All you need to know about building on properties in Hillsborough City under SB-9
Using SB9 to boost a property’s value in Hillsborough City is a good move for homeowners wanting to pay down a significant portion of their loan. If you’ve got the budget, you can also add extra units to generate rental income or make room for extended family while keeping your main home. To ensure your SB9 project works out, start by figuring out the eligibility requirements, how local rules apply to your property, and which SB9 option is the best financial match for your Hillsborough City property.
What is SB-9 and how does it apply to the properties in Hillsborough?
What is SB-9?
SB 9 or Senate Bill 9 allows any property within a "single-family residential zone" to be divided into two parcels and developed with up to two primary dwelling units per parcel, overriding local zoning laws. Essentially, the legislation enables two new types of development projects that should be approved through a streamlined ministerial process without discretionary review or public hearings.
How SB-9 applies to properties in Hillsborough?
SB 9 allows Hillsborough to apply objective zoning, subdivision, and design standards to qualifying lot splits and two-unit projects. The City Council enacted an Urgency Ordinance on December 12, 2021, and adopted Ordinance No. 781 on January 20, 2021, setting forth these standards.
What can homeowners build under SB-9 or Hillsborough’s HOME Act?
Urban Lot Split under SB-9
Urban Lot Splits allow an existing legally divided lot to be split into two parcels, regardless of the usual minimum lot size requirements set by the town.
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 Project under SB-9
A Two-Unit Project allows for the creation of two primary residences on a lot or, if there is already one primary residence, the addition of a second primary residence on a legally divided 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?
Each unit is required to be 800 square feet or smaller. However, California's SB-9 legislation does not impose a specific size limit on units, allowing for flexibility in their dimensions.
What are the setbacks?
There are side and rear setbacks of 20 feet, which can be reduced to a minimum of 4 feet to accommodate two 800-square-foot units. The front setback is set at 30 feet.
What is the parking requirement under SB-9?
New primary residences should include at least 1 off-street parking spot unless they meet specific exemptions. Projects located within a half-mile walking distance of either a major transit stop or a high-quality transit corridor are not required to provide any parking.
What are the lot constrains under SB-9?
Under SB-9, the lot being split should be at least 2,400 square feet, and the resulting lots should each be a minimum of 1,200 square feet. Additionally, each new lot should constitute between 40% and 60% of the original lot's area. The lot cannot have been created through a previous urban lot split and should not be adjacent to a lot that was established through a prior urban lot split by the same owner or anyone associated with the owner.
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 should be located within a single-family lot zoning district.
Can you disregard the environmental restrictions on the lot?
No, environmental restrictions on the lot cannot be disregarded. SB-9 requires compliance with these restrictions, which include prohibitions on development on prime farmland, farmland of statewide significance, wetlands, and conservation areas in natural community conservation plans, protected species habitats, and lands under conservation easement.
Can you bypass the Historical Preservation limitations?
No, you cannot bypass historical preservation limitations. SB-9 does not allow developments on historic properties, within historic districts, or on land designated for conservation.
Is it allowed to demolish an affordable unit?
No, it is not allowed to demolish an affordable unit in Hillsborough. SB-9 prohibits the demolition of any housing that is income-restricted for moderate, low, or very low-income households.
Is it allowed to build in High-Risk Areas?
No, building is not allowed in high-risk areas. SB-9 forbids developments in high fire severity zones unless all structures meet current fire code standards for these zones. Additionally, construction is not allowed in environmentally sensitive areas, hazardous sites, earthquake fault zones, or 100-year flood zones.
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, the homeowner should live on the property. The applicant is required to sign an affidavit declaring their intention to occupy one of the dwelling units on one of the resulting lots as their primary residence for at least 3 years following the approval of the urban lot split.
Are existing tenants’ rights protected?
Yes, existing tenants' rights are protected. The project should not alter or demolish any housing that has been occupied by a rental tenant in the past three years.
What are the rental regulations?
Units created under SB-9 should be rented for terms longer than 30 days, prohibiting short-term rentals.
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 simplifies procedures by following the predetermined guidelines and bypassing discretionary processes. It uses established criteria to expedite permit issuance without prolonged reviews or public hearings. Despite this streamlined approach, approval for lot divisions can still require up to 18 months in certain instances.
What are objective standards?
Objective standards comprising zoning regulations, subdivision criteria, and design review are guidelines designed to eliminate subjective judgments by government officials. They involve standardized criteria used by developers and officials when submitting proposals, ensuring consistent and predictable project evaluations, and offering clear guidelines for homeowners submitting their plans.
What are the steps to get the permits?
To obtain SB 9 permits in Hillsborough, submit the following to the Planning Division via email to Liz Ruess at [email protected]:
- Completed "Urban Lot Split Application."
- Title report for the property issued within 30 days of application submission.
- Copies of all property owners' driver's licenses or government IDs.
- Executed Letter of Agency if applicable.
- Executed Mortgage Holder Consent(s) if applicable.
- Executed Owner Affidavit.
- All necessary Lot Location Certifications.
- Site plan including property location, building design, materials, height, and approximate square footage for each occupied building, complying with Hillsborough Municipal Code Chapter 16.44 (SB 9 Urban Lot Splits).
- Payment of application fees based on a $320/hour planning staff rate plus public notification fees.
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 option, we recommend building a three-story duplex with a total of 4,000 square feet, along with an additional 1,000-square-foot Accessory Dwelling Unit (ADU). The overall estimated cost, covering construction, permits, and professional fees (excluding the land), is $2,150,677. The estimated value of the completed property in Hillsborough is about $7,455,000, which gives a return on investment (ROI) of [($7,455,000 - $2,150,677) / $2,150,677] * 100 = 247%.
Scenario 2
Lot Split with 2 new 4,000 sq.ft 3-story Duplexes
For this second option, we suggest splitting the lot to build two separate three-story duplexes, each with 4,000 square feet. The projected cost, excluding the land, is $3,458,374. The anticipated market value for these duplexes in Hillsborough is $11,928,000, leading to an ROI of 245%.
Conclusion:
SB-9 projects in Hillsborough City show a great return on investment, making it a smart choice for anyone looking to develop real estate there.