California ADU Law Update 2026: AB 1154 & SB 543 Explained
If you've been tracking California's ADU landscape, you know the state has been pushing cities to ease restrictions for years. The latest round — AB 1154 and SB 543, both taking effect January 1, 2026 — goes further than most homeowners realize.
We've already seen cities scramble to update their ordinances. San Jose posted revised guidelines within weeks; Fremont is still working through theirs. That gap matters if you're planning to submit early in 2026.
The short answer? Clearer rules on paper, tighter approval timelines, and fewer local loopholes. Whether cities actually meet the new deadlines is another question. Based on our experience with 200+ ADU projects across the Bay Area, you should still budget extra time for resubmittals.
What Changed in 2026?
AB 1154 targets JADU flexibility
Owner-occupancy requirements are gone for JADUs with their own bathroom. The catch? No short-term rentals — minimum 30-day stays only.
SB 543 tightens permit timelines
Cities now have 15 business days to confirm your application is complete, then 60 days to approve or deny. ADU size is measured by interior space only, which closes a common loophole where cities inflated square footage to trigger impact fees.
In practice, permit processing still varies. We've seen San Jose plan check take 75-90 days even with the new rules, mostly due to structural review backlogs. Fremont's ADU process runs smoother for straightforward conversions but can drag for detached units near setback limits.
AB 1154: JADU Rental Rules Changed
AB 1154 loosens restrictions on JADU rental use — but only if your unit has independent plumbing.
Owner-occupancy is no longer required
Previously, most cities mandated that either the main house or the JADU be owner-occupied. If your JADU includes its own bathroom (not shared with the main house), that requirement disappears.
Fair warning: the 30-day rental minimum is strict
JADUs cannot be used for short-term vacation rentals. We've had clients ask if they can list their JADU on Airbnb for a few months each year — the answer is no. Violation risk isn't worth it, especially since cities are starting to audit rental platforms more aggressively.
Last year we worked with a Cupertino client on a garage conversion JADU. The planning department initially insisted on owner-occupancy paperwork even after AB 1154 passed. We pushed back, citing the new law, and they eventually conceded — but it took three rounds of correspondence. Save yourself the headache by keeping documentation ready.
SB 543: Faster Permits (In Theory)
SB 543 is the most substantial ADU reform since 2020. Here's where it gets tricky — the law sets hard deadlines, but enforcement is still catching up.
15 business days to confirm completeness
Cities must review your submittal and flag any missing items within three weeks. Miss this window and your application is deemed complete by default.
Does this work in practice? About 60% of the time. We submitted a San Jose ADU permit last month that took 22 days for the initial review. The city didn't penalize itself for the delay, and we weren't about to fight over a week.
60 days for approval once complete
After your application is deemed complete, the clock starts ticking. Cities have two months to issue or deny.
Real-world timing is closer to 75-90 days for ADUs with any complexity. Oakland ADU submissions tend to stay within the 60-day range if you're doing a basic conversion. Detached units with new foundation work? Expect revisions and add 3-4 weeks.
ADU size measured by interior livable space only
This closes a loophole where some cities included exterior walls, covered patios, or even attached storage in their square footage calculations. Under SB 543, only the actual living area counts.
Why this matters: a 750 sf ADU (measured correctly) stays under the impact fee threshold. Before, we saw cities bump units to 780 sf by including thick walls and overhangs, then charge $12,000-$18,000 in fees. That game is over.
Impact fee exemptions reinforced
| Unit Type | Size Threshold | Impact Fees |
|---|---|---|
| ADU | ≤ 750 sf | Exempt |
| JADU | ≤ 500 sf | Exempt |
The 750 sf threshold is a double-edged sword. We've had multiple clients ask us to squeeze designs down to 749 sf to avoid fees. Problem is, that often means sacrificing a proper second bedroom or cutting the kitchen down to barely functional. Unless you're truly budget-constrained, don't design around the fee exemption — design for livability and let the fees fall where they may.
Local ordinances must align with state law
Cities now have to submit their ADU rules to California HCD for review. Non-compliant ordinances can be overridden by state law.
Sunnyvale's ADU requirements were flagged by HCD last year for overly strict setback interpretations. They've since updated their guidelines, but older projects caught in that transition faced extra scrutiny. If your city hasn't updated its code recently, expect plan check to involve some back-and-forth as staff figure out how to apply the new rules.
Frequently Asked Questions
Under SB 543 (effective January 1, 2026), cities must confirm your application is complete within 15 business days, then approve or deny within 60 days. In practice, expect 75–90 days for most projects. Cities like San Jose often exceed the deadline due to structural review backlogs, while straightforward conversions in Oakland typically stay within the 60-day range.
California allows detached ADUs up to 1,200 square feet. Garage conversions and interior ADUs are typically limited to 800–1,000 square feet depending on your city. SB 543 clarifies that only interior livable space counts toward this limit — exterior walls, covered patios, and storage areas are excluded. This closes a loophole where some cities inflated square footage to trigger impact fees.
Permit fees typically range from $5,000 to $15,000, covering plan check, inspections, and administrative costs. Under SB 543, ADUs under 750 square feet and JADUs under 500 square feet are exempt from impact fees — which previously added $12,000–$18,000 in some cities. The new measurement rules (interior space only) make it easier to stay under the threshold.
The CalHFA ADU Grant Program, which offered up to $40,000 for ADU construction, has exhausted its funding as of 2024. No new application rounds have been announced. However, other financing options exist, including home equity loans, construction loans, and some local incentive programs. We recommend checking with your city's housing department for current offerings.
When the CalHFA ADU Grant was active, eligibility required: owning and occupying a single-family home, household income at or below 80% of Area Median Income, and using the ADU as a long-term rental (not short-term). The grant prioritized first-time ADU builders. If the program reopens, similar criteria will likely apply.
Yes. You can live in your ADU and rent out the main house, or vice versa. Under AB 1154 (effective January 2026), JADUs with independent plumbing no longer require owner-occupancy — meaning you can rent both the main house and the JADU simultaneously. The only restriction: JADUs cannot be used for short-term rentals (minimum 30-day lease required).