Two new laws now allow you to build more units on your properties than just ADUs! I keep seeing properties where the client is being recommended to build 1 or 2 units but the property can add up to 24 units!
 
Both SB 79 AND SB 1123 are now in effect in California, having officially become operative on July 1, 2026.
 
SB 1123 Unit Limits and Key Provisions
The law updates the Starter Home Revitalization Act (SB 684)](0.5.9, 0.5.14) to establish the following rules:

• Maximum Units: It allows for the construction of up to 10 housing units per project.
• Accessory Dwelling Units (ADUs): If a local city or county decides to permit ADUs or Junior ADUs (JADUs) on the property, those additional structures do not count toward the 10-unit cap. This means local rules could theoretically boost the total housing density on the lot up to 20 units.
• Eligible Land: The law specifically expands previous legislation by allowing these 10-unit small lot developments on vacant lots located within single-family zoning districts, provided the lot is 1.5 acres or less and surrounded by urban uses.
• Unit Size Constraints: To ensure these remain affordable "starter" homes, the average size of the homes across the project cannot exceed 1,750 net habitable square feet.

Feature	SB 1123 (Starter Homes)	SB 79 (Transit-Oriented Housing)
Primary Goal	Suburban infill starter townhomes.	High-density multi-family urban apartments.
Maximum Density	Strictly capped at 10 units (+ local ADUs).	No unit cap; legalizes up to 9 stories.
Target Locations	Vacant lots in single-family zones.	Within 1/4 to 1/2 mile of major transit stops.
Geographic Scope	Statewide (parcels $\le$ 1.5 acres).	Restricted to "urban transit counties" only.
Zoning Focus	Converts single-family residential zones.	Overrides residential, commercial, and mixed-use.
Size Constraints	Homes must average ≤ 1,750 sq. ft.	No individual unit size caps.
Approval Method	Statewide automatic ministerial (by-right).	Local height/density override; requires union labor for buildings over 85 ft. tall or on privately-owned land.

In addition to these units, you can add Density Bonus units as well as SB 1211 ADUs! Finally the icing on the cake is the ability to sell off the units – which generates even more money.
 
I am happy to run an analysis on any property including the optimal designs to maximize rental income. Generally speaking, 2 and 3-bedrroms are optimal for selling off but barely pencil out when renting. By contrast, the 1-bedroom units are typically optimal for top rental income. Below is a recent analysis showing how powerful creative thinking can be. As always, please let me know if I can help. 😊

 
See video: Maximize Your Investment: Building More Units

For anyone thinking about turning a shed or garage into a tiny house

I see this come up a lot, so just wanted to share a few things people often underestimate.

For context, I used to work as a municipal/urban inspector and saw quite a few of these projects. A lot of them started with the same idea: “we’ll just convert what’s already there.”

Short answer: it’s usually a bigger project than it looks.

Foundation and floor issues

A lot of sheds and garages sit on basic slabs or even just blocks.

• No insulation = cold floors, especially in winter
• Poor grading + no foundation wall = water can easily get into the walls
• No frost protection = slab can move and cause cracks over time

You may end up needing to add an insulated subfloor or fix drainage around the building. Also worth checking that the siding isn’t too close to the ground (usually you want around 6–8 inches of clearance).

Moisture and rot

If the structure is older, there’s a good chance water has gotten in at some point.

Common things to find:

• Rot at the bottom of walls
• No proper barrier against moisture
• Signs of past water infiltration

If you already see damage outside, expect more once you open it up.

Not built for living

Most sheds and garages weren’t designed to be lived in.

You might need to:

• Rework framing
• Add proper insulation and air sealing
• Upgrade the roof structure depending on snow loads
• Redo electrical entirely

At a certain point, you’re not just converting, you’re rebuilding a big part of it.

Utilities are where it adds up

Plumbing, heating, ventilation, electrical… all the stuff that makes it livable.

This is usually where the cost and complexity increase a lot more than expected.

Cost reality

This is the part people don’t like hearing, but I’ve seen it multiple times:

By the time you fix structure, moisture issues, insulation, and systems, it can end up costing as much as new construction.

I’ve seen several cases where people started renovations, then got quotes from contractors along the way and realized it was going to cost the same or even more than building new.

In quite a few of those situations, they ended up giving up on the existing structure and demolishing it instead, simply because rebuilding from scratch was more straightforward and predictable.

When it makes sense

• Structure is solid and dry
• Foundation is stable and drains properly
• You’re okay working with the existing size and layout

Not trying to discourage anyone, just give a realistic picture before starting.

If you’re planning a conversion, what part are you most unsure about right now?

For those who already went through it, did you actually manage to make it worth it or did it turn into more of a headache than expected?