Multifamily Memo: How SB 1211 Could Transform Los Angeles Multifamily Investing

What is SB1211 & How Does it Impact my Multifamily Portfolio?

SB1211 allows up to 8 additional ADUs on multifamily properties not to exceed the current unit count. For example, if you have a 5 unit building you could, under SB1211, add an additional 5 units. This is very positive for buyers having a tougher time underwriting Los Angeles multifamily with higher interest rates.

The most ideal multifamily properties to take advantage of the density allowed by SB1211 would be properties with additional space such as 9,000 SF+ lots with a smaller building in the front.

Here is a good example on a current listing of ours: 5952–5960 Benner Street in Highland Park consists of two separate parcels and two structures of a total of 14 units on a nearly 18,000 square foot lot. There is plenty of space to add units. The units are actually spread across two lots which means that in theory you could double the unit count on this property.

Here is how the math works out:

One parcel is an 8 unit on 10,013 SF lot with nearly half the lot as open parking. Through SB1211 you can build 8 units in the parking area.

The second parcel is a 6 unit on 7,898 SF lot with the parking in the back area as well and could fit 6 ADUs.

The biggest concern with adding up to 8 ADUs on smaller multifamily properties is if you take away parking for the existing tenants and don’t build additional parking the new construction ADUs rent will be lower and tougher to rent out. One solution I have seen work well is building carports with the new ADUs above the carports.

SB1211 in my opinion is a big win for both the multifamily investors, housing advocates, and tenants. The law which takes effect on January 1st, 2025, will allow multifamily investors to get a little creative with their properties and add value which is unique as multifamily owners have been squeezed lately by local regulation and enhanced rent control measures. This will create a larger supply of housing without any tenant displacement which is desperately needed in Los Angeles. I would not be surprised to see thousands of additional ADUs get built in the next year or so through SB1211.

For buyers, they are essentially getting the additional land to build up to 8 ADUs for free because current pricing is based off of cap rate and other metrics. I am anticipating additional value for larger lots in the 6–12-unit range and a higher velocity of quick sales as investor sentiment ramps up with the excitement of SB1211. Feel free to reach out to one of the agents on the Tuvia Group to go over ADU ideas of your existing properties or look at purchasing one of our current listings that could take advantage of SB1211.