“. . . the new laws are intended to address the ongoing housing crisis and to make ADU development easier. . .”

New ADU laws that take effect January 1, 2020 will make ADU development easier. ADU is the acronym for Accessory Dwelling Unit; as the name suggests, this type of small dwelling is an accessory to (additional to) a main home in a single family residential area. ADUs are inter-generational housing that were historically called “granny units” because they were generally built for aging parents to enable them to live with their children while retaining the privacy of their own dwelling. ADUs were rare prior to 2017 because modern planning codes rendered this type of structure illegal or difficult and expensive to get built. Additional parking was typically required as were very expensive, independent utility connections from the street to the ADU. 

 In 2017, due to years of work by community activists, the State of California passed a series of laws -  SB 1069  (Wieckowski), AB 2299  (Bloom), and AB 2406  (Thurmond) - to make the creation of ADUs easier. The most fundamental and important of these laws was (and remains today) the law eliminating the requirement for additional parking for ADUs (provided the site is within a mile of public transit). Other important laws passed in 2017 included making it illegal to require ADUs to have separate utility connections. These state laws have led to a boom in construction of ADUs throughout California.

Community activists continued campaigning after the initial laws passed and this year the state legislature passed a series of laws under AB 68 that will take effect January 1, 2020. Those laws include Assembly Bill (AB 881), Assembly Bill (AB 670), Senate Bill 13 (SB 13), and Assembly Bill 68 (AB 68). The new laws are intended to address the ongoing housing crisis and to make ADU development easier. We list the five main aspects of new ADU law here that support getting ADUs built.

It is important to understand that all jurisdictions can create more lenient or liberal ordinances allowing owners to create ADUs that are larger and taller than the State minimum. Jurisdictions like San Mateo County, for example, allow for two-story ADUs. When putting together your ADU project plan, be sure to check with your local jurisdiction for ordinances that support ADU construction.

If you are interested in exploring how you can build an ADU on your property, Todd Jersey Architecture has been designing ADUs throughout the Bay Area and can guide you on the best type of project to maximize your investment. Email us or give us a call to set up your free project assessment. You can also sign up for our newsletter to receive ongoing updates about ADUs and other architecture related news.

1. No minimum lot sizes for ADUs

NO JURISDICTION CAN REQUIRE A MINIMUM LOT SIZE TO BUILD AND ADU. SOME CITIES AND COUNTIES, LIKE PASADENA, CA AT THE WRITING OF THIS ARTICLE, REQUIRE A MINIMUM SIZE OF LOT IN ORDER FOR AN OWNER TO BUILD AND ADU. FOR INSTANCE IF THE MINIMUM LOT SIZE IS 5,000SF AND YOUR LOT IS 3,000SF, CITIES CAN DENY YOU THE ABILITY OR RIGHT TO CREATE AND ADU

 2. No restrictions on the size of ADUs

THIS NEW LAW RESTRICTS THE ABILITY OF CITY AND COUNTY PERMIT BUREAUS TO LIMIT THE SIZE OF AN ADU BASED UPON CRITERIA LIKE HEIGHT RESTRICTIONS, RESTRICTIONS ON LOT COVERAGE OR RESTRICTIONS ON WHAT IS CALLED THE FLOOR AREA RATIO OR FAR.  THE STATE HAS INTERVENED TO CREATE STATE GUIDELINES ON SIZES OF ADU'S WHICH SUPERCEDE LOCAL ORDINANCES. THE NEW LAW STATES THAT AS LONG AS THE ADU IS BELOW 800SF FOR A ONE BEDROOM UNIT OR UNDER 1,000SF FOR TWO BEDROOM UNITS AND, AS LONG AS THE ADU IS SET BACK FROM ALL PROPERTY LINES BY AT LEAST 4 FEET AND BUILT WITHIN A 16 FOOT HEIGHT LIMIT, THEN A HOMEOWNER CAN BUILD THE SIZE OF THE ADU THAT THEY WISH.

 3. Expediting approval time for ADUs

THIS NEW LAW REQUIRES COUNTY AND CITY PLANNING AND BUILDING DEPARTMENTS TO TAKE NO LONGER THAN 60 DAYS TO APPROVE (OR DENY) A PERMIT FOR ALL ADU'S. IN THE GREATER SAN FRANCISCO BAY AREA THIS IS A WONDERFUL DEVELOPMENT FOR THOSE HOPING TO BUILD AN ADU IN A TIMELY MANNER BECAUSE ALL BAY AREA JURISDICTIONS TYPICALLY TAKE FAR LONGER TO ISSUE BUILDING PERMITS FOR EVEN THE SIMPLEST PROJECTS.

 4. Garage conversions made easy

THE NEW LAW STATES THAT OWNERS MAY NOW PLACE ADUS INTO EXISTING GARAGES WITHOUT BEING REQUIRED TO REPLACE THE PARKING SPACE IN THE EXISTING GARAGE ON ANOTHER PART OF THE SITE. THIS LAW PROMISES TO LEAD TO A LARGE NUMBER OF ADUS BEING BUILT IN EXISTING GARAGES, ONE OF THE MORE AFFORDABLE WAYS TO CREATE ADUS

 5. No additional utility fees

THIS LAW STATES THE ADUS CANNOT BE BURDENED WITH ADDITIONAL UTILITY FEES OF ANY KIND

6. No owner-occupancy requirement

THE OWNER OF THE PROPERTY DOES NOT TO LIVE IN THE PRIMARY RESIDENCE OR THE ADU.

Accessory Dwelling Units and "Triplexes"

Accessory Dwelling Units (ADU) are additional living quarters on the same lot as a primary dwelling unit. While California laws have paved the way for increased ADU development, some cities have enacted ordinances that render ADU development infeasible or cost prohibitive. By further reducing barriers to ADU development, the new bills discussed below could bring tens of thousands of new ADUs online over the next few years.

AB 68 (Assembly Member Phil Ting) / AB 881 (Assembly Member Richard Bloom) – Processing Timelines, Ordinance Prohibitions and Triplexes requires local agencies to either approve or deny an ADU project within 60 days of receiving a complete building permit application on a ministerial (CEQA-exempt) basis. The new law further prohibits local agencies from adopting ADU ordinances that: impose minimum lot size requirements for ADUs; set certain maximum ADU dimensions; require replacement off-street parking when a "garage, carport or covered parking structure" is demolished or converted to construct the ADU. Notably, the new law allows for an ADU as well as a "junior" ADUs where certain access, setback and other criteria are met – this has been referred to the "tripelex-ation" of single-family zoning. The new law has also explicitly identified opportunities for ADUs in multifamily buildings, including storage rooms, boiler rooms, etc., where building standards are met. New enforcement mechanisms have also been added. The Department of Housing and Community Development (HCD) may now notify the Attorney General's Office of any violations of these new provisions.

SB 13 (Sen. Bob Wieckowski) – Owner-Occupancy Prohibitions and Fee Limitations provides, until Jan. 1, 2025, that cities may not condition approval of ADU building permit applications on the applicant being the "owner-applicant" of either the primary dwelling or the ADU. Additionally, agencies cannot impose impact fees on ADUs under 750 square feet.

AB 587 (Friedman) – Separate Conveyances provides that local agencies may now allow ADUs to be sold or conveyed separately from a primary residence if certain conditions are met. Prior law that prohibited ADUs from being sold or conveyed separately from the primary residence in which they are co-located hindered shared ownership models, such as tenancies in common. This law, therefore, is expected to increase the ability of affordable housing organizations to sell deed-restricted ADUs to eligible low-income homeowners.

AB 670 (Friedman) – HOA Limitations prevents homeowners' associations from barring ADUs. Many single-family neighborhoods in California were established as common-interest developments under the Davis-Stirling Common Interest Development Act. These properties are typically governed by a set of Covenant, Conditions and Restrictions (CC&Rs), which often restrict the types of construction that can occur within and adjacent to a member's home. AB 670 makes unlawful any HOA condition that "prohibits or unreasonably restricts" the construction of ADUs on single-family residential lots.

AB 671 (Friedman) – Local Government Assistance requires local governments to include in their General Plan housing elements plans to incentivize and promote the creation of affordable ADUs. The law also requires HCD to develop, by Dec. 31, 2020, a list of state grants and financial incentives for ADU development.

Surplus Land Availability, Planning and Impact Fee Data

Several new laws intend to collect and make information available regarding surplus state and local land suitable for affordable residential development and to revamp the Surplus Lands Act procedures to ensure that affordable housing entities have early opportunities to purchase available land. (For additional information on HCD's release of interactive maps identifying surplus properties, see Holland & Knight's previous alert, "New California Surplus Lands Maps and Legislation to Facilitate Affordable Housing," Sept. 17, 2019.) Other notable laws require reporting on impact fees and HCD to prepare a 10-year housing data strategy.

AB 1486 (Ting) – Surplus Lands Act Process Amendments expands the Surplus Lands Act's (Act) requirements for local agencies in an effort to achieve more affordable housing on surplus properties. Existing law requires agencies, when disposing of surplus land, to first offer it for sale or lease for the purpose of developing affordable housing. The bill analysis states that local agencies have attempted to circumvent the Act process in the past. Notable amendments include a new requirement for a local agency to provide information about its disposition process to HCD and for HCD to submit, within 30 days, written findings of any process violations that have occurred. Amendments also provide that a local agency that violates the Act is liable for 30 percent to 50 percent of the final sale price.

SB 6 (Sen. James Beall) – Available Residential Land requires local agencies preparing a housing element or amendment on or after Jan. 1, 2021, to submit an inventory of land suitable residential development. Additionally, new law requires HCD to provide to the Department of General Services a list of lands suitable and available for residential development that were identified by a local government as part of the housing element. The Department of General Services must create a database of information regarding available local and state lands available and searchable by the public online.

AB 1255 (Rivas) – Surplus Public Land Inventory further requires agencies to make a central inventory of all surplus land and to report such information to HCD by April 1 of each year, beginning April 1, 2021. Agencies are further required to provide a list of its surplus land to requesting parties without charge. HCD must then report the information to the Department of General Services for inclusion in a digitized inventory or surplus properties.

AB 1483 (Assembly Member Tim Grayson) – Housing Impact Fee Data Collection and Reporting requires local agencies to make information available on housing development fees, applicable zoning ordinances and standards, annual fee reports and archived nexus fee studies. Such agencies are then required to update the information within 30 days of any changes. Additionally,HCD will be required, on or after Jan. 1, 2020, to prepare a 10-year housing data strategy that identifies the data useful to enforce existing housing laws and inform state housing policymaking. Among other information requirements, the strategy must include information that provides a better understanding of project appeals, approvals, delays and denials and provides an understanding of the process, certainty, costs and time to approve housing.

SB 235 (Sen. Bill Dodd) – Napa Regional Housing Need Allocation Reporting allows the City of Napa (city) and County of Napa (county) to reach an agreement under which the county would be allowed to count housing units built within the city in connection with the approximately 700 unit Napa Pipe project toward the county's regional housing needs assessment requirement. The governor's signing statement included an unusually direct message that the governor "expects permits will be issued expeditiously by the local jurisdictions, allowing [the] project to proceed immediately."

CEQA and Housing

Legislative efforts regarding CEQA include an important revision broadened the definition of a major transit stop as well as streamlining the process for supportive housing and homeless shelter projects.

AB 1560 (Friedman) – Defining "major transit stop" broadens the definition of a "major transit stop" under Public Resources Code Section 21064.3 to include bus rapid transit. Projects located within a half-mile of a qualifying bus rapid transit stop that meet other qualifying conditions may qualify for multiple benefits: parking reductions pursuant to the State Density Bonus Law; CEQA infill housing, aesthetic and parking exemptions; SB 375 streamlining for qualifying transit priority projects; a less than significant Vehicle Miles Traveled (VMT) impact presumption. The new definition also applies to local incentives, such as those adopted per Measure JJJ and implemented in the City of Los Angeles' Transit Oriented Guidelines, for residential projects located within 1,500 feet of a major transit stop.

SB 744 (Sen. Anna Caballero) – No Place Like Home Projects streamlines the approval process for supportive housing projects by clarifying that a decision to seek funding through the No Place Like Home program is not a project for the purpose of CEQA. No Place Like Home is a voter-approved bond measure that will allocate up to $2 billion for the development of permanent supportive housing and wrap around mental health services. The new law also provides a number of clarifying amendments that ensures a local government's design standards, impact fees and exactions are applied similarly to supportive housing projects as other residential projects in the same zone.

AB 1197 (Assembly Member Miguel Santiago) – CEQA Exemption for Supportive Housing and Emergency Shelters exempts from CEQA, until Jan. 1, 2025, any action taken by certain local public agencies to convey, lease, encumber land or provide financial assistance in furtherance of providing emergency shelters or supportive housing in the City of Los Angeles. The legislation carried an urgency clause, making the new law effective on Sept. 26, 2019.

Funding

Hopes of a return to Redevelopment Authority days were dashed when Gov. Newsom vetoed SB 5 (Beall), which would have created the "Affordable Housing and Community Development Investment Program,"a program similar to redevelopment in which cities and counties could redirect local property tax revenues toward projects such as affordable housing. In his veto message, Gov. Newsom cited the potential for the program to cost $2 billion annually. The governor and Legislature did, however, successfully enact into law a number of bills aimed at increasing overall funding for housing development, including laws that will create new regional finance agencies in the Bay Area and the San Gabriel Valley. Such housing bills include:

AB 1487 (Chiu) – Bay Area Housing Finance Authority (BAHFA) establishes a new regional authority to raise, administer and allocate funding for affordable housing in the San Francisco Bay area, and provide technical assistance at a regional level for tenant protection, affordable housing preservation and new affordable housing production. BAHFA will be governed by the Metropolitan Transportation Commission (MTC) Board and staffed with MTC personnel, but will operate as a separate legal entity than MTC. The law permits BAHFA, with approval from the Association of Bay Area Governments, to place measures on the regional ballot measure to raise funding for affordable housing, including parcel taxes (on per parcel basis) or special taxes on businesses (measured by gross receipts).

SB 751 (Sen. Susan Rubio) – San Gabriel Valley Regional Housing Trust (Trust) authorizes the creation of the Trust, a joint powers authority, by the County of Los Angeles and any or all of the cities within the jurisdiction of the San Gabriel Valley Council of Governments, with the stated purpose of funding housing to assist the homeless population and persons and families of extremely low, very low and low income within the San Gabriel Valley. SB 751 authorizes the Trust to fund the planning and construction of housing, receive public and private financing and funds, and issue bonds.

AB 116 (Ting) – Enhanced Infrastructure Financing District Creation removes the requirement that Enhanced Infrastructure Financing Districts (EIFDs) must receive voter approval prior to issuing bonds. EIFDs were created by the Legislature in 2014 after the demise of redevelopment in order to allow local governments to devote tax-increment financing for public and private projects such as transportation facilities, environmental remediation and affordable housing. Instead of requiring voter approval, the law will now permit the EIFD's governing body to issue bonds as long as its resolution to do so contains specified information related to the issuance of the bonds, and the board holds at least three public hearings on an enhanced infrastructure financing plan. (For more information on EIFDs and related infrastructure financing mechanisms that could assist your project, see Holland & Knight's previous alerts, "Enhanced Infrastructure Financing Districts," Nov. 12, 2014, and "What's Old, What's New and What Works," October 2016.)

SB 196 (Beall) – Community Land Trust Tax Exemption enacts a new welfare exemption for property owned by a Community Land Trust (CLT) that is being or will be developed or rehabilitated as housing. Traditionally, under California law property used for religious, hospital, scientific or charitable purposes is exempt from property taxes under the "welfare exemption." The new legislation extends the exemption during the construction phase until the homes are sold, but provides that a CLT will be liable for property taxes if the property was not developed, rehabilitated, or in the course of construction within 5 years of the lien date following its acquisition.

AB 1743 (Bloom) – Welfare Exemption expands the properties that are exempt from Community Facilities District (CFD) taxes to include properties that qualify for the property tax welfare exemption, and limits the ability of local agencies to reject housing projects because they qualify for the exemption.

SB 113 (Committee on Budget and Fiscal Review) – National Mortgage Special Deposit Fund (Fund) enables $331 million in state funds to be transferred to the Fund to provide funding for borrower relief and legal aid to vulnerable homeowners and renters.

AB 1010 (Assembly Member Eduardo Garcia) – Housing Program Eligible Entities allows duly constituted governing bodies of Native American reservations and Rancherias eligible applicants to participate in various state affordable housing programs.

Conclusion

The Legislature's housing output is certainly impressive in terms of total volume – and the new ADU package and SB 330 are important steps forward for homebuilders and housing advocates alike. But it is important to put these efforts within the context of the immense scale of California's housing supply crisis.

California home values remain the highest in the nation, and California renters pay 43 percent above the nationwide median, leading to immense strain on low- to moderate-income households. The homelessness crisis is evident on the streets of every city, and the state's homeless residents represent a quarter of the national total. Yet homebuilding in California has averaged less than 100,000 new units per year, much slower than in other states.

Prompted by the important work of the "Three P's" Coalition for Housing Production, Protection and Preservation, the governor pushed for a major effort that would take dramatic steps forward on all three of these areas, by limiting the ability of local governments to obstruct housing development, and even promising to withhold state transportation funding from local governments that fail to approve their fair share of affordable housing.

In the end, the Legislature's statewide rent control bill represented an historic step forward for "Protection" and "Preservation." But laws that would have represented a comparably dramatic step forward for housing production, such as Sen. Scott Wiener's SB 50, were not enacted. (SB 50, which will return next session, would eliminate highly restrictive zoning rules near existing job centers and public transportation.) The governor abandoned his proposal to withhold transportation funds from local governments that fail to meet their fair share of housing goals. Meanwhile, midyear statistics show that 2019 new housing starts may even decline in production from prior years – and certainly will come nowhere near the 500,000 units annually that would be necessary to stay on pace to meet the administration's goals.

In this year's package of housing laws, the Legislature has continued emphasizing (as seen in AB 68, AB 881, AB 101, AB 1485, SB 744, AB 1197, AB 1763 and AB 430) that it believes that the best way to build housing is to reform and streamline the local review process and move toward a "by right" model for housing that complies with local zoning and planning rules. However, the Legislature continues to apply this principle on a very limited scale rather than to advance the construction of the 3.5 million homes that Gov. Newsom has said must be built by 2025. In next year's session, builders and housing advocates must be active and vocal to ensure that California rises to the challenge of the housing crisis.

• The biggest news out of Sacramento in housing law is a historic measure providing statewide rent control and "just cause" eviction requirements for California renters.
• For advocates of increased housing production, the most significant effort enacted into law is the "Housing Crisis Act," which creates important new vesting rights for housing developments and limits on local review procedures.
• The California Legislature also again embraced Accessory Dwelling Units (ADU), with a package of laws that some are calling "the end of single-family zoning," allowing most single-family homes to be converted into three separate housing units.
• In its first year, the Newsom Administration is focusing on planning for housing development on surplus state lands and further reforming the regional housing needs allocation process. It remains to be seen whether next year's legislative session will yield the major steps forward on streamlining housing approvals that will be necessary for the administration to come close to meeting its goal of building 3.5 million homes by 2025.

As California's housing supply and homelessness crisis continues, the State Legislature has for the past several years passed numerous pieces of housing legislation in each legislative session. (See Holland & Knight's previous alerts, "A Closer Look at California's New Housing Production Laws," Dec. 6, 2017 and "California's 2019 Housing Laws: What You Need to Know," Oct. 8, 2018.) This year was no exception, with more than 30 individual pieces of housing legislation enacted into law.

This Holland & Knight alert takes a closer look at these laws, grouped into following categories:

• Tenant Protections. A statewide rent control measure that will take effect in 2020, among other tenant protection measures.
• Streamlining, Increasing Density and Reducing Barriers to Production. Sen. Nancy Skinner's "Housing Crisis Act" creates important new vesting rights for housing developments, and the Legislature has also enacted important new reforms to the Density Bonus Law and clarifications to SB 35's Streamlined Ministerial Approval Process.
• Accessory Dwelling Units and "Triplexes." A groundbreaking package of new laws that some are calling "the end of single-family zoning" will create new incentives and streamlined processes to build ADUs and triplexes.
• Surplus Land Availability / Planning and Impact Fee Data. New laws significantly expand Surplus Lands Act requirements for local agencies in an effort to achieve more affordable housing on surplus publicly owned properties.
• CEQA and Housing. The major transit stop definition was broadened to make more projects eligible for streamlining and a handful of limited California Environmental Quality Act (CEQA) exemptions were created for specific homelessness projects.
• Funding. Gov. Gavin Newsom vetoed a bill that would have created an "Affordable Housing and Community Development Investment Program" that would have revived redevelopment, but he signed a number of smaller funding bills, including laws that will create new regional finance agencies in the Bay Area and the San Gabriel Valley.

This alert also includes some observations about the important work California still needs to do to stem the housing crisis, and consider what may be around the corner in the 2020 legislative session. Except where noted, these new laws take effect Jan. 1, 2020.

Tenant Protections

The most significant housing law of the 2019 legislative session was the enactment of a statewide rent control law.

AB 1482 (Assembly Member David Chiu) – The Tenant Protection Act of 2019 enacts a cap of 5 percent plus inflation per year on rent increases statewide for the next 10 years. The new law does not apply a cap to vacant units, and owners can continue to reset rents to market rate at vacancy. It also prevents landlords from evicting certain tenants without landlords first providing a reason for the eviction and requires relocation assistance. The law does not apply to properties built in the last 15 years, nor does it apply to single-family home rentals (unless owned by large corporations) or to projects already under construction or under current rent control schemes. The new law defers to more stringent local measures, including existing local rent control with lower limits and local just cause eviction laws. The law's anti-eviction protections, which would limit evictions to lease violations or require relocation assistance, will kick in after a tenant has lived in an apartment for a year. Gov. Newsom's enactment of a rent cap comes less than a year after California voters rejected a ballot measure that would have expanded local rent control policies statewide, which would have likely resulted in tighter restrictions in some cities than those now offered by AB 1482. (For additional detail, please see Holland & Knight's previous alert, "Rent Control Bill Gets Gov. Newsom's Support as Clock Ticks on Deadline for New Laws," Sept. 9, 2019.)

AB 1110 (Assembly Member Laura Friedman) – Noticing Rent Increases requires 90-day notice, rather than 60-day notice, before a landlord may increase the rent of a month-to-month tenant by more than 10 percent.

SB 329 (Assembly Member Holly Mitchell) – Housing Discrimination prohibits landlords from discriminating against tenants who rely on housing assistance paid directly to landlords, such as a Section 8 voucher, to help them pay the rent.

SB 18 (Sen. Nancy Skinner) – The Keep Californians Housed Act ­removes the Dec. 31, 2019, sunset date on a state law which gives tenants at least 90 days' notice before their tenancy can be terminated if a landlord loses ownership of their rental property as a result of a foreclosure sale.

Streamlining, Increasing Density and Reducing Barriers to Production

Sen. Skinner's SB 330, the "Housing Crisis Act of 2019," stands out as the most important new law affecting large-scale housing developments.

SB 330 (Skinner) – Housing Crisis Act of 2019 includes a number of new procedural protections, including the following:

• Preliminary Application Protections – limitations on a jurisdiction's ability to change development standards and zoning applicable to the project once a "preliminary application" is submitted
• Application Completeness Streamlining – amends the Permit Streamlining Act to specify what constitutes a "preliminary application" and states that a jurisdiction has one chance to identify incomplete items in an initial application and after that may not request the submission of any new information that was not in the initial list of missing items
• Fees/Exactions Limitations – prevents jurisdictions from increasing exactions or fees during a project's application period, but allows such increases if the resolution or ordinance establishing the fee calls for automatic increases in the fee over time
• Hearing Limitations – prohibits cities or counties from conducting more than five hearings if a proposed housing development complies with the applicable, objective general plan and zoning standards in effect at the time an application is deemed complete
• Downzoning Prohibitions – prohibits a jurisdiction (with some exceptions) from enacting development policies, standards or conditions that would change current zoning and general plan designations of land where housing is an allowable use to "lessen the intensity of housing"; from placing a moratorium or similar restrictions on housing development; from imposing subjective design standards established after Jan. 1, 2020; and limiting or capping the number of land use approvals or permits that will be issued in the jurisdiction, unless the jurisdiction is predominantly agricultural

Some of the most important provisions in SB 330 sunset on Jan. 1, 2025, if not extended. (For additional detail on SB 330, see Holland & Knight's previous alert, "California Legislature Passes Housing Crisis Act of 2019 and Rent Control Bill, Among Others," Sept. 12, 2019; For background on the Housing Accountability Act, upon which SB 330 builds, see Holland & Knight's previous alert, "California Governor Signs into Law Major Reforms to Housing Accountability Act," Sept. 29, 2017.)

AB 1763 (Chiu) – Density Bonuses for 100 Percent Affordable Projects creates enhanced density bonus options, including a potential 80 percent increase in base density and unlimited density bonuses for qualifying projects within a half-mile of a major transit stop, under the State Density Bonus Law. However, this only applies to projects that consist of 100 percent affordable housing (no more than 20 percent moderate-income, and the remainder for lower-income).

AB 1485 (Assembly Member Buffy Wicks) – Amendments to SB 35's Streamlined Ministerial Approval Process makes a number of important clarifications to SB 35 of 2017, a law that allows qualifying housing and housing-rich mixed-use projects to qualify for a streamlined, ministerial CEQA-exempt approval process if the project meets the local government's objective zoning, subdivision and design review standards, provides a specific minimum number of affordable housing units, agrees to pay prevailing wages to construction workers, and meets other qualifying criteria. AB 1485 amends SB 35 in several ways:

• Moderate-Income Options – broadens eligibility for SB 35 to Bay Area projects that provide 20 percent of their units for moderate-income households (less than 120 percent of area median income), under certain conditions
• Calculating "Two-Thirds" Mixed-Use Projects – clarifies that the calculation to determine if a project qualifies for SB 35 where it consists of two-thirds residential excludes underground space such as parking garages and basements
• Approval Expiration Dates – clarifies that the three-year expiration for SB 35 approvals in case of litigation expires three years after a final judgment upholding the approval, and clarifies that the approval also remains valid as long as vertical construction of the development has begun and is in progress
• Subsequent Permits – clarifies that local governments must issue subsequent permits – such as demolition, grading, building permits and final maps – without unreasonable delay, as long as those subsequent permit applications substantially comply with the approved SB 35 permit
• Standards of Review and Consistency with Other Laws – clarifies that the standard for determining whether a project qualifies for SB 35 is highly deferential to the project applicant: a project complies with SB 35's criteria as long as "there is substantial evidence that would allow a reasonable person to conclude" that the development complies
• Housing Accountability Act– clarifies that under existing law, SB 35 projects are entitled to protection under the Housing Accountability Act

(For further information on SB 35's streamlined ministerial approval process, see Holland & Knight's previous alerts, "California Issues Initial Implementation Guidance on 2017 Housing Laws," Feb. 15, 2018, and "A Closer Look at California's New Housing Production Laws," Dec. 6, 2017.)

AB 101 – Housing Development and Housing 2019-20 Budget Act – requires local governments to provide "by right," CEQA-exempt approvals to certain qualifying navigation centers that move homeless Californians into permanent housing. The law, which took effect on July 31, 2019, also creates additional incentives for cities to comply with their mandates to plan for sufficient housing in their Housing Elements, and provides some modest additional remedies that the state can use in court when cities fail to comply with housing element law. These reforms fall well short of Gov. Newsom's proposal at the beginning of 2019 to withhold state money from cities that fail to plan for and approve sufficient housing.

AB 430 (Assembly Member James Gallagher) – The Camp Fire Housing Assistance Act of 2019 is intended to create housing relief in areas of Butte County, where the housing stock was devastated by the 2018 Camp Fire. The new law creates a streamlined, ministerial CEQA-exempt approval process in and adjacent to the cities of Biggs, Corning, Gridley, Live Oak, Orland, Oroville, Willows and Yuba City for qualifying housing developments that comply with those localities' objective zoning, subdivision and design review standards.

AB 1783 (Robert Rivas) – Farmworker Housing creates a streamlined, ministerial CEQA-exempt approval process for qualifying agricultural employee housing developments on land zoned primarily for agricultural uses.

Many people approach tax season with some level of trepidation. And for good reason - taxes are complicated! If you're not a tax expert, it can be daunting to dig into the minute details of tax law. Stumbling through all the minor details can make you worried you've missed something. By familiarizing yourself with some landlord tax basics, however, you can decrease your anxiety and feel more prepared at tax time. Here are some key things you'll want to know.

Landlord Deductions

The law is very favorable to landlords, and there are lots of deductions you can take. Most items and services related to your business that are reasonable and necessary are deductible. Deductions may include loan and business card interest, property depreciation, insurance, fees and taxes, professional services, utilities, travel costs, equipment and supplies, marketing costs, home office costs, tax preparation costs, and the like. 

Record Keeping

Be sure to keep detailed records. Documenting all your income and expenses, especially the expenses you plan to deduct, is important evidence that will support the tax information you submit to the Internal Revenue Service. Save proof of money exchanges and include as many details as possible, like date, amount paid or received, person who paid or person who received the money, nature of transaction, and anything else you feel is important. If you don't have actual documentation, you can use credible evidence to back most expense claims, except for some travel claims, meals over $75, entertainment, and certain equipment. Chances are it'll be easiest to keep track of your income and expenses electronically. Using a service like TenantCloud's income and expense tracker helps you automatically keep a consistent manner of accounting in near real time. By tracking and keeping everything in a central location, it'll make this money exchange tracking process much easier for you.

You will also want to properly store various business documents. If you do this locally on your computer, consider keeping backup copies in a cloud-based service, like TenantCloud, where you can access documents without being limited by your proximity to local copies. Uploading documents mentioned above and legal documents, such as deeds, leases, inspections, permits, business records, insurance policies, past taxes, and the like, will also help you in case of emergency; if anything happens to your local copies, you can rest assured that you haven't permanently lost your records.

Schedule E

To file your taxes, you'll need to understand which tax forms apply to your situation. There may be a few different tax forms you'll need to fill out, depending on your situation, but the most common and the one you'll likely use is the Schedule E.

Form 1040, Schedule E, Supplemental Income and Loss

As a landlord, you'll file a Schedule E. The Schedule E is where you'll list your income and expenses. Expenses you'll list on this form include advertising, auto and travel, cleaning and maintenance, commissions, insurance, legal and other professional fees, management fees, mortgage interest paid to banks, other interest, repairs, supplies, taxes, utilities, and depreciation expenses. How much of this schedule you'll need to fill out depends on ownership. If you own your rental property as an individual, you’ll file your landlord taxes entirely on Schedule E. If you own your rental property through a business entity, then the business entity will submit a tax form, and you’ll fill out a partial Schedule E. If for any reason you aren't sure, check the owner names on your deed to see if the owner is you or your business entity.

There are other more complicated arrangements to consider as well. If you co-own a property with another person (other than your spouse) or several other people, you’ll file taxes on a Schedule E only on your portion of ownership, while your owner or co-owners will fill out their portions on their Schedule Es. When you co-own a property with your spouse and you file jointly, however, no matter how the property ownership is divided, you will file only one Schedule E.

Generally business entities have different forms to fill out, but there are a couple exceptions to this: Limited liability corporations (LLCs) with one member are treated as sole proprietorships for tax purposes and only need a Schedule E. A two-member LLC owned by spouses living in community property state, like California, Texas, Arizona, electing to be a disregarded entity also uses a Schedule E.

Passive Activity Laws

Passive activity laws are important to understand at least on a basic level so you aren't caught off guard by them at tax time. Essentially these laws dictate that you can’t deduct losses from passive activities against income from active activities. So if you lose money on your rentals this year, you probably can’t deduct the losses against, say, income from your full-time job, which is probably considered an “active” activity. You’ll have to wait until your passive activities bring in enough money to offset passive losses to receive the full benefit of your deductions. This process can span several years before you receive deductions on your passive losses. 

Tax Professionals

At the end of the day, you may want to just hire a tax professional until you understand more about landlord tax law. Taxes can be complicated, and a tax professional will make sure you're filing correctly; will help you understand the nuances of your particular local, state, and federal law situation; and will help you gain the most benefit while filing. Eventually, once you feel comfortable enough with landlord tax law, you may feel confident enough to do your taxes on your own, but until then, a good tax advice can go a long way.

Understanding tax implications, especially as a new landlord, can help you strategically approach your taxes. While the real estate rental tax landscape is complicated and easy to gloss over, one important tax law you'll want to understand is passive activity loss (PAL). Since most real estate rental income is considered passive income, this law will likely apply to you, and if it doesn't, you should know why. So let's dive in!

Active versus Passive

Active income is income you earn through continual work, like a salary, wages, and self-employment income. If you stop working, you generally stop receiving money. Under this concept, time equals money. Passive income, on the other hand, is money that comes to you when you aren't "actively" earning it. You may have initially worked to start an income flow (or simply invested money to start it), but the work you put in after the initial investment period is minimal or nonexistent.

When it comes to taxes in general, you can deduct only passive losses against passive income and active losses against active income. The Internal Revenue Service (IRS) generally considers rental real estate a passive activity, although there is an exception, which we'll get to. This means if your real estate rental expenses are greater than your rental income for the year - and most real estate rental properties don't turn a profit in the early years - you may have to wait for future tax years to claim your passive losses against future passive profits. While you may not be able to benefit from your deductions in the year they incur, the IRS allows you to roll them over from year to year until you are able to use them. If, however, you have other passive income from other sources, you can use that to offset your rental real estate passive losses in the year you incur them.

If, for example, you have a full-time job outside the real estate realm and you have a side business leasing your rental properties, you probably won't be able to deduct your passive real estate losses against your active income. Because of this type of situation, some landlords prefer to qualify their rental real estate business as an active activity to deduct rental real estate losses against other active income. Let's look at how you can qualify your rental real estate business as an active activity and what deductions you can claim if you can't.

Material Participation in Your Business as a Real Estate Professional

Qualifying as an Active Activity

As we mentioned earlier, most income from real estate rentals is considered passive and is subject to the PAL laws, but there are exceptions. If you've "materially participated" as a real estate professional in your rental real estate business, then the IRS considers your income from that business active income. To qualify as a real estate professional, more than half of your work for the year must be in real estate property activity. Renting real estate fits this category.

In addition to qualifying as a real estate professional, you must work at least 750 hours in your "trades and businesses." This 750-hour requirement is tricky. Each one of your properties requires 750 hours of work unless you elect to clump all your rental properties together as a single activity. If you have a lot of rental properties, electing to make them a single activity will greatly reduce the amount of time you must work; however, keep in mind that once you clump your properties together as a single activity, you can't unclump them later if another tax arrangement better suits your situation.

If you're married filing jointly, only one of the two of you must meet the criteria listed above, even if your spouse doesn't technically own the property. The qualifying person would need to meet the 750-hour threshold and spend more than half of his or her work time in real estate business activities. This means you can't add your hours to your spouse's hours to meet the 750-hour threshold. You or your spouse need to meet it independently. Be sure that you or your spouse document in detail the time spent on your real estate rental business. No one wants to be audited only for the auditors to find insufficient proof of business activity. A great place to store your work log is on TenantCloud's calendar. Not only does the TenantCloud calendar help you keep track of your time, but it automatically fills your calendar with tasks and reminders you won't want to forget, like "lease 12 will end in 30 days."

Deductions When Your Property Remains a Passive Activity

If you or your spouse don't qualify as real estate professionals - say you work a full-time job outside the real estate industry, your rental real estate business will be considered a passive activity. However, if you actively participate in your real estate rental business even if the business isn't considered an active activity, you're eligible to deduct up to $25,000 against your active income. To qualify as an active participant who isn't a real estate professional, you must own at least 10% of the rental properties and be making management decisions. In order to claim the full $25,000, your adjusted gross income (AGI) must be $100,000 or less. If your AGI falls between $100,000 and $150,000, you'll still be able to claim some of this $25,000, but the benefit will phase out at $150,000. (These amounts will be lower if you're married filing separately.)

Many rules have exceptions, and these tax laws are no different. If you have additional questions about how this tax law and active versus passive income apply to you, be sure to reach out to a tax professional.

What other tips do you have for landlords at tax time? Leave a comment below. We'd love to hear your thoughts or pieces of advice on this topic.

I’m currently in the midst of designing several bathroom remodels and multiple bathrooms in new build homes, so I have bathroom design constantly on my mind lately. Bathrooms are one of my specialties and really how I got my start in Interior Design (along with kitchen design), so I’ve been collecting bathroom inspirations photos for years now.

After studying thousands of bathroom photos and designing dozens over the past ten years, I’ve learned that not all bathroom design is created equal.

As a former engineer, my clients quickly learn that I’m a pragmatist. Form has to follow function, especially in a bathroom or kitchen. I don’t care how pretty it is or how cool it looks if it doesn’t work!

I’ll be honest, in my early days as a designer, I probably made all of the mistakes listed below. But, every job teaches me something new, and I never repeat those missteps again. If you’re getting ready to remodel or design a bathroom, make sure that you or your designer avoids these critical bathroom remodeling mistakes.

# 1 YOU HAVE TO GET WET TO TURN ON THE SHOWER

This list isn’t necessarily ranked in order; however, positioning the shower so you have no choice but to get drenched in freezing cold water every morning has to be the worst bathroom design mistake you can make.

The Shower Controls in This Bathroom Are Directly Opposite the Door NOT under the Shower Head

For some reason, people became convinced that the shower controls – the on/off and temperature valves – need to be located directly under the shower head. But, often the shower head is at the far end of the shower from the door, meaning you can’t reach the controls unless you step into the shower.

I have seen showers where the client keeps the shower head pointed towards the wall while they turn on the water. This doesn’t really seem like an optimal user experience for someone’s dream bathroom.

The worst shower layout is one in which you have to get into the shower and also close the door to turn on the shower so there’s no escape. Terrible! I’ve definitely encountered this setup in hotels, and it totally sucks.

So, how do you avoid this happening to you? Look at the plans for your bathroom and picture yourself opening the door and reaching for the controls. Can you easily access them without stepping into the shower and under the shower head?

Remember, most shower doors swing both ways so as long as you can open it one way and reach your controls, it works.

If you can’t, then another revision is definitely in order. You can usually fix the issue by moving either the controls or the door.

# 2 POOR OR BAD VANITY LIGHTING

Vanity lighting design definitely deserves its own post, and I am planning to publish one soon. My biggest pet peeve with many Insta-famous or HGTV-trendy bathrooms is the lighting design at the vanities.

If you have a smaller vanity (42″ or less), then often (but not always) your only solution is to place the vanity light over the mirror. However, for larger vanities, I think it’s a mistake to sacrifice optimal lighting for a cool look or fancy decorative mirror.

Vanity with a Sconce on Either Side of the Mirror and Recessed Can Above

Spacing vanity lighting so that it feels balanced and proportional with the mirrors and the cabinetry is a fine art. I agonize over it on every single bathroom project I design. My priority is always to provide a sconce on each side of the mirror with the bulb height between 60″ and 66″. When combined with a recessed can over the sink, the three light sources diffuse hard shadows.

If you’ve ever looked at yourself in a bathroom mirror and thought you aged 10 years, look up. I bet the light source is a downward facing sconce centered over the mirror.

#3 NOT PLANNING STORAGE APPROPRIATELY

A Double Master Bath Vanity with Tons of Storage and Drop Down Dressing Table

So often I see photos of beautiful bathrooms with absolutely terrible storage, especially in master bathrooms. The furniture style vanities can look really pretty but are they totally practical?

It’s so important to seriously consider everything you need to store in your bathroom both for the things you use every day in your beauty and hygiene routine as well as linens and other supplies like toilet paper. Once you understand everything you use on a daily basis, then think about the best way to store it. Do you have serums, moisturizers, makeup, etc. that needs to remain vertical? How tall are the products you use? How long and wide are your hair brushes?

I like to incorporate a variety of drawer depths whenever possible as well as cabinets with doors. The sink cabinet can be a great place for hiding the wastebasket. I also keep tall products like hairspray on a lazy susan from Container Store under my sink.

This Polished Nickel Medicine Cabinet From Restoration Hardware Adds Tons of Storage

I know medicine cabinets aren’t as sexy as a gorgeous decorative mirror, but they are ridiculously practical in smaller bathrooms. In the vintage style bathroom above, we only had room for a single 48″ freestanding vanity, so we maxed out storage for small toiletries by adding this polished nickel medicine cabinet from Restoration Hardware. I’ve lost count of how many times I’ve used this exact medicine cabinet because it’s very handsome, generously sized, and comes with an integrated light and electrical outlet. No more razor or electric toothbrush sitting on the counter!

#4 NOT INCLUDING A HAND SHOWER

Masculine Modern Farmhouse Bathroom: Walk-In Shower with Polished Nickel Fixtures

Maybe you do your own cleaning and maybe you don’t. Either way, someone is going to be cleaning your gargantuan walk-shower at least every couple weeks. If you don’t include a hand-shower, then the only way they’ll be able to rinse down the shower walls is with a bucket. And, that’s really just mean.

I love my hand shower for both cleaning and for rinsing my hair. If you set it up correctly, you can run your main showerhead and your hand shower at the same time. It’s a more affordable version of body jets, especially if you mount the hand shower on an adjustable wall bar, which I highly recommend.

#5 TRYING TO CHEAP OUT ON PLUMBING FIXTURES

During my very first interior design related job – at the Great Indoors in Chandler, Arizona, 14 years ago – a very nice plumbing salesman educated me on the evils of cheap plumbing. He told me that cheap plumbing fixtures from big box stores or discount outlets are often made with cheap plastic parts that break instead of metal.

Masculine Modern Farmhouse Bathroom: The Mirabelle Pendleton Tub Filler in Polished Nickel Specified through Ferguson

Fast forward ten years. I was freshening up the hall bathroom in our last house and bought an inexpensive version of a name brand faucet at a big box hardware store even though I warn my clients against this very thing. When we couldn’t figure out how to install it ourselves, we had to call a plumber. After two hours, he informed me he needed to go out and buy all new parts for the inside of the faucet because it was “cheap plastic junk.” So that $90 faucet ended up costing over $300.

I specify all plumbing for my projects through my sales representative at the local plumbing supply companies. They know their product inside out. They know all the parts and pieces that need to be included like valves, and wall elbows, and escutcheon for hand showers. And, they stand behind the product and help you when something goes wrong or needs replacing. They are completely invaluable members of my team.

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I could have gone on and on with more bathroom remodeling mistakes that I see people make all the time, so maybe I need to write a follow up post. What do you think are the biggest bathroom remodeling or bathroom design mistakes people make? Are there any bathroom trends you’ve been spotting that drive you nuts with their impracticality? Let me know in the comments.

A few months ago, a college friend reached out to me with some questions about renovating his kitchen using IKEA cabinets. I’ve designed two of my own kitchens with IKEA kitchen cabinets and several for clients, so I was able to give him some advice on how to plan for and work with them.

#1

IKEA SEKTION CABINETS ARE FRAMELESS

If you have an old outdated kitchen, chances are that your cabinets are framed. This means that there is a lip around the front face of the cabinet, maybe up to 1.5″, like a picture frame. IKEA cabinets are frameless, which means that there is no lip.

Why does this matter? Frameless cabinets have up to 10% more storage per linear foot than framed cabinets. The drawers and pullouts can maximize the width of the box and not be limited to the opening size. Aesthetically, it means that you won’t see any of the cabinet box behind the doors and drawers. You will only see the doors and drawers and no hinges.

Functionally, it is important to understand the difference in framed vs. frameless because there are different rules for frameless cabinets when it comes to clearances at walls and when you change cabinet depths. If you don’t leave space between the cabinet and the wall, for example, your door or drawer won’t be able to open.

#5

SEKTION CABINET BOXES ARE NOT FINISHED

IKEA cabinet boxes come in two colors – white and dark brown. The white boxes are meant to be paired with all of the light colored doors and the brown boxes all of the dark doors.

No matter what door you choose, the box of the cabinet will not match the door. If you have an exposed end anywhere in your kitchen, you need a panel to finish it. This includes, for instance, the side of a pantry cabinet that is adjacent to a wall cabinet and base cabinet.

#8

YOU NEED A DECO STRIP IF YOU WANT UNDER-CABINET LIGHTS

Under-cabinet lights require a little lip under the wall cabinet so that you don’t see them. Since IKEA cabinets are frameless, they don’t have a lip. They do sell deco strips that you can add to the bottom of the cabinet to conceal the under-counter lights. The wall cabinet panels actually come sized to accommodate a 2″ high deco strip.

In the above kitchen by Sarah Richardson Design, you can clearly see the deco strip under the wall cabinets. You can also see how Sarah used panels to cover the sides of the cabinets and in between the stacked cabinets. Inexpensive cabinets now look like more expensive custom cabinets.

I have been increasing the backsplash height to account for the 2″. There is nothing worse than discovering (too late) that your coffee maker won’t fit under your wall cabinets. However, this might not be possible if you have an 8′ ceiling and want to use the 40″ high uppers.

You may have heard that design is best left to the professionals, but that doesn’t mean that you can’t give it a go yourself. If you have a good eye for design and the skills to create something truly unique, taking on a project as a non designer can be beneficial. However, it’s important to have a good idea of what you are doing and what you want to achieve.

Top Design Tips for Non Designers

• Use a Lot of Contrast - It doesn't matter what you are designing, it is important that you use plenty of contrast between the background and font. You should choose a background color and font color that are very different so as not to cause eye strain when someone is reading the text. You will find that black text and a white background work extremely well, whereas light grays and yellows do not. You don’t want people to have to squint to read anything on the design.
• Choose Almost Black Over Black - Don’t make the mistake of assuming that there is only one type of black color, as this is not the case. Rather than using pure black for text, choose almost black as this is a lot easier to read when it is on a white background.

• Place Important Content First - One of the most important things to think about is placement and layout. When you are designing anything, you should place important information first. You only have a few seconds to engage and interest the audience,which is why the key facts need to be the first thing they see. All important information should be placed at the top of the design and visible from a distance.
• Align Everything - If something doesn't feel right about your design, take a look at the alignment. When the alignment is off, aspects of the design can feel out of place and messy. It’s a lot more aesthetically pleasing to have everything aligned, neat and organized.
• Design in Black and White First - Though you will surely be creating colourful artwork, start off by designing in black and white. Once you have added individual elements and are happy with the layout, add color. This will help you to focus on the design itself, rather than focusing too much on whether or not you are choosing the right colors.  Color evolves emotions, which can make it difficult to see design problems.

Taking on a new design project as a non designer can be daunting, but there’s nothing to say that you can’t create a fantastic logo or banner. Regardless of what you are designing, think carefully about the colors you are using and the layout of text, images and graphics. You should want your design to be unique and intriguing, but you don’t want it to be complicated and confusing. Remember advertisers (the clients your designing for) want a return on investment.  So you’ll soon know if your designs are working or not. If you’d like to find out about measuring ROI – read this Ultimate Banners article.

Author:

Nichelle Antoque
Content Outreach Manager
Ultimate Banners