What Hawaii can learn from California’s long and bumpy road to ADU stardom

by George Ashford, Andrew Justus, Alex Armlovich, Niskanen Center, August 13, 2024 (Creative Commons License)

This spring, Hawaii joined the growing list of states that have loosened restrictions on Accessory Dwelling Units (ADUs) to alleviate the housing shortage. Also known as “granny flats,” ADUs are apartments on the same lot as another, larger structure, typically a single-family home. Hawaii’s new law, SB3202, requires the state’s five counties to create new zoning districts that allow at least two ADUs on single-family lots. 

Unlike in California, where pro-housing legislators have spent nearly a decade easing ADU restrictions, Hawaii law allows local governments to set restrictive development standards for ADUs. This is not uncommon; most states making their first effort to allow ADUs leave exploitable loopholes, which result in underwhelming initial outcomes. If  Hawaii’s legislators hope to achieve positive outcomes from their work in the 2024 legislative session, they should follow California’s example by shielding ADUs from burdensome local restrictions.

California’s ADU success

California passed its equivalent of SB3202 in 2016, requiring local governments to allow ADUs in all single-family zones. In the following years, legislators built on their initial victory with a steady trickle of reforms expanding state protections for ADUs. As local governments imposed new standards to limit ADU development, the state created new exemptions from those standards. 

The result has been an explosion in ADU production. California saw nearly 28,000 ADU permits in 2023, constituting 21% of total housing permits for that year. Even as overall housing construction remains stagnant in the Golden State, ADU growth shows no sign of slowing. New ADUs are also far more likely to be affordable to low-income renters than other kinds of new housing. ADUs are proving one of California’s most successful tools to fight the housing shortage, making the state a national ADU leader. It will remain so until other states can replicate California’s victory in the ongoing game of NIMBY whac-a-mole for ADUs. 

Hawaii will likely have to embrace a similar approach to achieve similar results. Like California’s first attempts at building more ADUs, SB3202 has a critical weakness: it gives local governments broad discretion to impose development standards that can make ADUs infeasible. This weakness, however, also presents an opportunity. California lawmakers did not know how local governments might seek to restrict ADUs, so they took the better part of a decade to pass the reforms that unlocked its current level of ADU production. With the benefit of hindsight, Hawaii can do it faster.

Hawaii state legislators can proactively build on SB3202 by protecting ADUs from unnecessary local restrictions. California legislation shows what effective state protections might look like. The Golden State’s experience setting the stage for an ADU boom indicates that Hawaii should establish reasonable size, height, and setback standards that supersede local standards where local standards are more restrictive, prevent local governments from charging disproportionate feeds for ADUs, limit local parking requirements, and provide pre-approved ADU plans for homeowners using the new law. 

Size and in-lot placement restrictions

Many harmful ADU regulations in California targeted the size of ADUs or where they are located on a given residential lot. These include minimum lot size, floor-area ratio, street frontage, and lot line setback requirements. While localities may view these restrictions as helping to preserve the aesthetic appeal of single-family neighborhoods, they can quickly become prohibitive to ADU development if applied too aggressively. To ensure they are not, Hawaii should consider creating a “statewide exemption ADU.” 

Passed in California in 2019 in response to unreasonably strict setback, size, and height requirements, a statewide exemption ADU law sets height, size, setback, or other spatial standards that override local standards if the local standards are more restrictive. In other words, it requires local governments to waive requirements that would make a reasonably sized ADU infeasible. This approach allows local governments to maintain some control over the aesthetics of their neighborhoods, as they may still impose standards that are less restrictive than the state’s, but ensures that they do not set unreasonable standards that subvert state ADU laws.

Fees

Unnecessary local government fees could also threaten the Hawaii legislature’s ADU ambitions. These include particular water and utility connection fees and “impact fees” charged to support local schools and infrastructure. ADUs developed within the footprint of an existing home do not always need new sewer and utility connections. Local governments sometimes charge new connection fees anyway, raising ADU development costs beyond what is required to meet the additional demand for local services. Disproportionate impact fees can similarly, and unduly, limit ADU development. A few years after the initial round of reform, California localities were charging ADU fees as high as $50,000 per unit, one-third of the median ADU construction cost in the state. 

California legislators saw that disproportionate fees were stifling ADU construction and significantly limited them. With the Golden State’s experience to draw from, Hawaii legislators need not wait for the same process to play out. Preventing counties from charging sewer and utility connection fees to internal ADUs and requiring that ADU impact fees be proportional to impact fees for traditional single-family homes would ensure counties can collect the revenue necessary to support new growth while keeping ADU development costs down.

Parking requirements

Another way to increase SB3202’s effectiveness is to limit parking requirements. One of the first steps California legislators took to ensure the success of their ADU reforms was eliminating parking requirements for ADUs near transit. Other states, including Colorado, Montana, Washington, and Massachusetts, limited parking requirements to some degree as part of their first round of ADU reforms.

With SB 3202, Hawaii gives local governments unlimited authority to impose parking requirements on ADUs. Development models show that these requirements are costly enough to significantly influence whether or not developers build new housing. With ADUs, where developers are likely to be ordinary homeowners with limited access to capital, keeping costs down is essential. Squeezing in a driveway or additional garage space is impossible on many single-family properties. Requiring homeowners to do so will make ADUs scarcer and more expensive.

Owner-occupancy requirements

Hawaii legislators should also consider banning owner-occupancy requirements for ADUs, as California did three years after their equivalent of SB3202 and Colorado, Montana, Washington, and Massachusetts did in their initial ADU legalization laws. Current Hawaii law does nothing to stop local governments from requiring property owners to live on the same lot as their ADU. 

These restrictions keep traditional builders out of the ADU development landscape, even though developers will likely have the most significant access to the capital needed to build ADUs. If ADUs are to contribute to Hawaii’s housing goals meaningfully, the state should not restrict who can build them.

Pre-approved plans

Besides protecting ADUs from overregulation, Hawaii can encourage construction by helping homeowners through the development process. A 2023 California law requires that all cities create pre-approved building plans for ADUs by 2025, but some of the state’s top ADU-permitting cities, such as Long Beach, have provided them for years. Pre-approved plans for ADUs can make construction more economical while giving communities more influence over aesthetics and can even facilitate competition from manufactured and modular ADUs. Reducing the “soft costs,” of ADU design and permitting,which often come hand-in-hand with confusing regulatory processes designed for industry experts, will help make the ADU development process accessible to a broader swathe of Hawaii homeowners.

Conclusion

The history of ADU reform in California shows that building ADUs at scale is not a one-and-done operation. Local governments are often reluctant to allow significant proliferation of ADUs in single-family neighborhoods and find creative ways to prevent it. Legislators in California monitored local implementation and removed pernicious barriers to ADU development as they arose. Hawaii legislators should do the same. Because California has already charted a course, Hawaii legislators also have an opportunity to be proactive, heading off the most burdensome local restrictions before they take effect. California’s experience indicates that doing so will pay off in new, affordable housing, and lots of it.

---30---

P: How Hawaii Can Make the Most of its ADU Law | Planetizen News 

GRIH: Prominent think tank urges state to ensure SB3202 is implemented | Grassroot Institute of Hawaii