As I’ve summarized on this page, California rolled out statewide legislation changes that loosened restrictions on building ADUs, expanded the type and number of ADUs homeowners can add to their properties, and lowered the fees associated with building as of January 1st, 2020. This means it’s never been easier or more affordable to build an ADU on your property. Below, I’ve provided more detail on the reduced fees, updated financing options, tax deductions, and energy-saving options you can expect when embarking on an ADU project in under today’s conditions.
2020 Reductions in Fees and Regulation
Regulation changes are working in favor of homeowners who are looking to add a detached ADU to their property. A particularly impactful change has been the reduction of parking restrictions. As of January 2020, as long as you live within a half-mile of public transit, one block from a public car-share program, or if your home is on a street that offers on-street parking permits, you are no longer required to add an additional parking spot for your ADU! This enables many homeowners who were previously barred from building an ADU to move forward. It also effectively reduces construction costs because you are no longer required to build a car port, garage, driveway extension, etc. to create more parking on your property;
Beyond this, the new bill eliminated the associated impact fees for any ADU smaller than 750 square feet. In the past, these fees could cost those looking to build an ADU up to $50,000.
Favorable Conditions, New Financing Options, and Tax Deductions
This year’s low interest and mortgage rates make it the perfect time to build your ADU in a cost-effective way. Further, the passing of the aforementioned bill has spurred the development of new financing options. In June, the Silicon Valley Housing Trust launched an ADU loan program for homebuilders in the South Bay. Fannie Mae has also recently enabled more lending against ADUs, making the project much more feasible for many.
If you plan on renting out your ADU, you’ll be happy to learn that you can deduct a portion of your ADU’s fire insurance bills, HOA fees and mortgage interest! In other good news regarding the effect of your new ADU on your taxes, your ADU also won’t trigger Prop 13 and will instead result in a blended assessment of your property.
Energy Efficient and Solar-Ready Options
Some California-based ADU companies are making their units even more affordable (and greener) by making them more energy-efficient. Turn-key ADU provider Habitat controls electrical costs by connecting their ADUs to your existing electrical service through either the main panel or a separate panel on the outside of the house. They’ve paid attention to every detail in order to keep their customers’ monthly electrical bills at a minimum; making sure their units come standard with energy-efficient LED lights and low-flow faucets. Every ADU also comes solar-ready, meaning you can easily switch to solar power and save even more money and in long-run.