California Just Changed Its ADU Rules. Here’s Why I’m Looking at Some Properties Differently.
If you're looking at a house in Los Angeles with a large backyard, that extra land may have just become more interesting.
California has continued to expand its accessory dwelling unit laws, and one of the latest changes could be especially relevant to buyers and property owners thinking about rental income or long-term development potential.
AB 956 expands California's ADU rules to allow up to two detached ADUs on a qualifying lot with an existing or proposed single-family dwelling.
That's a meaningful change. But from an investment standpoint, the interesting question isn't simply, "Can I build two ADUs?"
It's: Does building one or two ADUs actually make sense on this particular property?
More Units Doesn't Automatically Mean a Better Investment
When I evaluate a property for ADU potential, the number of units allowed is only the beginning.
This is especially relevant in neighborhoods like North Hollywood, Burbank, Studio City and Sherman Oaks, where two properties with similar lot sizes can have very different development potential.
I'm looking at how the existing house sits on the lot. Is there usable space behind or beside it? Is there reasonable access to the rear of the property? Where would future residents enter? What happens to parking, outdoor space and privacy?
A detached garage at the back of a deep lot with a usable driveway, for example, presents a very different opportunity than a house that consumes most of the lot width or leaves no practical way to reach the rear.
Then there are the physical constraints: grading, drainage, utilities, existing structures and the location of sewer and other connections.
A 7,500-square-foot lot can look enormous in a listing photo and still be awkward or expensive to develop.
Conversely, a property that doesn't initially look remarkable may have a layout that makes adding another unit much more practical.
The Economics Still Have to Work
Additional development rights can create opportunity, but they don't eliminate construction costs.
Before assigning significant value to the possibility of adding one or two units, I would want to understand:
What could realistically be built on the site?
What would it likely cost to design, permit and construct?
What rent could the completed units reasonably generate?
How much of the existing yard, parking or other property utility would be lost?
How long would it take before the additional rental income actually begins?
That's the difference between seeing development potential and assuming development potential automatically equals value.
Why This Matters When You're Buying
This change gives buyers another reason to look beyond the house itself.
Two homes can have similar square footage, similar finishes and similar asking prices, while the underlying properties offer very different long-term possibilities.
A well-positioned house, useful side-yard access, an existing detached structure, favorable utility locations or simply a more workable lot configuration can become increasingly important when you're evaluating what a property could become over time.
For an owner who wants rental income, multigenerational living space or simply more flexibility in the future, those characteristics may deserve just as much attention as the kitchen or primary bedroom.
I Still Wouldn't Buy a Property Based on "ADU Potential" Alone
California has made ADU development easier in many respects, but state law is not a substitute for evaluating an individual site.
Local requirements, building and fire standards, utility constraints, site conditions and project economics can all affect what is ultimately feasible. And within the Los Angeles area, the jurisdiction itself can matter: a property in the City of Los Angeles isn't necessarily going through the same local process as one in Burbank or another neighboring city.
So when I see a large lot, I'm not automatically counting two future rental units.
I'm Asking a More Useful Question:
What can I realistically do with this property — and would it be worth doing?
That's the lens I use when evaluating Los Angeles properties with additional development potential.
Tim Brown is a California-licensed real estate agent, civil engineer and real estate investor serving Los Angeles. His engineering background includes residential and commercial land development, grading, drainage, stormwater management, permitting and site development.
This article is for general informational purposes only and is not legal, tax, lending or land-use advice. ADU feasibility and requirements vary by property and jurisdiction and should be confirmed with the applicable agencies and qualified professionals.
