Zoning & ADU Opportunities For Apartment Buildings in Los Angeles and the South Bay
Increasing Unit Count or Income via SB 9, ADUs,Density Bonuses, CHIP, & ED-1
Los Angeles and the South Bay are experiencing a wave of zoning reforms and housing legislation that open up major opportunities for apartment owners. From SB 9 lot splits to Accessory Dwelling Units (ADUs) and density bonuses under CHIP and ED-1, landlords now have more tools than ever to boost rental income, add new units, or reposition assets for higher resale value. Understanding these programs is key to maximizing property potential in today’s shifting real estate market.
How Landlords Can Mine New Value
SB 9 Lot Splits – Senate Bill 9 allows many single-family lots across Los Angeles to be split into two parcels and developed with duplexes. That’s up to 4 units where only one home stood before. South Bay neighborhoods like Torrance, Redondo Beach, Gardena, and Hawthorne, El Segundo, Manhattan Beach, Redondo Beach, Hermosa Beach, Lawndale and Lomita are already seeing SB 9 applications rise.
Accessory Dwelling Units (ADUs) – California permits ADUs (garage conversions, backyard cottages, or attached units) on both single-family and multifamily properties. In Los Angeles, 1–2 detached ADUs plus up to 25% more units in multifamily buildings are allowed. For example, a 10-unit property may add 2 extra ADUs, increasing cash flow significantly.
CHIP (Citywide Housing Incentive Program) – In Los Angeles, CHIP streamlines zoning incentives for affordable and mixed-income housing. Landlords can leverage reduced parking requirements, greater height limits, and extra density if they dedicate a portion of units to affordable tenants. This can mean an additional 20–35% unit count in areas like Downtown LA, Koreatown, and Hollywood.
Executive Directive 1 (ED-1) – Mayor Bass’s ED-1 accelerates approval timelines for 100% affordable projects. While designed for nonprofit developers, investors can also partner with affordable housing groups to reposition underutilized sites faster and with fewer regulatory delays.
Density Bonus Programs – California’s statewide density bonus law allows up to 50% more units in exchange for affordable housing set-asides. In high-demand areas like Long Beach and West LA, this incentive can transform a mid-sized apartment project into a significantly larger income-producing property.
Local Market Trends – In 2024, Los Angeles approved more than 10,000 ADU permits, making it the leading U.S. city for ADU construction. For investors, this means demand for zoning expertise and entitlement services is skyrocketing, especially in the South Bay where land is constrained but demand remains high.
Key Considerations for Owners
Return on Investment (ROI)
While construction costs for ADUs average $150,000–$250,000 per unit, rental premiums in Los Angeles often support ROI within 5–7 years.
Entitlement & Permitting
Programs like ED-1 can cut project approval time by 50% or more, reducing holding costs and allowing faster lease-up.
Financing Options
Lenders are increasingly offering ADU-friendly refinance products and construction loans tailored for small-scale multifamily expansion
FAQs
1. How does SB 9 apply in Los Angeles County?
SB 9 permits lot splits and duplexes on qualifying single-family parcels. However, not all parcels are eligible. Properties in historic zones, environmentally sensitive areas, or with tenant protections may be restricted. Owners should verify zoning with city planning before pursuing development.
2. Can multifamily owners really add ADUs to existing buildings?
Yes. Under California law, landlords of multifamily properties can add up to two detached ADUs and additional attached units equal to 25% of the existing unit count. For example, a 12-unit building can legally add up to 3 extra units through ADUs, subject to site layout and parking requirements.
3. What is the difference between CHIP and ED-1?
CHIP is a permanent L.A. citywide incentive program offering zoning bonuses for affordable/mixed-income projects.
ED-1 is an executive order that speeds up the approval process specifically for 100% affordable housing projects. Both aim to expand supply, but ED-1 is about speed and streamlining, while CHIP is about incentives and density.
Conclusion
For Los Angeles and South Bay property owners, zoning reforms like SB 9, ADUs, CHIP, and ED-1 create real opportunities to increase unit count, maximize rental income, and enhance long-term property value. By understanding and applying these programs strategically, landlords can stay ahead of the market, add income streams, and improve the ultimate sale price of their multifamily assets.
