What is the California AB 976?
The California Assembly Bill 976 is a new law that removes owner-occupancy requirements that bans ADU construction unless an owner lives in either the main house or the accessory unit. The bill permanently allows homeowners to rent out ADUs, regardless of owners' residency on the property.
AB 976 was signed into law on October 11, 2023, and takes effect January 1, 2024. It allows ADUs to be used strictly for rental purposes to expand the rental housing market in California. Removing owner-occupancy requirements will likely simplify applying for loans or using home equity to finance ADU construction.
The law perpetually extends the rental unit provisions of AB 881, passed in 2020 and due to expire in 2025. AB 881 prohibited local governments from imposing owner-occupancy requirements on properties where ADUs are built until 2025. Before AB 881, many local governments required the property owner to live in either the ADU or primary home. This notorious poison pill made it challenging to get financing and kept owners and investors from building more affordable rental ADUs.
According to the Terner Center for Housing Innovation, homeowners cite the ability to offer ADUs for rent as one of the main reasons they build these types of homes. Rental income can serve as an essential source of financial security. AB 976 removes the sunset provision in AB 881. Instead of requiring owner occupancy, it authorizes local agencies to require that an ADU be used for rentals of terms 30 days or longer.
