All you need to know about building on properties in East Palo Alto City under SB-9
Adding value to a property in East Palo Alto City with SB9 is a solid way for homeowners to reduce a large portion of their mortgage. If you have the means, you could also add extra units to bring in rental income or provide room for extended family while keeping your main home. To get the most out of your SB9 project, make sure you’re clear on the eligibility requirements, how local regulations might impact your property, and which SB9 option is the best financial fit for your place in East Palo Alto City.
What is SB-9 and how does it apply to the properties in East Palo Alto?
What is SB-9?
SB-9 also known as Senate Bill 9, passed by the California Legislature and effective since January 1, 2022, allows for ministerial approval of housing projects that can include up to two dwelling units on single-unit zoned parcels. Additionally, it permits ministerial approval for dividing lots to create up to two units on each newly formed lot.
How SB-9 applies to properties in East Palo Alto?
SB-9 allows properties in East Palo Alto to undergo lot splits to accommodate up to two units per new parcel, facilitating residential development in R-LD Single-Family Residential zones without requiring discretionary review processes, such as public hearings. This enables property owners to streamline the approval process for housing projects, subject to compliance with local zoning and building regulations.
What can homeowners build under SB-9 or East Palo Alto’s HOME Act?
Urban Lot Split under SB-9
Under SB-9, an Urban Lot Split refers to a single subdivision of an R-LD Single-Family Residential zone parcel into 2 separate parcels, enabling a maximum of 4 units in total.
In this case you could have the following unit configurations:
A. Lot 1 Single-Family Dwelling (SFD)
Lot 2 Single-Family Dwelling (SFD)
B. Lot 1 Single-Family Dwelling (SFD)
Lot 2 Duplex
C. Lot 1 Duplex
Lot 2 Duplex
D. Lot 1 Single-Family Dwelling (SFD) + Single-Family Dwelling (SFD)
Lot 2 Single-Family Dwelling (SFD)
E. Lot 1 Single-Family Dwelling (SFD) + Single-Family Dwelling (SFD)
Lot 2 Single-Family Dwelling (SFD) + Single-Family Dwelling (SFD)
Two-Unit Housing Development under SB-9
For two-unit housing development under SB-9, R-LD Single-Family Residential zone parcels can accommodate up to 2 primary units, which could mean constructing 2 new units or adding 1 new unit to an existing one on the lot.
You could have the following unit configurations:
- Single-Family Dwelling (SFD) + Single-Family Dwelling (SFD)
- Single-Family Dwelling (SFD) + Single-Family Dwelling (SFD) + ADU (max. size 1,200 sqft) or JADU (max. size 500 sqft)
- Duplex
- Duplex + ADU (max. size 1,200 sqft) or JADU (max. size 500 sqft)
- Duplex + 2 ADU (max. size 1,200 sqft)
Deciding which development option works best for you is not easy, unless you understand their cost and ROI for your property. You need an SB-9 Analysis for each option to make the best decision.
How large the new units could be and what are the lot contains?
The size of new units in East Palo Alto should meet local zoning regulations requiring a minimum of 800 square feet per unit. However, State SB-9 in California allows flexibility in unit size, allowing units of any dimensions on eligible lots.
What are the setbacks?
Setbacks of at least 4 feet are required for new construction on the sides and rear of the property. No setbacks are necessary if using an existing structure or rebuilding in the same dimensions and location as the original structure.
What is the parking requirement under SB-9?
The parking requirement under SB-9 requires 1 parking space per unit, except if the project is within a half-mile of a high-quality transit corridor, major transit stop, or within one block of a car-share vehicle.
What are the lot constrains under SB-9?
Under SB-9, the lot requirements specify that the original parcel should be at least 2,400 square feet. The resulting new parcels cannot be smaller than 40% or larger than 60% of the original size, with each new parcel being at least 1,200 square feet in area.
Additionally, properties that have already undergone an SB-9 urban lot split or are adjacent to such properties are ineligible for further subdivision.
Don't leave money on the table by limiting the size of your project to a minimum! SB-9 Analysis calculates for you the maximum building area so you can get the highest return.
Who and which properties are eligible for SB-9 or HOME Act?
What are the zoning districts for properties eligible for SB-9?
Properties eligible for SB-9 are typically located in the R-LD Single-Family Residential zoning district.
Start by checking if your property is eligible for SB-9 because not all the single-family zoned lots are eligible.
What are the ownership and development limitations after completing a project using SB-9?
Does the homeowner need to reside on the property?
Yes, homeowners should declare their plan to live in one of the units as their primary residence for a minimum of 3 years, except if they are associated with a community land trust or a qualified nonprofit as defined in the Revenue and Taxation Code.
Are existing tenants’ rights protected?
Yes, SB 9 restricts the removal of more than 25% of exterior walls on properties where there is a current tenant or where a tenant has lived within the past three years, even if the rental unit itself is not being altered.
What are the rental regulations?
Units developed under SB 9 are restricted from short-term rentals, requiring property owners to confirm through an affidavit that these units are designated for rentals lasting more than 30 days.
How can you get the permits under SB-9 or HOME Act?
Projects subject to SB-9 can move forward using a ministerial permit process, avoiding discretionary review or hearings.
What does ministerial approval mean?
Ministerial approval in housing development streamlines the process by following predefined guidelines and avoiding discretionary procedures. It relies on set criteria to facilitate permit issuance without extensive reviews or public hearings. However, even with this streamlined approach, approval for lot splits can still take up to 1 and a half year in some cases.
What are objective standards?
Objective standards comprising zoning regulations, subdivision criteria, and design review guidelines aimed at removing subjective judgments by government officials. They utilize standardized criteria that developers and officials apply when submitting proposals, ensuring consistent and predictable project evaluations and providing clear guidelines for homeowners submitting their plans.
What are the steps to get the permits?
SB 9 projects undergo 2 review processes: first, a streamlined Zoning Clearance review conducted by the Planning Division, followed by a building permit review overseen by the Building Division:
- Obtain Zoning Clearance Approval:
Submit the SB 9 application package to the Planning Division, following the requirements outlined on the SB 9 Checklist.
- Building Permit Review:
Once Zoning Clearance is approved by the Planning Division, submit the same package to the Building Division for review.
- Construction and Building Permit Inspections:
Upon receiving the building permit, construction may commence. Inspections at various stages of construction will be necessary.
- Building Finals:
After passing all inspections and paying applicable fees, the applicant will receive final building approvals, concluding the permit process and allowing occupancy of the accessory unit.
The permitting process is complex, and you'll need to hire professionals to draft the drawing set and to go through the process for you. SB-9 Analysis comes with referrals to local professionals that can help you complete the project.
How fast can you complete a project per SB-9?
This information outlines the different phases of the project along with their respective durations.
Feasibility Study with deciding the final scope of the project:
• Maximum of 3 days (CityStructure)
• Weeks if using other resources
Secure Financing: 2 to 3 weeks
Hiring the Team: 2 weeks
Design Process:
• Schematic Design: 1-2 months
• Permit Set / Design Development Drawing Set: 2-3 months
• Construction Drawing Set: 2-3 months
Permit Planning and Building Permits: 9 to 15 months with the possibility of extending further due to departmental backlogs
Construction:
• Lot Split only: 1 year
• Single Family House/Duplex: 1 year
• Accessory Dwelling Unit (ADU): 3 to 6 months
How much does a SB-9 project costs?
In this analysis, we'll explore two scenarios to assess anticipated expenses, property assessments, and potential profits for real estate ventures.
Scenario 1
New 4,000 sq.ft 3-Story Duplex + 1,000 sq.ft ADU
In this first scenario, we suggest constructing a three-story duplex with a combined area of 4,000 square feet, plus a 1,000-square-foot Accessory Dwelling Unit (ADU). The total estimated cost, including construction, permits, and professional fees (excluding land), is $2,153,087. The projected market value of the finished property in East Palo Alto is around $4,975,000, resulting in a return on investment (ROI) of [($4,975,000 - $2,153,087) / $2,153,087] * 100 = 131%.
Scenario 2
Lot Split with 2 new 4,000 sq.ft 3-story Duplexes
For this second scenario, we recommend dividing the lot to build two separate three-story duplexes, each with a total area of 4,000 square feet. The estimated cost, excluding land acquisition, is $3,457,384. The projected market value for these duplexes in East Palo Alto is $7,960,000, resulting in an ROI of 130%.
Conclusion:
For anyone interested in developing residential properties, East Palo Alto City stands out as a very attractive option. Projects using SB-9 here can offer excellent returns.