that entails.
He said he likes the idea of creating a granny flat for an extra rental, but doesn’t like the cost of a big construction project.
“That’s not going to happen,” Sund said. “I’m all about freedom for property owners. I can’t imagine a lot of families doing it because it is unaffordable.”
It’s not a requirement to build dense housing on a new lot. An individual or housing developer can still build a single-family home if they chose to on the biggest lot they can find. The traditional one-story, single-family home has not been outlawed as some critics have suggested and developers are still planning large single-family home developments because that is the most popular type of housing.
That’s not to say there is not the potential for a big change. The biggest difference is a community can’t stop a person from building a duplex on a single-family lot after decades of only one-story homes across the suburbs.
Local groups often argue — at the ballot box and city council meetings — that increasing zoning will destroy community character. Proponents of the law say those same policies have pushed out people of color and low-income San Diegans from areas they work.
A lack of housing and rising housing costs hurt the economy, said Atkins. “If workers can’t afford to live here, if businesses can’t retain workers, it will impact our economy and way of life.”
Atkins said she is aware construction of additional units will be costly for a homeowner who wants to split their lot, but she said the legislation is just one piece of the puzzle in a number of housing bills coming out this year. Atkins said her legislation won’t create huge change overnight, but it will slowly make a difference over time by increasing supply.
Atkins said complaints about changes to community character come from a place of fear. She noted her bill has protections to preserve the look of communities, such as historic districts being exempt. Also, construction plans for setbacks and heights still need to be approved by local governments.
Death of The Suburbs?
Fox News host Tucker Carlson called the law the “Death of the Suburbs” on his TV program Wednesday but most policy experts doubt it will be that drastic.
“How will this improve anyone’s life? It won’t,” said Carlson, a native of La Jolla. “It means demolishing homes to put up rental units.”
There are a lot of reasons why researchers say these fears likely won’t materialize.
The Terner Center at UC Berkeley said there are 554,502 single-family lots in San Diego County, and out of that there are 398,386 lots eligible for splits under Senate Bill 9. However, it says it is only feasible for 54,500 lots to be split, or 9.7 percent.
If a homeowner is able to recoup their investment by a market-rate rental or a sale, the Terner Center says that is a feasible lot split. Other factors that could make a property unfeasible are geographic challenges to lots, market conditions that would make converting lots financially unattractive, and if the property already has a granny flat.
The Terner Center says the feasibility number should not be considered a forecast because it is unclear how many homeowners will want to go through the process.
In San Diego County, for example, it may be more feasible and economical to split a lot in Hillcrest than Santee.
The median single-family home price in Hillcrest in June was $1.5 million, said CoreLogic, and the median for a resale condo was $625,000. In Santee, the median resale home was $731,000 and the condo resale median was $455,000.
If the homeowner wants to sell, it probably would be easier to quickly earn back the cost of construction in Hillcrest.
If they want to rent, the scenario is similar.
The average rent in Hillcrest in mid-September was $2,118 a month, said real estate tracker CoStar. In the Santee/Poway/Ramona area, the average rent was $1,765 a month.
If you aren’t considering the cost of land, because you already own it, the cost to build a new home can vary based on how fancy you want to make it. However, in general, the cost to build — considering labor, materials and finishes — could be around $487,500 for a basic 1,500-square-foot single-family house, said James Fahy, principal of San Diego landscape design firm Deep Rooted Designs.
He said most contractors are charging around $325 per square foot or higher since the pandemic. Fahy said contractors are so in demand at the moment that they have risen prices, but also because material costs have gone up considerably.
He said the same formula could be applied to other home types allowed by Senate Bill 9, such as roughly $552,500 for a 1,700-square-foot duplex or $292,500 for a 900-square-foot granny flat.
Moeder said the requirement for a homeowner to live on the property for three years makes them the de facto developer of new housing, meaning they are legally liable for issues at the new unit instead of just selling a lot and letting a developer take the risk.
He sees other issues: High capital gains taxes for owners quickly selling a new unit and most homeowners not having enough space to do a split.
Good for The Market?
If you bought a single-family home in a San Diego suburb last year and were looking forward to raising a family in a somewhat quiet area, you probably won’t be thrilled when two duplexes go up next door.
Troy Daum, the founder of CMR United, a 500-person group that opposed a development in Carmel Mountain Ranch, said Newsom’s action would destroy neighborhoods without local input and was an example of government overreach.
Daum’s group was recently unsuccessful in stopping a 1,200-unit apartment and townhouse project in their neighborhood called The Trails. The City Council approved the project last week.
He said the recent action by lawmakers in Sacramento was another example of politicians not thinking through housing plans. Daum said it’s easy to just call him and others in his group NIMBYs (Not in My Backyard) but the truth is they want more housing. They just would prefer it go in unused retail or industrial land instead of drastically changing established neighborhoods.
“It’s a terrible bill as far as I’m concerned,” he said. “How is it the governor gets to dictate all the building policy with no input locally? It’s a massive change of direction.”
There is already frustration among homeowners about California’s, and San Diego County’s, relaxation of zoning laws to allow granny flats behind most single-family homes. Residents in Kensington, Talmadge, Rolando and El Cerrito recently formed a group, Neighbors for a Better San Diego, to oppose a city policy to further remove barriers to granny flat construction.
Just in the city of San Diego, granny flats — sometimes called accessory dwelling units, or ADUs — have added more housing supply. There were nine units built in 2016, 13 in 2017, 61 in 2018, 202 in 2019 and 386 in 2020.
Also annoying neighbors: Parking regulations have been relaxed. Senate Bill 9 specifically states a local government cannot require more than one off-street parking spot per unit. Also, if the new home — a duplex or single-family home — is within a half-mile of public transit, no street parking is not required. Public transit is not just the San Diego Trolley, but also any bus stop.
Still, there might be opportunity where others see a nuisance. San Diego real estate agent Bo Bortner said the changes could appeal to a potential buyer because it creates more opportunities for rentals.
“In San Diego, if you are buying and have the opportunity to have a rental income, it makes a huge difference,” he said. “If you can have that rental income and help cover part of the mortgage, it makes owning a home more affordable.”
Bortner said he hasn’t heard from any single-family owners rushing to get out of areas before the new law comes into effect on Jan. 1. He said he thinks concern over the law might be overblown because a lot could be split in two with two single-family homes without harming the ambiance of the neighborhood.
Where The Density Could Go and Who Is Exempt
If homeowners really take to Senate Bill 9 and start ripping up properties in January, it’s still anyone’s guess what areas will see the biggest density gains.
Currently, the densest housing area in all of San Diego County is in Mission Beach, said the San Diego Association of Governments.
Researchers cautioned housing density does not always mean population density. Coronado and Mission Beach have high density but it doesn’t mean a lot of people are living there year-round. Mission Beach is dominated by vacation rentals and Coronado has a lot of homes that are second houses for affluent owners that might live part of the year somewhere else.
There are areas of San Diego County that some might be surprised to learn are exempt from the new law — including most of South Park because of its historic status. In 2017, 407 properties in South Park were all turned into a historic district by the city because of its history as a streetcar suburb. Senate Bill 9 said such locally designated historic districts are exempt.
Moeder, the real estate analyst with London Moeder Advisors, said it is hard to predict where density could go because it is only determined by where homeowners want to do it. A simple way is to look at where lots are the biggest, like Rancho Santa Fe, but that also doesn’t tell you much. For example, homeowners in eastern Chula Vista could decide to do it, while a whole block in Golden Hill could not.
There is also another law that could create more density, Senate Bill 10, which was also signed by Newsom.
Senate Bill 10 doesn’t change zoning but allows cities to streamline the process to allow housing developments with up to 10 units in areas near transit on lots that used to be for single-family homes. The bill allows developers to circumvent the California Environmental Quality Act and stops environmental reviews that could delay projects by years.
©2021 The San Diego Union-Tribune. Distributed by Tribune Content Agency, LLC.
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