SB9 vs. ADU Bonus Program: Choosing the Best Strategy for Your Property in San Diego

San Diego’s housing market is tough—tight inventory, high demand, and rising prices make it a constant challenge for property owners, renters, and developers. If you own property in San Diego and you’re considering adding units to maximize its potential, you’ve probably heard about SB9 and the ADU Bonus Program. Both are powerful tools to expand housing, but they take very different approaches. So, how do you figure out which one works best for your property?

This guide breaks down what you need to know about SB9 and the ADU Bonus Program, using real-world insights to help you make the right decision.

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Understanding SB9: California Housing Opportunity and More Efficiency Act

Let’s start with SB9. Signed into law in 2021, SB9 allows property owners to split single-family lots into two parcels and build up to four units on what used to be a single-family lot. The law is designed to address the housing shortage by increasing density in neighborhoods traditionally zoned for single-family homes.

Key Features of SB9

Lot Splits:

One of the most talked-about features of SB9 is the ability to split your lot into two. This opens the door to building separate units on each parcel, which can be sold or rented independently.

For example, if you own a larger lot in a suburban area, you can divide it, build two homes on each parcel, and sell them separately. This is a huge plus for property owners looking to unlock more value from their land.

Owner-Occupancy Requirement (for Lot Splits):

Here’s where it gets a little tricky. If you’re splitting the lot, you must occupy one of the units for at least three years. If you’re not planning to live on the property, this might not be the best option. However, if you’re adding units without splitting the lot, this requirement doesn’t apply.

One of the more creative projects we tackled was an SB9 non-lot split project in La Mesa. On paper, it might look like something out of the ADU Bonus Program because we added two detached units to an existing lot, but it was actually an SB9 project. The big difference? We didn’t split the lot, which meant we avoided triggering the owner-occupancy requirement that comes with lot splits under SB9.

This approach worked perfectly for the property owner, who wasn’t interested in living on-site. Instead, we focused on maximizing the existing lot’s potential by designing and building two new units that fit seamlessly with the property.

Infrastructure Upgrades:

SB9 often triggers infrastructure upgrades, especially for things like separate water meters, sewer connections, and fire safety requirements (yes, fire sprinklers). These can add time and cost to the project, but they’re necessary for creating fully independent units.

For instance, our La Mesa Project wasn’t without its challenges. Even without a lot split, we had to meet several infrastructure requirements—adding sewer connections, ensuring adequate water supply, and addressing zoning constraints. It felt like walking a fine line between SB9 and ADU regulations, but it was worth it. By the end of the project, we delivered two high-value rental units without the added complexity of parceling the land.

Advantages of SB9

• Flexibility: Create separate parcels and maximize property value.
• Ownership Potential: Allows you to sell individual units, which isn’t an option with ADUs.
• Ideal for Larger Lots: Works best for properties with enough space to accommodate a lot split.

Challenges with SB9

• Longer Timelines: The permitting process can take over a year, especially with infrastructure upgrades.
• Higher Costs: Lot splits and new units often require significant investment.
• Owner-Occupancy: Limits flexibility for developers or investors not living on-site.

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Exploring the ADU Bonus Program: A San Diego Initiative

Now, let’s talk about the ADU Bonus Program, which is unique to the City of San Diego. This program was designed to encourage property owners to build more Accessory Dwelling Units (ADUs) by offering density bonuses for affordable housing.

Key Features of the ADU Bonus Program

Expanded ADU Allowances:

The program allows you to add more ADUs than typically permitted by zoning laws, as long as you include a percentage of them as affordable housing units. This makes it easier to build multiple units on your property while helping meet the city’s housing affordability goals.

No Owner-Occupancy Requirement:

Unlike SB9, the ADU Bonus Program doesn’t require you to live on the property. This is a big win for investors and developers who want to maximize rental income without committing to owner-occupancy.

Streamlined Permitting:

San Diego has become very familiar with ADU projects, and the permitting process reflects that. The ADU Bonus Program benefits from a relatively straightforward and faster approval timeline compared to SB9.

Advantages of the ADU Bonus Program

• Faster Approvals: The city processes ADU applications more efficiently than SB9 lot splits.
• Lower Costs: No lot splits or major infrastructure changes are required, reducing upfront investment.
• Rental Potential: Adds significant rental income without the restrictions of ownership.

Challenges with the ADU Bonus Program

• Limited Scope: You’re expanding on your existing lot, not creating new parcels.
• Affordability Requirement: To take advantage of the density bonus, you need to dedicate a percentage of units as affordable housing, which could impact overall profitability.

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Key Differences Between SB9 and the ADU Bonus Program

When deciding between SB9 and the ADU Bonus Program, the right choice often comes down to your property’s location, size, and your long-term goals as an owner.

Lot Splits vs. Existing Lot Expansion

SB9 shines when you want to split a larger lot and build entirely separate parcels. For example, in our La Mesa project, the flexibility to add units without splitting the lot worked perfectly for the owner’s goals. However, if splitting your property and selling off parcels isn’t part of your plan, the ADU Bonus Program might be more your speed.

With the ADU Bonus Program, you’re working within your existing lot, adding units without creating new parcels. This makes it an excellent choice for property owners looking to generate rental income without the added complexity of dividing their property.

Permitting and Timelines

SB9 projects tend to have longer timelines due to the complexity of lot splits and infrastructure upgrades. Think fire sprinklers, water meters, and sewer connections—all necessary for creating fully independent units.

The ADU Bonus Program benefits from San Diego’s familiarity with ADU projects, which means faster permitting and fewer hoops to jump through. If speed and simplicity are your priorities, the ADU Bonus Program is the way to go.

Affordability Incentives

Here’s where the ADU Bonus Program takes the lead: it incentivizes affordable housing by offering density bonuses. If you’re willing to dedicate a percentage of your new units as affordable housing, you can build more units than typically allowed by zoning regulations.

SB9 doesn’t include these specific incentives, making it more focused on flexibility for property owners rather than addressing housing affordability directly.

Costs and Infrastructure

SB9 projects often come with higher upfront costs due to the need for infrastructure upgrades, especially when splitting lots. For example, in our La Mesa project, we had to address sewer connections and water supply even without splitting the lot.

The ADU Bonus Program typically avoids these costs, as you’re building within the existing lot’s infrastructure. This makes it a more budget-friendly option for many property owners.

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Which Option Is Right for You?

If your focus is on maximizing property value through lot splits and creating separate parcels, SB9 is a fantastic choice. It’s ideal for larger suburban lots and property owners who are willing to invest in a long-term strategy.

On the other hand, if you’re looking to generate rental income quickly and efficiently, the ADU Bonus Program offers a more streamlined approach. It’s particularly well-suited for urban properties and owners who want to expand without the added complexity of lot splits.

For larger lots with room to spare, SB9 opens up opportunities for significant development. But for smaller urban lots, the ADU Bonus Program helps you maximize density without overextending your resources.

For instance, while SB9 allowed us to creatively add two units in La Mesa, the ADU Bonus Program has been a go-to for property owners in areas like North Park and Hillcrest, where space is at a premium and speed matters.

Navigating the rules and requirements of SB9 and the ADU Bonus Program can feel overwhelming. That’s why having a partner who understands the ins and outs of both is invaluable. Whether it’s avoiding owner-occupancy rules with SB9 or leveraging density bonuses with the ADU Bonus Program, experience matters.

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Maximize Your Property’s Potential with Builders Now

At Builders Now, we’ve seen firsthand how both SB9 and the ADU Bonus Program can transform properties. Our team specializes in helping property owners navigate these options, tailoring solutions to meet your specific goals.

Whether you’re considering a lot split or looking to add multiple ADUs, we’re here to guide you every step of the way—from planning and permitting to construction and completion.

Ready to take the next step? Let’s talk about how we can help you make the most of your property while contributing to San Diego’s housing solutions.