Why a California law to create housing units hasn’t worked

When California legislators voted in 2021 to eliminate zoning laws that require neighborhoods to have only single-family homes, supporters and detractors alike fiercely argued that it would have a big impact.

But two years after Senate Bill 9 went into effect, fewer than 500 property owners have sought to subdivide their land, and the number of new housing units completed is only in the dozens, according to The Wall Street Journal, which cited state data.

SB 9 allows owners of properties with single-family homes anywhere in the state to sell or subdivide part of their lot. It also allows each lot to include up to two units, including duplexes.

SB 9 was designed to inject supply into what is arguably America’s most challenging housing market, but that has yet to happen. Local officials throughout the state have created limitations on height, square footage, architectural style and landscaping, making it more difficult for homeowners to comply and turn a profit, according to the Journal.

California cities reported 194 lot-split applications in 2022 and 321 last year. Several startups are looking to capitalize on the passage of SB 9, including BuildCasa, a venture-backed firm that pays homeowners up to $400,000 for their excess lot space, handles all applications and other permits, and then sells the plot to a developer who can build on it.

BuildCasa told the Journal that it has signed contracts with 87 homeowners in California, with 12 projects and a total of 24 units approved. Most of the customers are older homeowners who don’t have a mortgage and are looking to partially cash out while aging in place, co-founder Paul Steidl said.

In 2023, the entire state of California issued only 70,000 permits for single-family homes — roughly the same number as the Houston metro area.

Ben Metcalf, of the the Terner Center for Housing Innovation at the University of California at Berkeley, said in February that the state has had 140 distinct pieces of legislation on housing affordability since 2016, but these laws haven’t made much impact in the permitting numbers.

Maybe the most successful housing legislation in the state relates to accessory dwelling units, which has resulted in about 80,000 permits being granted since 2016.