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| Each week, the Silicon Valley Association of Realtors (SILVAR) shares local housing data, sales trends, expert insights and other real estate-related topics. This week, the association provides an explainer on new California real estate laws. |
A number of new California laws aimed at boosting housing inventory and streamlining the construction and purchase of homes are in effect this year. Here’s a look at some of these laws and how they could impact the greater Midpeninsula region.
Housing production
Split lots
Building duplexes on single-family lots should become much easier under Senate Bill 450. The new law closes any loopholes that allowed cities and counties to block owners from subdividing and building up to two duplexes on single-family properties deemed eligible for higher density under existing Senate Bill 9, also known as the California Housing Opportunity and More Efficiency (HOME) Act.
The law, which went into effect on Jan. 1, was created to streamline the approval process by making it tougher for local authorities to reject “SB 9 projects.” The law prevents local governments from imposing excessive restrictions or delays in the approval process and limits denial of projects to public health and safety issues only. All SB 9 projects must be approved or denied within 60 days.
Ever since SB 9 took effect in 2021 to spur the construction of more housing units – duplexes, triplexes, ADUs – in single-family neighborhoods, cities have pushed back on the zoning change by passing restrictions to block these types of projects from being built. The law made waves in Woodside, for example, when elected leaders famously tried to circumvent SB 9 by designating the entire town a mountain lion sanctuary. Eventually, the effort fizzled in February 2022 after the state attorney general called the move “contrary to law.”
The new law will essentially eliminate these types of roadblocks.
SB 9 does not apply to all Caifornia cities, however. A Los Angeles judge ruled last April that the law is invalid in charter cities, which are governed by their own charters rather than by the state’s general law. Palo Alto, Mountain View and Redwood City are all charter cities and exempt from SB 9.
Transit corridors
Another new law that could spur more housing possibilities is Assembly Bill 2553. The law, now in effect, expands the area around transit corridors that qualify for reduced vehicular traffic impact fees and eliminates minimum parking requirements for new developments near transit stops.
The new is intended to spur more housing near bus routes and rail lines by encouraging denser development around high-transit areas.
Palo Alto and Mountain View, for example, could likely see more future developments by transit stops on El Camino Real and San Antonio Road.
Tougher penalities
Local jurisdictions now face much tougher penalties for ignoring state housing laws. Senate Bill 1037, which went into effect on Jan. 1, gives California’s attorney general power to impose civil penalties on cities and counties that violate certain state housing laws, such as failing to adopt a compliant housing element or ignoring state laws that require streamlined approval of certain types of housing projects.
The law was designed in response to the statewide housing shortage crisis and aims to strengthen enforcement of state housing laws and eliminate barriers local governments place on housing developments.
The state attorney general no longer has to file a lawsuit against a municipality and wait for a judge’s ruling before seeking civil penalties. Under the new law, the attorney general can hold municipalities accountable from the moment they violate state housing requirements. Cities in violation face monthly penalties of $10,000 to $50,000 per month, which would be used to fund the development of affordable housing within their jurisdiction.
The new law is intended to provide a stronger disincentive for local municipalities to defy state housing requirements.
In California, it’s common for cities to be out of compliance with housing mandates, especially in the Bay Area. Last spring, about a third of Bay Area cities and counties were reportedly out of compliance with state housing laws, according to data from the Department of Housing and Community Development.
On the Midpeninsula, Atherton faced monthly fines and possible court-imposed penalties for not complying with the state’s housing element law last year. Under state mandate, the town was required to come up with a plan for adding 348 housing units to its inventory, but failed to meet its deadline.To avoid potentially having the matter go to court, the city finally approved a housing plan in the 11th hour last October. If this had occurred this year under the new law, the state could have immediately levied fees on the town without first filing a lawsuit in court.
Legalized Accessory Dwelling Units
California amended and passed a number of laws last September limiting local government control over the development of small backyard cottages known as Accessory Dwelling Units (ADUs), as these units are considered an important remedy to the state’s housing shortage and affordability challenges. From legalizing unpermitted ADUs to loosening building restrictions along the coast, these laws are intended to make it much easier for homeowners to add secondary living spaces to their property.
One law in particular rolls back existing regulations impacting many of those with units already built.
For those with unpermitted backyard cottages, AB 2533 expands the statewide amnesty program that allows property owners to legalize their ADUs by applying for a permit without facing penalties or excessive fees. The new law now applies to both ADUs as well as junior ADUs (units built within an existing single-family home) and extends coverage to units built up to Jan. 1, 2020. Property owners can legalize these units through a simplified permit process, provided they meet basic health and safety standards.
The law applies to all local ADU ordinances and could significantly boost state-mandated housing goals. A 2024 report by Housing Solutions Lab showed that in San Jose, for example, the city met only 26% of its state-mandated housing construction goals, but if all the informal ADUs (which were captured by satellites) had been permitted, the city could have reported significantly more new housing construction. According to the report, property owners legally built about 291 detached ADUs in the city from 2016 to 2020. In comparison, there were an estimated 1,045 additional informal detached ADUs built during the same time period. Communities statewide are facing this same issue, according to the report.
Buyer-broker agreements
Considered among the most significant changes to California real estate law in years, California Assembly Bill 2992 now requires buyers and their agent to sign a buyer-broker representation agreement before an offer can be made on a property.
The purpose of this law, which went into effect on Jan. 1, is to help ensure both the buyer and their agent are clear about the agent’s role, responsibilities and compensation. The law was passed in response to new industry standards that took effect in August 2024 as part of the National Association of Realtors’ antitrust lawsuit court settlement over how broker commissions are negotiated. AB 2992 cements those standards into law in California.
The buyer representation agreement cannot last longer than three months from the date the agreement was made, except for agreements between a real estate broker and a corporation, limited liability company, or partnership.
The law is intended to make the homebuying process more standardized and transparent.
Silicon Valley Association of Realtors (SILVAR) is a professional trade organization representing 5,000 Realtors and affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term Realtor is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of Realtors and who subscribes to its strict Code of Ethics.
Real Estate Editor Linda Taaffe contributed to this article.
