SB 1117 Could Make Building an ADU More Affordable!
A new California law could save homeowners thousands of dollars in development impact fees and school fees!
California has passed Senate Bill 1117 (SB 1117), which takes effect January 1, 2027. This important legislation changes how certain fees are calculated for Accessory Dwelling Units (ADUs), potentially reducing the cost of building both larger ADUs and multiple smaller ADUs.
1. Lower Development Impact Fees for Larger ADUs
Development impact fees are charges imposed by cities and other local agencies to help fund public infrastructure and facilities needed to support new development. Depending on the jurisdiction, these fees can add thousands of dollars to the cost of constructing an ADU.
California already prohibits development impact fees on ADUs measuring 750 square feet or less. However, larger ADUs have generally been subject to fees calculated proportionately based on the size of the ADU compared with the primary residence.
SB 1117 makes an important change to that calculation!
Under the new law, for properties with up to two ADUs, development impact fees on an ADU larger than 750 square feet must be calculated using only the square footage exceeding 750 square feet.
This means the first 750 square feet are excluded from the proportional impact-fee calculation, even when the ADU itself is larger than 750 square feet.
An Example: Building a 1,200-Square-Foot ADU
Imagine you're planning to build a 1,200-square-foot ADU on a property with a 2,000-square-foot primary residence.
Under the previous rules:
Impact fees could be calculated proportionately using the entire 1,200 square feet of the ADU.
Under SB 1117:
Only the 450 square feet exceeding the 750-square-foot exemption are included in the proportional calculation.
That's a substantial difference! In this example, the square footage used for calculating proportional impact fees decreases by 62.5%. Actual savings will depend on your municipality's impact-fee schedule and the specific project.
2. Another Big Win: Lower School Impact Fees in San Diego!
SB 1117 also addresses an important issue that has affected homeowners building multiple smaller ADUs in the City of San Diego.
Here's the problem:
Under the City's current permit-processing approach, when multiple ADUs are included on the same building permit, their square footage can be combined when determining whether school impact fees apply.
For example, imagine a homeowner building two detached ADUs, each measuring just 300 square feet.
ADU #1: 300 square feet
ADU #2: 300 square feet
Combined total: 600 square feet
Because the combined square footage exceeds 500 square feet, the City may identify the entire 600 square feet as subject to school impact fees, even though neither ADU individually reaches the 500-square-foot threshold.
SB 1117 provides an important clarification!
The new law specifically addresses individual ADUs and JADUs containing less than 500 square feet, establishing that they are treated as residential construction that does not increase assessable space by 500 square feet for purposes of the school-fee threshold.
For our example of two separate 300-square-foot ADUs, this provides a statutory basis for treating each qualifying unit individually rather than combining their square footage to trigger school impact fees.
How Much Could San Diego Homeowners Save?
Using a residential school impact fee of $5.38 per square foot as an example:
Under the combined-square-footage approach:
600 square feet × $5.38 = $3,228 in school impact fees.
Under the individual-unit treatment clarified by SB 1117:
Those two qualifying 300-square-foot ADUs should not trigger school impact fees merely because their combined square footage exceeds 500 square feet.
Potential savings: $3,228!
For homeowners considering multiple smaller ADUs, the potential savings could be even greater. This is another example of how California continues to remove financial obstacles to ADU construction.
3. What About Smaller ADUs?
The existing development impact-fee exemptions remain in place:
ADUs of 750 square feet or less: No development impact fees.
Junior ADUs of 500 square feet or less: No development impact fees.
ADUs larger than 750 square feet: On properties with up to two ADUs, only the square footage above 750 square feet is included in the proportional impact-fee calculation.
Properties with more than two ADUs are subject to different calculation rules.
4. Why Is This Such Good News for Homeowners?
Many homeowners want larger ADUs to accommodate additional bedrooms, create more comfortable living spaces, house family members, or maximize rental potential. Previously, increasing an ADU beyond 750 square feet could expose the project to impact fees calculated using the entire unit's square footage.
SB 1117 reduces that financial disincentive, potentially making larger ADUs a more attractive investment.
And for homeowners building multiple smaller ADUs in San Diego, the law provides an important clarification that could eliminate school impact fees that would otherwise be assessed based on the combined square footage of multiple units.
Important: SB 1117 does not eliminate every fee associated with building an ADU. Building permit fees, utility connection charges, school fees on projects that do not qualify for an exemption, and other applicable costs may still apply. Actual savings depend on project eligibility, applicable fee schedules, and local implementation.
Let ADU Pros Help You Take Advantage of California's Changing ADU Laws!
California continues to create new opportunities for homeowners to expand their properties, increase housing options, and generate rental income.
But understanding how state laws interact with local municipal requirements is essential to making smart design and construction decisions.