Setting the record straight on common misconceptions about SB 9.

California’s Senate Bill 9 is a new and exciting bill that started stirring up controversy well before it was passed into law in September 2021. Thanks in part to falsehoods and scare tactics spread by SB 9’s opponents, there are lots of misconceptions regarding the new law and its requirements.

In the following blog post, we’ll address five of the most prevalent SB 9 myths and misunderstandings to set the record straight.

5. “You have to own your property free and clear to use SB 9”

True or False? FALSE

Overview: You don’t have to own your home outright to use SB 9. Your mortgage provider has to approve a lot split, but not duplex or ADU development.

Many homeowners assume that they can’t utilize SB 9 if they’re still paying off their mortgage. However, that’s simply not the case.

There is nothing in the law that stipulates that a property must be owned outright to be eligible, and cities can’t require it via local ordinance. However, you may run into some challenges with your mortgage provider depending on the SB 9 development path you pursue.

If you’re considering an SB 9 urban lot split, there are some steps that you’ll need to take prior to submitting your application. First, you will need to contact your mortgage provider and have them approve the split. After that, you’ll need to obtain a partial release of mortgage. If your lender won’t approve the lot split, or if partial releases are specifically forbidden in your mortgage contract, then you'll need to refinance your mortgage in order to split your lot. to learn more, read our article on how to split your lot if you have a mortgage.

Using SB 9 to build a second primary unit on your property doesn't require your lender's permission. Under the duplex path, you’re eligible to build an additional primary unit and up to two ADUs or JADUs, depending on local laws. Although not legally mandated, it is considered best practice to inform your mortgage provider about large-scale renovations (like building additional residential units).

One thing to consider is how you’ll fund your SB 9 project if you’re early on in your mortgage and haven’t paid much of it off yet. Many popular choices for financing home improvement projects rely on established home equity for capital. If you’re low on home equity, your borrowing options might be somewhat limited.

Read this article on financing SB 9 projects for more information.

4. “SB 9 won’t let you split your lot AND build an ADU”

True or False? FALSE

Overview: SB 9 does NOT prohibit the building of ADUs on properties that utilize both provisions of the law (lot splits and duplexes/second units). However, cities may place restrictions on the number and type of residential units allowed. Refer to your local ordinance to see what restrictions apply in your area.

Senate Bill 9 allows two paths for development: subdivision (urban lot split) and duplexes. There seems to be a misconception that SB 9 law prevents a homeowner from building accessory dwelling units (ADUs) if they pursue both of these paths. This is something we hear from potential clients, press articles about SB 9, and even city ordinances.

One can likely contribute this confusion to the law’s text (and certain cities’ interpretation of it). The state law says that a local agency shall not be required to allow accessory dwelling units or junior accessory dwelling units (JADUs) on properties that use both provisions of the law. SB 9 says nothing about preventing applicants from building ADUs in conjunction with a lot split and duplex development. It does, however, give cities permission to place their own restrictions on that particular development path.

Because local governments may adopt their own ordinances, your SB 9 ADU-building rights depend on where you live. Some cities (like Encinitas) allow property owners to build ADUs along with lot splits and duplexes, while other cities (like Millbrae, Walnut Creek, and San Rafael) do not. Some cities—including Rancho Palos Verdes, San Jose, and Redondo Beach— limit the total number of residential units allowed for lot splits, regardless of whether or not they’re ADUs.

For up-to-date information on SB 9 ordinances in your area, check our SB 9 City Guides and subscribe to our email list (at the bottom of this page).
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3. “You can’t use SB 9 on a rental property”

True or False? FALSE

Overview: As long as you’re not demolishing more than 25% of the existing housing unit and no tenants have been evicted within the past fifteen years, you may pursue SB 9 development on a former or current rental property.

Again, this common misconception is likely a result of some confusing language in the law itself.

Senate Bill 9 does place some restrictions on SB 9 development for current or former rental properties, but context is important. The law clearly states that a proposed SB 9 development may not require the demolition or alteration of any housing structure that has been used as a rental within the past three years. It places the same restrictions on low-income housing and rent controlled units. Alteration is defined as changing more than 25% of the building’s exterior walls.

Properties with a history of eviction, however, are a different matter. SB 9 development of any kind is restricted on properties where tenants have had their accommodations withdrawn (under Chapter 12.75 of the California Government Code) within the past fifteen years.

For more information on residency rules for SB 9 developments, read our post on Occupancy Requirements for SB 9.

2. “If you split your lot, you’ll lose half your home value”

True or False? FALSE

Overview: Splitting your lot will cause a modest (~10%) drop in property value, most of which can be regained through additional SB 9 development.

It’s not difficult to see the origins of this myth. At first glance, it seems to make logical sense: if you sell off half your lot, won’t your lot will be worth half as much? Perhaps surprisingly, that doesn’t appear to be the case.

Splitting your lot will initially decrease your property value (your home will be situated on less land, after all). However, it won’t decrease the value as much as you might think—and certainly not by half.

Home value isn’t determined by lot size as much as the square footage of the house and the price per square foot of the neighborhood. California surveyors predict that a 60/40 lot split will only diminish the larger property’s value by around 10%.

Furthermore, you can recoup most of that loss by building a duplex or ADUs on your property. The additional housing units will increase your property’s value, and you can fund all or most of the construction with the money you make from the lot split. You can also rent out your new unit(s) for a source of perpetual passive income.

1. “SB 9 will ruin neighborhoods/single family housing/life in California as we know it”

True or False? FALSE

Overview: SB 9 will not turn your quiet suburban cul-de-sac into midtown Manhattan—not tomorrow, not ten years from now. It will slightly increase densification over the next several years, but the overall impact is predicted to be modest.

Despite the fear-mongering of certain city council members and NIMBY neighborhood groups, Senate Bill 9 will not destroy your neighborhood or the California Dream. You can rest assured that SB 9 is not the death knell of single-family housing that the bill’s opponents make it out to be.

SB 9 is predicted to have a moderate effect statewide, and it will likely take several years before much of an impact is noticeable. The Terner Center for Housing Innovation at UC Berkeley found that only 5.4% of single-family lots in the state are eligible and financially feasible for SB 9 development. Of these eligible properties, only a portion of homeowners will have the desire to sell or significantly develop their property. Considering the numbers, it’s highly unlikely that even one of the properties on your street will pursue SB 9 development (let alone every house on the block).

The goal of Senate Bill 9 is to help alleviate California’s housing crisis by adding a few more units in existing neighborhoods. It’s not going to take anything away from homeowners; on the contrary, it will allow homeowners more freedom to develop their property. At the same time, it will create more options for renters and make homeownership more accessible for moderate income families. That’s why most progressive pro-housing groups (like California YIMBY) support SB 9 and the opportunities it can bring.

Conclusion

We hope this article has answered some of your questions about SB 9. With legislation so new and groundbreaking, some initial confusion is to be expected. Legal text is complicated and can be difficult to interpret, and local ordinances often add to the complexity. In addition to the difficulty of deciphering legislation, much of the confusion can be attributed to outspoken SB 9 detractors. Many opponents of the law have spent the past several months actively spreading false information and inventing highly urbanized nightmare scenarios to scare people away from SB 9.

As time goes on and the new law settles into practice, local governments and everyday citizens alike will become more familiar with the law. Once that starts to happen, much of the confusion and uncertainty around SB 9 will dissipate.

In the meantime, Homestead can help you learn about SB 9 and how you can use it to develop your property. Check our SB 9 City Guides to learn about your local restrictions and requirements, and use our free eligibility search tool to determine whether your property meets the prerequisites for SB 9 development.