Real EstateCalifornia
California ADU Financing and SB 9 Lot Splits: Lender Underwriting Challenges and Legal Issues
California SB 9, effective January 1, 2022, enabled lot splits and duplex construction on single-family parcels statewide, and California's ADU laws have been steadily expanding allowable unit sizes and streamlining approvals. But financing for ADU construction and SB 9 lot-split transactions has not kept pace with the legal framework — lenders face title, zoning, and underwriting challenges that are slowing the conversion of legal rights into actual housing. Real estate attorneys need to understand the gap between what the law allows and what lenders will fund.