SB 1116 Passes: New CA Housing Rules for LA Projects

What happened: On August 26, 2026, California's SB 1116 passed a final legislative vote and was ordered to engrossing and enrolling. This bill changes planning and zoning rules to speed up and lower costs for smaller, for-sale starter homes, and is now awaiting the Governor's signature for final approval.

On August 26, 2026, the California State Senate concurred with Assembly amendments to Senate Bill 1116 on a 40–0 vote, clearing its final legislative hurdle. The bill, which amends planning and zoning laws for housing development projects and subdivisions, is now being prepared for the Governor's desk.

What changed?

SB 1116 makes several key changes to state housing law intended to streamline the creation of smaller, lower-cost starter homes, like townhomes and condos. The bill builds upon prior legislation to make small-lot infill projects more feasible.

Key changes include:

• Smaller Parcel Sizes: For certain qualifying projects, the bill may allow the creation of new for-sale parcels as small as 960 square feet. This is a reduction from previous minimums.
• Lot-Size Averaging: When developers use lot-size averaging to subdivide a property, none of the new lots created can be more than 150% of the average lot size for the project.
• Reduced Setbacks: SB 1116 limits the ability of local governments to impose additional front and internal setback requirements on qualifying starter home projects.
• State Oversight: Local governments that adopt ordinances to implement the starter home framework must submit them to the California Department of Housing and Community Development (HCD) for a compliance review.
• New Reporting: The bill requires local governments to report annually on how often these provisions are used, including the number of lots created, to help the state track its impact.

These changes are designed to provide a more predictable, ministerial (by-right) approval process for projects that meet the state's criteria.

When does it take effect?

While SB 1116 has passed the legislature, it is not yet law. Its final timeline depends on the Governor's action. However, the bill itself contains a clear effective date for its main provisions.

What this means in the South Bay and on the Westside

For high-value, land-constrained markets like the South Bay and Westside, SB 1116 could create new opportunities for infill development.

In Manhattan Beach, Hermosa Beach, and Redondo Beach, where vacant lots are rare and land is expensive, the bill's provisions for smaller lot sizes and reduced setbacks could make it economically viable to replace a single older home with a small development of two, three, or four fee-simple townhomes. This increases the supply of for-sale housing without needing large tracts of land.

Similarly, in Venice, Santa Monica, and Culver City, SB 1116 provides a streamlined path for building more ownership housing. For agents, this could mean new inventory of smaller, more attainably priced homes. For our title team, this means we anticipate seeing more complex small-lot subdivision maps that require careful examination of newly created easements for access, utilities, and shared maintenance agreements.

These projects will place new demands on the Los Angeles County Registrar-Recorder's office. Title and escrow must be prepared for more intricate recording packages, including final maps, CC&Rs, and reciprocal easement agreements that all need to record in a specific sequence.

What agents and homeowners should do now

Even though the bill is not yet law, now is the time to prepare. Here are the steps to take:

1. Track the Bill's Status: Monitor the Governor's website for news of a signature or veto. The bill's final form depends on this action. The bill's official history can be tracked on the state's legislative information site.
2. Review the Final Text: Once the bill is enrolled and signed, the final text will be published. This is the version that matters for legal and planning purposes. Do not rely on summaries.
3. Consult with Planners: For developers considering a project, start conversations with city planning departments in late 2026 to understand how they intend to implement the new rules.
4. Anticipate New Inventory Types: Agents should prepare for a potential increase in small-lot townhome or cottage court-style listings starting in late 2027 or 2028, as the first projects under these rules get built.
5. Check Your Title Strategy: Before acquiring a property for development or advising a client, discuss the project with your title representative. New subdivision rules create new potential for errors in legal descriptions, easements, and access rights.

Open questions

As of August 29, 2026, several key details are still pending.

• Governor's Action: Will Governor Newsom sign SB 1116, veto it, or let it become law without a signature? This is the most significant unknown.
• Final Enrolled Text: The final, official version of the bill has not yet been published. There could be minor technical changes from the version that passed.
• HCD Guidance: The California Department of Housing and Community Development will likely issue guidance memos and FAQs for local governments. The timing and content of this guidance are not yet known.

Sources

• Bill Status & History: CalMatters Digital Democracy: SB 1116
• Housing Advocacy Summary: California YIMBY Newsletter
• State Agency to Monitor: California Department of Housing and Community Development (HCD)

FAQ

What is SB 1116 in California?

SB 1116 is a California state bill passed by the legislature in August 2026. It amends planning and zoning laws to make it easier, faster, and cheaper to build smaller, for-sale starter homes like townhomes and condos on small infill lots.

Is SB 1116 a law yet?

No. As of August 29, 2026, SB 1116 has passed both houses of the California Legislature but is awaiting the Governor's signature to become law. Its provisions are intended to apply to development applications submitted on or after January 1, 2027.

How does SB 1116 affect Los Angeles real estate?

If signed into law, SB 1116 will likely encourage the development of small-lot subdivisions and townhomes in dense, high-cost Los Angeles neighborhoods like those in the South Bay and on the Westside. It does this by allowing smaller parcel sizes and streamlining the local approval process.

What does 'engrossing and enrolling' a bill mean?

'Engrossing and enrolling' is a formal step in the legislative process after a bill has passed both chambers. It means the bill is being checked for accuracy and prepared in its final, official format to be presented to the Governor for signature or veto.

This new legislation introduces opportunities but also complexities for real estate transactions. Understanding how a new subdivision map, easements, and CC&Rs will be handled is critical. To ensure your next South Bay or Westside deal is structured correctly under these changing rules, contact us. We're Matt Goeglein and Xavier de la Piedra IV at Fidelity National Title, and we're here to help you navigate the details.