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SFV Code Update: How to Maximize Rental Income from Your ADU or JADU

Hrayr Shahnazaryan
Written By Hrayr Shahnazaryan
Technically Reviewed By Arsen Akopyan Lic #1074874
Last Updated
For homeowners in the San Fernando Valley—from the established estates of Encino to the thriving neighborhoods of Van Nuys and Sherman Oaks—the landscape of property investment has fundamentally changed. The recent passage of state legislation (specifically AB 976 and the feasibility of AB 1033) has permanently removed the most significant barrier to using your Accessory Dwelling Unit (ADU) as a pure investment vehicle: the owner-occupancy requirement. At Gaga US Construction, we understand that homeowners like you are looking for trusted, licensed builders who are not just experts in framing for ADU construction, but are also experts in code compliance. This in-depth guide is designed to clarify the new ADU laws California 2025, explain the critical differences between an ADU and a Junior ADU (JADU), and show you exactly how to maximize adu rental income Los Angeles style, right here in the SFV. The Game-Changer: Owner-Occupancy is Permanently Removed (AB 976) For years, many San Fernando Valley homeowners who wanted to build an ADU on a rental property, or rent out both the main house and the ADU, faced uncertainty. AB 976 has finally ended that ambiguity. Key Impact of AB 976 for SFV Homeowners: Permanent Prohibition: Effective January 1, 2024, AB 976 makes it illegal for local jurisdictions (including the City and County of Los Angeles, which govern the SFV) to impose an owner-occupancy requirement on any new ADU. Investor Freedom: This opens up massive opportunities for property owners to generate adu rental income Los Angeles-level profits by renting out both the primary residence and the ADU simultaneously. No More Sunset: This law makes permanent a previously temporary exemption, providing long-term certainty for your investment. In plain terms: If you build a standard Attached or Detached ADU with Gaga US Construction in the SFV, you are now legally free to move out and treat the entire property (main house + ADU) as a dual-income rental asset. ADU vs. JADU: The Critical Difference that Affects Rental Income While the owner-occupancy rule is gone for ADUs, it remains firmly in place for their smaller cousin, the Junior Accessory Dwelling Unit (JADU). Understanding this difference is key to maximizing your rental strategy. Feature Accessory Dwelling Unit (ADU) Junior Accessory Dwelling Unit (JADU) Location Attached, Detached, or Garage Conversion Must be contained entirely within the Primary Residence. Maximum Size Up to 1,200 sq. ft. No more than 500 sq. ft. Owner-Occupancy PERMANENTLY NO LONGER REQUIRED (AB 976) STILL REQUIRED. Owner must live in the main house or the JADU. Kitchen Must have a full, independent kitchen. Must have an efficiency kitchen (small sink, counter, and cooking appliance). Cost Driver New foundation, roof, and utility trenching. Junior ADU cost is lower due to interior conversion. The JADU Cost Advantage (and Occupancy Requirement) The junior adu cost is often significantly lower than a full ADU because it avoids major exterior work like foundation digging and separate utility hookups. This makes it ideal for homeowners in Van Nuys or Sherman Oaks who want quick, low-cost rental income but do not mind remaining on-site. However, because the owner-occupancy requirement remains for JADUs, if your goal is to move out and rent both units, the full ADU is the only viable option under the new ADU laws California 2025. SFV Technical Deep Dive: Setbacks and Framing for ADU Success While the law has changed the rules of use, the construction standards remain strict, especially in the San Fernando Valley. Homeowners hire Gaga US Construction not just for compliance, but for the quality of the build itself. 1. SFV ADU Setbacks: Maximizing Your Lot (The 4-Foot Rule) The biggest question about where you can place an ADU comes down to setbacks. The good news is that state law has streamlined this, overriding most restrictive local SFV ADU setbacks. Side and Rear Setbacks: The minimum required setback for a new detached ADU is only 4 feet from the side and rear property lines. This allows homeowners in tight urban lots across the Valley (like in Van Nuys) to maximize the unit’s size. Front Setbacks: The front setback is still generally governed by the primary zone regulations.7 Our architects ensure your design adheres to these while maximizing the buildable area. Existing Structures: For garage conversions or additions, the existing structure’s setbacks are often preserved, which is a major time and cost saver. 2. Framing for ADU: The Structural Foundation of Your Investment The frame is the skeleton of your investment. When considering your adu rental income Los Angeles-level goals, you need a frame built for durability and tenant appeal. Load Bearing Design: Our engineers design the framing for ADU structures to withstand high winds and seismic activity, particularly important in the SFV. This means strict adherence to sheer wall requirements and correct nailing patterns as per the CBC. Soundproofing: To maximize rental appeal and minimize tenant complaints (especially for attached or above-garage units), we integrate strategic sound dampening materials within the walls and floors. A quiet unit in Sherman Oaks commands higher rent. Fire Safety: While new state laws often exempt ADUs from needing sprinklers if the main house doesn’t have them, correct fire-rated wall construction is essential, particularly when dealing with the 4-foot SFV ADU setbacks. Gaga US Construction’s Commitment: We are licensed builders specializing in every facet of the process, ensuring that the structural work—from framing for ADU units to final finishes—is done right, protecting your investment for decades. Maximizing Your Rental Income Potential (AB 1033 & Beyond) With the owner-occupancy rule gone, the focus shifts entirely to maximizing revenue. The AB 1033 Feasibility Factor (The Future of SFV Investment) AB 1033 permits local jurisdictions to create ordinances that allow an ADU to be sold separately from the main house as a condominium unit. Future Homeownership: While this is optional for the City of Los Angeles to adopt, if implemented, it would allow a homeowner in Encino to essentially “condo-ize” their property, sell the ADU separately to recoup the full junior adu cost or ADU cost, and generate a massive capital gain, while retaining ownership of the main house. Gaga’s Advantage: Our designs are prepared for this future. We ensure every ADU is built with necessary design features (like separated utility meters) that would make it eligible for independent conveyance under a future AB 1033 ordinance. Design Strategies for Top ADU Rental Income Los Angeles To attract the highest rents in the SFV market, your ADU needs high-end features: In-Unit Laundry: A non-negotiable amenity that drives a higher monthly rent premium. Private Outdoor Space: Even a small, fenced-off patio or deck separates your unit from the competition in Van Nuys. Separate Meters: Having separate electrical and gas meters is crucial for simplified tenant billing and maximizing profitability. Our construction process includes coordination with utility providers for this essential step. Stop Searching for Contractors: Hire the SFV’s Licensed Experts The new laws create opportunity, but only if you partner with a licensed builder who understands the specific codes and construction requirements of the San Fernando Valley. If you own property and are looking to capitalize on the new ADU laws California 2025 by building a high-quality, profitable ADU or JADU, your search ends here. Gaga US Construction is the fully licensed, insured, and local firm dedicated to delivering budget certainty and code compliance. Schedule Your Code & Investment Assessment Today! Call us at (747) 609-6912 or fill out our quick online form. We will analyze your property against the latest SFV ADU setbacks and legal changes to provide a fixed-price quote for your ADU or JADU project.

For homeowners in the San Fernando Valley—from the established estates of Encino to the thriving neighborhoods of Van Nuys and Sherman Oaks—the landscape of property investment has fundamentally changed. The recent passage of state legislation has permanently removed the most significant barrier to using your Accessory Dwelling Unit (ADU) as a pure investment vehicle: the owner-occupancy requirement.

At Gaga US Construction, we understand that homeowners like you are looking for trusted, licensed builders who are experts in both code compliance and construction. This guide clarifies the new ADU laws for 2025 and explains how to maximize your rental income.

The Game-Changer: AB 976
Effective January 1, 2024, AB 976 made it illegal for local jurisdictions (including the City of Los Angeles) to impose owner-occupancy requirements on standard ADUs.

What this means for you: You are now legally free to move out and treat your entire property (main house + ADU) as a dual-income rental asset.

ADU vs. JADU: The Critical Difference

While the owner-occupancy rule is gone for ADUs, it remains firmly in place for their smaller cousin, the Junior Accessory Dwelling Unit (JADU). Understanding this difference is key to your strategy.

Feature Accessory Dwelling Unit (ADU) Junior ADU (JADU)
Location Detached, Attached, or Conversion Must be inside the Primary Residence.
Max Size Up to 1,200 sq. ft. Max 500 sq. ft.
Owner Occupancy NO LONGER REQUIRED (AB 976) REQUIRED. Owner must live on-site.
Kitchen Full, independent kitchen. Efficiency kitchen (limited appliances).
Cost Driver Foundation & Utility Trenching Lower (Interior Conversion)

SFV Technical Deep Dive: Setbacks & Framing

While the law has changed the rules of use, the construction standards remain strict. Homeowners hire Gaga US Construction for the quality of the build itself.

  • The 4-Foot Setback Rule: State law now overrides most restrictive local zoning. You can place a detached ADU as close as 4 feet from your side and rear property lines, allowing you to maximize space in tight Van Nuys lots.
  • Seismic Framing: Our engineers design the framing for ADU structures to withstand high winds and seismic activity. We strictly adhere to shear wall requirements and nailing patterns to ensure safety.
  • Fire Safety: While new laws often exempt ADUs from sprinklers (if the main house lacks them), correct fire-rated wall construction is essential when building within the 4-foot setback zone.

Future-Proofing: AB 1033 & Separate Meters

AB 1033 is a newer law that allows cities to opt-in to an ordinance permitting ADUs to be sold separately as condominiums. While not yet universal, we design for this future.

To maximize rental income and future value, we recommend Separate Utility Meters. This simplifies tenant billing and is a strict requirement if you ever plan to "condo-ize" and sell the unit separately under AB 1033.

Frequently Asked Questions

Can I rent out both my main house and my ADU in Los Angeles?
Yes. As of January 1, 2024, California Assembly Bill 976 permanently prohibits local agencies (like the City of LA) from imposing owner-occupancy requirements on permitted ADUs. You can now rent out both the primary residence and the ADU simultaneously.
Does a Junior ADU (JADU) require owner occupancy?
Yes. Unlike standard ADUs, Junior ADUs (JADUs) still require owner occupancy. The property owner must reside in either the primary dwelling or the JADU itself.
What are the setbacks for a detached ADU in the San Fernando Valley?
Under current state law, the maximum required setback for a new detached ADU is 4 feet from the side and rear property lines. This overrides older, more restrictive local zoning rules.

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