This week, Aaron Norris is joined by Senator Bob Wieckowski. He was elected in 2014, and he represents the 10th Senate District in the California State Legislature. The district stretches from Southern Alameda County into Santa Clara County. He serves on a number of Senate committees as well, including judiciary, budget and fiscal review, transportation and housing, and ethics. He has been one of the leading voices pushing for housing solutions, including legislation on accessory dwelling units. He hopes to help out with California’s affordability issues and lack of new construction. His background is as a small business owner and bankruptcy attorney.
Aaron began by saying that depending on who you ask, by 2021 California is 1.5-3.5 million housing units short of where we need to be. Aaron asked if there was any update on this, which Bob said it is about correct. There is some obvious construction going on right now for the lag that occurred in the recession. But, we would have to keep today’s pace going for a decade or so just to make up for the lost time when nobody was building anything.
The Norris Group had just interviewed the California Building Industry Association, and it was nice to hear that they were very pro accessory dwelling units. One of the things they said in the interview is that California has the longest timeline from raw land entitlements up to 15 years where the next state with the worst numbers are Florida at 18 months. Aaron asked why California is so difficult to build and wondered if it was a concern. Bob said it is a gigantic concern. We have our California SEQA Act, and we want to make sure things are open and people understand what the process is and if we will destroy an endangered species. He is the chair of the Senate Environmental Quality Committee, so he is ground zero on laws that people have that would overturn SEQA. The creativeness people have because of the frustrations and the desire is to overturn the landmark legislation that we have is high. What also occurs is that people do not realize the discretion local governments have will trigger a SEQA review.
There has been a lot of discussion recently in the legislature about a buy right, or local laws where you have the absolute right to build a 4-story structure (commercial, structural, residential), and the local government takes the discretion away for themselves and allows you to do it. This will take that 18-year period and shrink it down quite a bit for the construction costs. It is a mixed pot of what exactly causes the delays. Nevertheless, it is a big concern.
Aaron went on to talk about ADUs. He had heard of granny flats and casitas, but he wondered how the conversation even got started with ADUs and how Bob became one of the forefathers of the California ADU movement. He said they had to come up with a different invention, and therefore they invented the accessory dwelling units. With a secondary dwelling unit, or grandma flat, he saw so many restrictions and legislation in California just in the last 15 years. In 2002, legislation came out that required cities to develop second unit ordinances. All 492 of them did, but they made it so restrictive and with so many barriers. You had Pasadena that had a minimum lot size of 15,000 feet. Who has a 15,000-foot lot? People have 4-6,000 square foot lots, but this is typically track home land in California that is a big chunk of this property. They came to the conclusion that if they said they were accessory from the mother house, they are part of the homeowner’s right.
For example, if you go to the department store and accessorize your outfit with a bracelet, it is not a brand new outfit. It’s a bracelet. Bob built a 440 foot addition onto his house, his wife got a brand new kitchen, and they both got a new bathroom and expanded their smallest room to the largest room. He had a one day permit in the city of Fremont for which he paid $1,000. They were over-the-counter plans, one day, and it was done. That is not the rule now. There are people in Santa Barbara and different cities up and down the coast still waiting for a permit since the legislation was passed. They are still waiting despite being required to get one within four months. Hopefully, this can be changed to two months.
Aaron spent a lot of time with John Aaronson, who really helped him with the chapter on ADUs. He said he will not even work with some of the cities. They are busier and hiring more people who may or may not know what they are doing. Things are taking longer, so there are a lot of things going on. Some are so difficult that even with the new legislation, he just does not want to work with some of them.
Aaron asked if Senate Bill 1069 is where it all started, to which Bob said it is. Aaron asked about the process of how it got started and how it was received along the way. He said he was fed up with cities saying they wanted to have local control. This meant they would have a roadblock and these barriers that folks would have. If we will have local control, it should be given directly to the homeowner, so they could decide what to do with the property. The big barriers they knew were parking. You had to have off-street parking on your lot. If you converted your garage, you had to build a brand new parking garage. They realized that in normal suburbia, a lot of people have 4 or 5 cars anyway. There was no restriction on how many cars they could have. You would think if they had an ADU and an absolute right within a half mile of some transit, you could then weigh the ability of cities to place a parking barrier on folks. This was a big deal.
The second factor is people have an absolute right to convert any portion of their existing house into an ADU. Everybody knows somebody sitting in a 3,000 square foot house, maybe a couple, and if they want to put in a kitchen or change a window to a door, it will cost them $40,000. They wanted to say that if they wanted to reconfigure their house or garage, they had an absolute right. These were the big barriers that they punch through with 1069. It was a little mini revolution they had going. Aaron said by the time he was paying attention in 2017, he didn’t know if cities loved it or hated it. It was ridiculous.
Bob had to go back the next year in 2017 because some cities were saying he did not define what tandem parking was in the legislation. He had to go back and describe what tandem parking was in the legislation. Some people could park two people on their driveway because the side of their house was all cement or some other crazy thing. He allowed the water and sewer districts to have a proportional fee since they were making all these deals at the last minute. This meant if somebody has a 3 bedroom, 2 bathroom home in the Inland Empire that was built in 1972 for four people, mommy, daddy, and two kids, you don’t see this anymore. Now you have only two people living there. In some houses you may have 14, but normally the sewer and water system was paid for when somebody bought the house.
Also, they are not being overused. If you put in an ADU and still have 3 or 4 people on the property, then the question is what will change the surface. Bob was told he did not list water districts in the bill; so after negotiating with him in 2016 and 2017, they said the law did not apply to him. He uses this as an example to say the governmental agencies are doing everything they can to thwart the homeowners’ right or ability to build these little cottages or convert the garage into a livable space when we are in the middle of a housing crisis.
Aaron mentioned accessory dwelling units and how the set of laws make it possible to do a few things with a detached or attached property. With a granny flat or casitas in the back, there are rules that vary by city. There are also rules for attached, which include a converted basement, an attic, or garage that was previously unpermitted. You can end up turning this into an efficiency unit. There is a lot of flexibility, and it is amazing. Aaron was surprised Bob left it very open. Aaron thought it was done well and understood how the parking worked. Aaron asked if things have gotten better. The updated version of Senate Bill 1069 was SB 229, and it addressed things like tandem parking and other utilities.
He also saw 831 come out, so clearly other things are happening. Aaron asked if he was happy with the progress or if 831 was something showing we have to dig in more. Bob said we had to dig in more with 831 because he was finding out what the cities were doing. Both the cities and the homeowners were responding. One of the stats he likes to say is that over 23 years, Stan and Barbara had less than one ADU approved every year. This is one per year. In 2017 when 1069 went into effect, they had something like 38 or 68 people who applied for an ADU. There is a desire for people to come into the market.
With the 831, they looked at the other barriers, and one of the big ones was fees. He tried to do this with the 1069, but he had to drop it. The developer impact fees paid by the developers when they built their McMansion or tract homes is applied by the city to the private homeowner putting the ADU in their backyard. This could be $5,000 to $40,000. He argued that these were not developers but homeowners. They already paid the impact fee in 1977 when the house was built. This was one of the goals.
In another goal, Los Angeles said they believed there were 300,000 unpermitted units in Los Angeles County. The reason people do not have a permit when they build the unit is they do not want to pay the money to the governmental agency or restriction facility. He tried to fashion a more amnesty program so they could get these people to come out of the woodwork and get their units legalized. If it is unsafe or unhealthy, then all bets are off. It must meet the safety and health codes from when it was built. For example, if you built your ADU in 1995 and built it to code, whatever the code is today is different. However, you would still be able to get a permit. If you did not build it to code, the administrator could pull it. This was the biggest fee.
The third factor was some of the cities were coming in and saying they were required to put deed restrictions on their houses that said they were the homeowner and resided in the house in which they lived. They had the homeowner’s residence requirements. You could only have an ADU if you lived in one of the units with an ADU. However, there are two problems with this. The first is that it is unconstitutional because no other type of housing product has that restriction. The second is that the banks were saying they were going to call back all the loans out there because they were not going to occupy a house if they foreclosed on it. They may have to foreclose, and they do not want to send the guy from the Bank of America to live in the house under the local restrictions. One of the elements of the 831 was to say there is no requirement and you cannot require the owner of the house to live in the unit that has an ADU. It was controversial but what they had to do.
Aaron asked Bob if he meant we should get rid of owner-occupied all together. He said yes and throughout the state. This would be a big change and something they are seeing pop up quite a bit. As they are doing research on ordinance by city, Aaron has seen how they have added not only the owner-occupied language, but some are going as far as not allowing you to have a vacation rental. He could understand this because of the nature of what this was supposed to accomplish. Bob was silent on Airbnb in the 1069, and was silent on it in the 831 also. He represents Fremont with the Tesla and Claremont with the 49ers. However, he knows there will be a big college playoff at the stadium. In this rare case, someone could have an Airbnb in the city near the stadium where people would never normally go for a vacation rental. On those special events, he could see somebody in these towns rent out their ADU for a week and make bank. This is one of those things where Bob said each locality should control that in their own way. Whether they let it exist or not is not what worries him. What he worries about is housing people.
Aaron asked where 831 is on this and where the future is in regard to getting these things through will be. Bob said 831 is dead. They closed the session on Friday, August 31. For this legislative session, that two-year effort is dead. The idea, however, is not destroyed. People will always encounter defeats, and this measure was defeated. However, the ideas will not be because too many homeowners are depending on Bob Wieckowski. People may not know his name, but they know they want ADU reform. They will reintroduce a similar version of 831 in January when they return, or possibly even next month. He wants a low bill number because he feels so passionate about this idea of releasing these barriers to homeownership and allowing people to develop their property as they want for the benefit of folks living in their community and backyard. If we are in a crisis, you have to respond like you are in a crisis.
Bob understands the bias people have about granny units and secondary units. He does not put much weight into it. He can see some people mismanage their house. They have a beautiful house worth $1 million, and it looks like it has been trashed when you drive by it. This can happen to a small little place in somebody’s backyard.
Aaron said the issue he is seeing on the real estate investor side is they are taking the spray, pray, and pay approach. Here, they are just buying something assuming they can build whatever they want, pray it will be fine, and they end up paying because they get caught. They could also be held up by sometimes very important reasons like it being under a live wire where the city is saying waive the utility and have the owner sign a non-liability. It may be a publicly-owned utility that does not want to pass the risk onto the users. Some of it is very important, but investors are not asking the right questions. With the way the bill was written, there is some flexibility now with the cities to say they cannot have theme there because of safety reasons since it may be in a historical district. Investors have to be careful and do their homework.
Bob said he knows a lot of houses were built in fire zones. You do not want to add to the problem and put people in harm’s way. What he would like to see and what he thinks is going to happen is some financial product coming out of the banking community for ADU owners. You have ma and pa who have social security coming in, but they live on a gold mine across the street from Google. On paper, they don’t have the cashflow to show they can sustain it. They realize if you build it, somebody will walk across the street. That pack of individuals could then buy it.
For the real estate investors, the amnesty program could be a solution. Someone will have an illegal or unpermitted unit; and if they go through the 831 scenario and say they should be able to participate in the amnesty program, then there will homeowners giving all these rules for getting something permanent. It would then be a source of income. He could see a family buying a unit where they would rent out the 3-bedroom house and rent out the ADU until they have kids. They could then flip it and rent out the ADU and live in the big part. It is important financially to talk this way in California.
However, there are some people where this could be an issue. If their kids move away and one is in Phoenix while the other is in Oregon; if you want to spend time with the grandkids and still spend 6 months in San Bernardino, you might as well live in the 600 unit in the back, get rid of your junk, and go live with the grandkids. There are so many ways for people to be creative in the real estate arena.
Aaron asked what people’s thoughts are on what the legislation will pass as far as being able to move your basis statewide. Aaron asked if it was looking good, which Bob said it is. What is funny is three years ago when he first introduced the 1069 and was at the podium presenting, he did not have any friends. Nobody knew what he was talking about or what an accessory dwelling unit was. A miracle happened and the real estate people began wanting to know. Suddenly, other groups including the banking institution said they like new products. In the three years since the introduction of 1069 to today, the enthusiasm and list of supporters is growing. When people like the radio show listeners find out what some of these roadblocks are, look at 831, and say yes to them. This would really open up the floodgates.
Since 1069 passed, the ADU construction has increased in California 63%. If this next series of barriers is removed, he suspects it to increase. When you go back to your million and a half or 3.5 million shortage, he does not think it is unreasonable to say that California could sustain in a five year period a million more units.
If you want to find out the status of where things are at, Bob’s website is the best place to go. They have a whole section on ADUs and will be updating it as they get to a new bill. They want to focus on these barriers and what they are trying to get done. Aaron hopes he can be back on the radio either next month or the beginning of next year.
The uncut version of this interview is in the portal under Accessory Dwelling Units, and it is for VIP subscribers. If you have not looked at the VIP subscription, check out www.thenorrisgroup.com/premium. They just added four brand new chapters, including Accessory Dwelling Units. They will continue adding to this since it is a great opportunity for real estate investors in California in the year ahead. Things are changing, and they will definitely have Senator Bob Wieckowski back.
They also added a market timing event on January 26. Bruce Norris will be presenting in Riverside California Real Estate: On Borrowed Time. This report features his latest forecasts and predictions for the years ahead for California, where he is going, and why. It’s all on the website, check it out under Events.