Mayor Pro Tem Bryan MacDonald doesn’t like AB 1033 and supports the staff’s position not to pass the ordinance. (Photo courtesy City of Oxnard)
Oxnard–The City Council held a study session during its Tuesday, April 2, meeting and took a wait-and-see approach to advancing Accessory Dwelling Unit (ADU) regulations authorized under California Assembly Bill (AB) 1033.
THE regulation intends to create opportunities for home ownership by allowing property owners to create an Accessory Dwelling Unit as a condominium.
Mayor Pro Tem Bryan Macdonald said AB 1033 is a nightmare waiting to happen.
“I see all kinds of issues, between lot line splits, the sale of ADU units that are all on a single lot when they should be on a split lot,” he said. “Then you have lot line adjustments, and it’s not going to do anything to increase taxes. There will probably be a property tax increase. I don’t see that happening because if you split the lots, each lot will have lower taxes.”
Planning & Environmental Services Manager Joe Pearson II presented the video and said ADU 33 authorizes a local agency to adopt a local ordinance to allow the separate conveyance of the primary dwelling unit and ADUs as condominiums. This is a change from the prior law, AB 587, where the separate conveyance of an ADU was prohibited except in limited circumstances.
“The intent of the new bill is to create homeownership opportunities for lower-income and first-time home buyers,” he said. “There are advantages and disadvantages as well as unknowns that should be considered in evaluating this matter.”
He said that for homeowners looking to potentially subdivide their property, there is an existing option under mandatory State Law (SB9), and the Staff recommends not adopting the ordinance at this time.
“Some of the advantages are there is an increase in more moderate-income units, and whether an ADU is rented out or independently sold does not change how it is counted under the Regional Housing Needs Allocation,” Pearson said. “ADUs Converted to ownership through a subdivision could reassigned essentially as moderate-income units and counted towards meeting the City’s moderate-income housing requirement.”
He said the availability of smaller homes at less cost could provide an attractive opportunity for homebuyers priced out of the housing market or seniors seeking to downsize from larger properties.
“It addresses a housing need that has been challenging to meet,” he said. “The bill also provides for a potential increase in the availability of homeownership opportunities for smaller homes. This is because the subdivision of the property would generate two condominium opportunities for each residential site. This would result in more moderate income units, addressing a need that’s challenging to meet.”
He said there’s potential for an increase in the availability of medium- to large-size homes as small homes created through the subdivision of ADUs provide options for people hoping to downsize their residence instead of aging in place.
“They would still be able to move into these smaller units and enjoy the benefits of homeownership while having a smaller unit that fits their needs,” Pearson said. “The bill could incentivize property owners to build an ADU. AB 1033 requires that an ADU be completed prior to the recordation of the final map. AB 1033 will convert rental units into ownership units.”
He said AB 1033 could incentivize some property owners who were previously not interested in building an ADU for rent to develop an ADU with the intent of selling it.
“Implementing this law could result in an increase in property tax revenues in the City,” Pearson said. “The primary residents and new ownership ADU would have separate property tax assessments. It is expected that the remaining single-family converted property would be reassessed to reflect a smaller lot size; therefore, the property tax assessment associated with that property would likely be less than the newly created ADU property, which would have a separate property tax assessment, which may result in an increase in assessed value.”
He said it’s unknown if it would result in a nominal increase in property taxes.
“There would also be potential disadvantages to implementing the new law,” he said. “There will be impacts to workload. The 2021-2029 housing element establishes a series of housing programs to be implemented by the Staff through the end of the 2021-2029 housing cycle. These programs were adopted with the housing element as they implement the established goals and policies of the 2030 General Plan. As this new law was not contemplated in the new housing element or general plan, there would be a need for the reshuffling of workloads to prioritize this effort.”
He said this would result in potential delays to the work plans and priorities established by the adopted housing element without any real proof the new law would increase housing development.
“Under existing ADU requirements, parking is often not required for the construction of new ADUs,” he said. “It can be reasonably anticipated that due to the potential sales price of an ADU being above the low-income range associated with rental ADUs, a higher number of occupants would be associated with the purchase of an ADU, as opposed to the same ADU being rented.”
Pearson said additional parking demands could be associated with a for-sale ADU.
“One of the other potential concerns is the loss of housing to investors,” he said. “Under current State law, cities are prohibited from requiring the owner of the primary residence to reside in either the primary residence or any of the ADUS, meaning investment ownership is allowed now. However, AB 1033 is a potentially more profitable option for investors. This potential is based on the assumption that a sub-divided property is more valuable than an undivided property, so the return on investment would potentially be higher.”
He said investment-driven competition can further drive up existing home prices.
“Another disadvantage is the lack of affordability restrictions,” he said. “ACDs consider ADUs to be affordable by design when available for rent,” Pearson said. “However, AB 1033 does not include any affordability restrictions. Therefore, they would not be limited to low-income or very-low-income groups.”
He said there would also be an impact on the inclusionary housing ordinance, as ADUs added to residential projects are not subject to the City’s inclusionary housing requirements.
“Therefore, opting into AB 1033 creates a means for potentially getting around the City’s inclusionary ordinance,” he said. “ADUs can be added and sold, putting them over the threshold; however, they would not be subject to the inclusionary ordinance because the base development was under the threshold for qualifying under our inclusionary housing ordinance at this time.”
He said implementing the new law could result in losing units typically affordable to lower-income households.
“AB 1033 could impact the affordability projections in the housing element for market-rate developers to circumvent the inclusionary housing program,” Pearson said. “The construction of ADUs over and above the stipulated housing development in the lower-income category helps the City fulfill the lower-income housing category, which is typically a difficult income level to satisfy.”
He said opting into AB 1033 would require the construction of rental housing for lower-income people.
“That’s due to the fact that, as information provided by applicants have shown, many of the ADUs offered for rent fall into the very-low- or low-income rent category,” he said. “In addition to the potential advantages and disadvantages, there are complexities that are likely to stall interest in an AB 1033 program, resulting in very few properties actually utilizing the program.”
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