According to HousingWire, California has enacted a series of housing laws over recent years designed to encourage construction of smaller, more affordable homes, but builders navigating these options say keeping up with the changes feels overwhelming. Developers have multiple pathways to work with, including accessory dwelling units, starter homes, and townhome subdivisions, each with different rules and approval processes. Some projects are already moving through these channels while others have been completed, suggesting the laws are having meaningful effects even though the constant revisions make it challenging for even experienced builders to stay current.
The current small-home legislation has deep roots in the accessory dwelling unit laws that started back in 2016 and 2017 under then-Governor Jerry Brown. Those initial ADU reforms set a template that later small-home bills followed: statewide standards, limited local discretionary review, and tight approval timelines. What started as rules for backyard units evolved into a framework that also covers starter homes and townhomes, allowing builders to use similar construction approaches across different project types depending on which law they choose to follow.
The starter home laws have evolved significantly since the original 2021 version. The second iteration in 2023 allowed up to 10 new homes on a site without a hearing, including keeping an existing building on its own parcel. The 2024 update expanded this to vacant single-family lots, and a new version taking effect in 2025 further expands eligible sites while limiting local standards. There's also a newer townhome-focused law requiring local governments to approve subdivision maps for qualifying townhome projects, all designed to create more density and housing options.
Real estate developers I read about are getting creative with these tools and finding ways to maximize density. One firm completed a townhome infill project and marketed a nearly 800-square-foot two-bedroom unit while another developer is layering ADUs with townhomes on church property to create multiple housing types on a single site. Builders consistently mention that the construction side of these projects works well, but financing remains a real obstacle since lenders are still getting comfortable with these newer pathways and the higher interest environment makes splitting lots and financing two new homes more difficult.
What I am seeing locally is that our region will benefit tremendously from these reforms if the financing piece catches up. The Bay Area and East Bay have long struggled with housing supply and affordability, and these tools give us legitimate pathways to add more units on existing properties. The challenge for sellers and buyers here is that many projects are still in early stages of the financing and approval process, so we should expect to see more starter homes and cottage-style units hit the market over the next couple of years as developers work through these options and lenders become more familiar with them.
