California

In 2023, the Terner Center published “Making It Pencil: The Math Behind Housing Development” to assist policymakers in understanding the financial feasibility of large-scale, for-rent midrise apartment buildings. However, recent state and local land use reforms have focused on smaller-scale housing in lower-density neighborhoods, including accessory dwelling units (ADUs), duplexes, and fourplexes, often referred to as “missing middle” housing. States like California, Oregon, and Montana, along with cities such as Minneapolis and Portland, have introduced legislation and rules to promote this housing growth.

This policy paper employs the methodology from our 2023 report to analyze the development characteristics of missing middle projects. Through a series of project pro forma case studies across four California markets, the report finds that many missing middle housing types are not financially feasible, with four-unit ownership buildings being the most challenging to develop. Despite these challenges, missing middle housing can play a crucial role in providing entry-level homeownership and naturally affordable rental options. It is imperative for local and state policymakers to reexamine regulations that hinder the development of missing middle housing, such as lot size, parking, and insurance requirements.

Explore the comprehensive “Missing Middle Housing Study” in Sacramento, a data-driven citywide effort addressing housing choices, walkable living, and attainable housing needs at all income levels.

Key insights:

The report puts suggested steps need to be taken to help deliver more attainable housing.

• A critical step is to increase the delivery of housing at all income levels, but in a manner that is sustainable and feasible, and does not adversely impact existing infrastructure capacities (of roads, utilities, etc.) and the quality of life of existing residents.
• A critical strategy is to streamline and encourage the production of smaller, simpler, less complicated and less expensive housing projects in areas that have existing infrastructure and amenities. Missing Middle Housing can fulfill this requirement, and provide an efficient way to meet this pent up demand.

This vital report informs Sacramento’s long-term planning and housing policies, prioritizing affordability, equity, and access while addressing displacement risks and proposing measures to preserve the unique character of established neighborhoods.

Further to the report, you can stay up to date with all of Sacramento’s Missing Middle Housing developments by checking out their dedicated website.

California ADU Reform: Removing Barriers to Small-Scale, Affordable Housing
California faces one of the most severe housing shortages in the United States. Accessory dwelling units (ADUs) — small, attached or detached homes on the same lot — offer a promising solution, yet local restrictions long limited their development.

This case study explores the Casita Coalition’s successful advocacy for legislation that removes key ADU barriers, giving cities the option to allow ADU sales. Passed in fall 2023, the law takes effect in 2024, opening new opportunities for affordable, small-scale housing.

See how policy reform is unlocking ADU potential across California.

Keywords: California ADU reform; accessory dwelling units; gentle density housing; affordable housing California; Casita Coalition; ADU policy change; small-scale multi-unit housing; housing shortage solutions; missing middle housing; ADU sales legislation

Encinitas ADU Policies: Expanding Housing Supply Through Infill Development
In land-constrained Encinitas, meeting demand for diverse and affordable housing is a growing challenge. With limited undeveloped land, the city is turning to infill housing — especially accessory dwelling units (ADUs) — to boost supply and offer more housing choices.

This case study examines how state-level reforms and local ordinances are working together to encourage ADU construction, helping address high housing prices and rents while diversifying housing types.

Explore how Encinitas is using ADU-friendly policies to meet housing needs.

Keywords: Encinitas ADU policy; accessory dwelling units; gentle density housing; affordable housing Encinitas; ADU construction incentives; small-scale multi-unit housing; infill housing solutions; housing supply California; missing middle housing; ADU ordinances

This report from the Terner Center for Housing Innovation, part of UC Berkeley, highlights barriers faced by developers working in states that have enabled multiple units to be built on traditionally single-family zoned lots.

Key insights:

The report details that Middle Housing delivers many benefits to communities:

• Increases racial equity in housing and neighbourhood access
• Providesentry-level homeownership opportunities
• Creates lower greenhouse gas emissions per household).

The following developer challenges are highlighted:

• Design requirements need to be flexible/supportive of missing middle housing;
• Larger projects of 8-12 units need to be permitted to make projects financially viable; that complicated utility and subdivision rules deter small-scale development;
• Approval timelines need to be more efficient; and that there is currently a lack of traditional financing tools to create a funding package for projects.

Key recommendations:

• Introducing development code changes beyond zoning reforms, including updating design requirements and assessing current impact fees and utility requirements
• Allocate dedicated resources to streamline permitting and approval processes
• Considering more ambitious land use changes, such as increasing the maximum units that can be developed per lot, to help foster increased missing middle housing development.