WILL MY PROPERTY TAXES GO UP IF I BUILD A “GRANNY FLAT” IN THE BACKYARD?
California lawmakers passed a number of laws last year aimed at encouraging homeowners to build accessory dwelling units, also known as ADUs, “granny flats,” “in-law suites” and garage conversions. The Legislature considered these laws a step in the right direction to create more housing in the face of a stubborn shortage that is driving home prices and rents higher and higher.
One of these new laws, Assembly Bill 68, effectively zoned every single-family lot in California for three residences: the main house, a stand-alone ADU, and what the law calls a “junior accessory dwelling unit,” that is, a garage or extra room that has been remodeled to become a separate residence.
Other new laws prohibit cities from charging homeowners excessive fees or causing delays in the permitting process to build these units. Additionally, local governments are not allowed to require off-street parking for the new residents or insist that the property owner live on-site. Even homeowner associations are no longer allowed to have restrictions on ADUs in their communities if those limitations conflict with state law.
However, with all the effort to encourage the construction of accessory dwelling units, lawmakers skipped over one critical matter: property tax reassessments.
Homeowners who add a granny flat in the backyard or convert a garage to an apartment will receive a new property tax bill. It will reflect the current market value of that improvement, just as if they added a room addition.
It doesn’t matter whether the granny flat is rented out for extra income or if it’s really granny who’s living in it. The new or renovated square footage will be reassessed to market value as of the date of completion of construction.
Adding an accessory dwelling unit or two will not affect the assessment of the rest of the property. It won’t cause you to “lose Prop. 13.” The tax assessment on your home, except for the new construction, stays the same. As before, it can go up no more than 2 percent per year.
However, if you’re considering adding a granny flat to your property, or adding a shower and a kitchen to the garage and renting it out to help pay the bills, be aware that your property tax bill will go up. The new construction will have a base-year value as of the date of completion. After that, the assessed value of that portion of your property may increase no more than 2 percent per year under Proposition 13.
For more information about reassessment of new construction or renovations, contact your county assessor’s office.