The California Home Act: Unlocking the Potential of Residential Lot Splitting and Accessory Dwelling Units

12/20/20233 min read


When it comes to real estate In Orange County, California has always been a hotbed of innovation and opportunity. From the gold rush of the 19th century to the tech boom of the 21st century, the Golden State has consistently attracted those seeking a chance to strike it rich. And now, there's a new gold rush on the horizon, but it doesn't involve digging for precious metals. Instead, it involves the development of homes on big lots, corner lots, and cul-de-sacs.

The catalyst for this new wave of opportunity is the California Home Act, which came into effect on January 1, 2022. This legislation has paved the way for residential lot splitting, allowing homeowners to divide their properties into two lots and build up to four separate living units. This means that those with large lots, corner lots, or properties located in cul-de-sacs now have the chance to capitalize on their space by constructing accessory dwelling units (ADUs) and either selling or renting them out.

One of the key provisions of the California Home Act is that it allows for a maximum of two units on each of the two lots created through lot splitting. This means that homeowners can potentially build two ADUs on their property, in addition to their primary residence. This presents a unique opportunity for homeowners to generate additional income or create a multi-generational living arrangement.

But what exactly are ADUs? ADUs, also known as granny flats, in-law units, or secondary units, are self-contained living spaces that are located on the same property as a single-family home. These units can be attached to the main house, such as a converted garage or basement, or they can be detached, like a separate cottage or studio. ADUs typically have their own entrance, kitchen, bathroom, and living area, providing residents with privacy and independence.

The reinstatement of ADU sales separate from the primary home, through Assembly Bill 1033 in October, has further fueled the interest in residential lot splitting. Previously, ADUs could only be sold together with the main residence. However, this new legislation allows homeowners to sell the ADUs separately, opening up a whole new market for buyers looking for affordable housing options or investment opportunities.

So, why are homes on big lots, corner lots, and cul-de-sacs particularly attractive for those interested in building ADUs and splitting their lots? There are several reasons:

1. Space for Expansion

Big lots provide ample space for homeowners to expand their properties and build ADUs without compromising the existing living space. This is especially beneficial for families who want to accommodate aging parents, adult children, or extended family members while maintaining their own privacy.

2. Privacy and Independence

Corner lots and cul-de-sacs offer greater privacy and a sense of separation from the main road. This makes them ideal locations for building ADUs, as residents can enjoy their own private entrance and outdoor space without feeling like they are living in the shadow of the main house.

3. Potential for Rental Income

With the high demand for housing in California, renting out ADUs can be a lucrative source of income for homeowners. By splitting their lots and building ADUs, homeowners can take advantage of the rental market and potentially offset their mortgage or generate additional income.

4. Investment Opportunities

The ability to sell ADUs separately from the primary residence opens up new investment opportunities. Buyers looking for affordable housing options or those interested in real estate investment can now consider purchasing ADUs as standalone properties, providing a more accessible entry point into the market.

It's important to note that while the California Home Act has opened up exciting possibilities for homeowners, there are still regulations and guidelines that need to be followed. Local zoning laws, building codes, and permit requirements may vary, so it's crucial for homeowners to consult with local authorities and professionals experienced in ADU development.

In conclusion, the California Home Act has sparked a new gold rush in the real estate market, with homeowners on big lots, corner lots, and cul-de-sacs realizing the potential of residential lot splitting and ADU construction. This legislation has not only provided an opportunity for homeowners to maximize the use of their properties but has also opened up new avenues for affordable housing and real estate investment. As California continues to evolve, it's clear that the state's innovative spirit is alive and well, creating exciting possibilities for homeowners and investors alike.




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