Will SB 9 and 10 Make San Francisco Real Estate Affordable?

SB 9 and 10 in San Francisco and CA Real Estate

Hi friends,

With the recall in the rearview, the next big story in California was a pair of newly signed laws: Senate Bills 9 and 10.

Both bills try to help the state's affordable housing crisis. So... will they?

Here's some background:

• SB 9, aka the California Housing Opportunity and More Efficiency (HOME) Act, allows property owners to split a single-family lot into 2 lots and place up to 2 units on each, up to 4 units total. Exceptions are included for currently affordable/rent-controlled/market-rate housing and designated historic places. The resulting units can't be rented short-term (<30 days), and the owner must occupy one unit as their primary residence for 3 years after. 
• SB 10 allows local governments to streamline zoning for new multi-unit housing near transit or in urban infill areas, up to 10 units per parcel.
• For a deeper dive, read more here.

There's no question that the state needs more homes. For decades, California’s household population has been growing at a faster rate than its housing supply (until last year, oddly enough). 

But critics argue that these bills are not the answer. SB 9 in particular has drawn heat from advocates for Black and brown communities, low-income and unhoused populations. The bill has no affordability requirements for new units, and opponents say it opens the door to further gentrification.

Also questionable are the logistics of actually splitting your lot and building new units. Under SB 9, the homeowner must first pay off their existing mortgage. Then there's the challenge of getting a big construction loan in a time when building costs are extremely high (and in an extreme-HCOL city like San Francisco? fuggedaboutit).

Statewide, "just 5.4% of single family parcels would be financially capable of supporting new housing as a result of SB 9," according to estimates by UC Berkeley's Terner Center. At best that would mean ~700k new housing units, about 1/5th of Governor Newsom's desired 3.5m by 2025. 

Ultimately, more housing is good, and the state should get some thanks to these bills. But it will be pricey, it will take years, it won't necessarily be where it's most needed and certainly not in enough quantity to solve the housing conundrum. But hey... it's something.

If you have any thoughts, I'd love to hear them.

As always, please don't hesitate to reach out with any real estate questions. We're always happy (and grateful!) to help you and anyone you send our way!

Warmly,

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