California’s Small-Lot Playbook: How SB 1123 and SB 684 Are Changing Housing Development

Featuring: Matt Baran, Architect and Founder of Baran Studio Architecture

On The Affordable Housing & Real Estate Investing Podcast, the best podcast for affordable housing investments hosted by Kent Fai He, architect and developer Matt Baran breaks down two of California’s most impactful housing laws: SB 1123 and SB 684 — and how they’re quietly transforming the way developers can turn a single lot into multiple homes.

Matt isn’t just a designer. He’s a problem solver who’s been working at the intersection of architecture, zoning, and legislation for over a decade. His firm, Baran Studio Architecture, has designed dozens of infill and small-lot projects across California.

This episode is a must-listen for developers, city planners, and affordable housing advocates who want to understand how these new small-lot subdivision rules actually work in the real world — and how to avoid the hidden pitfalls that can derail a project before it starts.

What Are SB 684 and SB 1123, and Why Do They Matter for Developers?

California’s housing crisis has forced the state to rethink zoning laws that once made small infill projects nearly impossible.

Matt explained that SB 684 opened the door for small-lot subdivisions, allowing developers to split larger parcels into as many as 10 fee-simple lots, as long as they meet certain density standards.

“SB 684 made this a thing you could do statewide,” Matt said. “You could subdivide up to ten units as long as it met either the underlying density or 30 dwelling units per acre, whichever was higher.”

The challenge? SB 684 required developers to use 100% of the maximum density, which often pushed projects over the 10-unit threshold and disqualified them from the very law meant to help them.

That’s where SB 1123 came in. It fixed the rigidity by:

• Allowing single-family zones to qualify.
  
  

• Introducing a 66% density rule for more flexibility.
  
  

• Creating a “remainder parcel” option that lets developers carve off one lot while calculating density on the rest.
  
  

This flexibility means smaller developers and builders can add infill housing without massive entitlement battles — exactly what California needs to increase affordable supply.

How SB 1123 and SB 684 Empower Small-Lot Development

Matt compared today’s legislation to what he was doing in Oakland over a decade ago, when small-lot subdivisions were a local experiment.

“Back then, we were building houses in people’s backyards before anyone was talking about small-lot development,” Matt said. “Now, it’s state law.”

Here’s how these laws are reshaping infill development:

• Small-lot subdivisions are now legal statewide, not just in cities like Oakland or Los Angeles.
  
  

• Developers can sell fee-simple homes instead of condos, which simplifies financing and boosts buyer confidence.
  
  

• The new 66% density option means builders can design livable layouts instead of being forced to cram too many units onto one site.
  
  

Matt emphasized that this change is not just about maximizing density — it’s about making good housing design possible again.

“People want their own piece of dirt,” he said. “When you give them that, it incentivizes development and homeownership.”

How to Evaluate a Lot for Small-Lot Development

Kent asked the question most investors and architects wrestle with: How do you actually know if a property qualifies?

Matt walked through his process step by step.

1. Start with zoning.

   • Confirm if the parcel is in a single-family (R1) or multifamily (R2, R3, etc.) zone.
     
     

   • SB 1123 now allows small-lot development in both.
     
     

2. Check for existing units or occupancy.

   • The property must be vacant or uninhabitable if it’s zoned single-family.
     
     

   • In multifamily zones, existing structures can often remain while you subdivide the back portion.
     
     

3. Run the density math.

   • Use either the underlying zoning or Mullen density (30 dwelling units/acre) — whichever allows more units.
     
     

   • Divide your lot size by 1,452 square feet per unit to estimate your potential.
     
     

4. Verify utilities and access.

   • Look for existing sewer, water, and power lines.
     
     

   • Plan for access easements for vehicles and utilities.
     
     

5. Lay out the site — don’t just calculate.

   • “One of the biggest mistakes people make,” Matt warned, “is just dividing the lot by the number and saying, ‘I can fit ten units.’ You need to actually lay it out and see how it works.”
     
     

His approach balances design with practicality. The goal isn’t to maximize units at all costs but to create livable homes that actually sell.

What Are the Biggest Hidden Costs Developers Miss?

When developers think about feasibility, they often underestimate infrastructure and utility costs.

Matt listed several overlooked expenses that can quickly destroy a deal:

• Utility hookups: Water and sewer meters can cost $30K–$40K per unit.
  
  

• Undergrounding power: Budget at least $100K per project.
  
  

• Impact fees: In cities like Sunnyvale, park impact fees can reach $110K per unit.
  
  

• Fire sprinklers and solar: Now required on nearly every new home.
  
  

“Everyone talks about construction cost per square foot,” Matt said. “But what about water meters, trenching, and connection fees? Those are real numbers that can kill your deal.”

He advised developers to always assume worst-case scenarios when underwriting:
“If the inspector changes his mind, if you need a second standpipe, if the utility trench runs longer — have a contingency for it.”

How Legal Cases Like Sheetz v. County of El Dorado Affect Impact Fees

Matt referenced a pivotal case, Sheetz v. County of El Dorado, which ruled that cities can’t charge unconstitutional impact fees unrelated to actual project impacts.

“It was a takings case,” he explained. “Cities can’t just charge massive fees without proving the impact of your development.”

Some developers have already challenged these fees successfully, arguing that building new housing actually reduces overall housing costs.

However, many cities have yet to adjust their practices — some may even switch to inclusionary housing mandates to maintain revenue, which could further squeeze small builders.

“If you’re building ten units and one has to be deed-restricted affordable, that’s probably your profit gone,” Matt said.

Key Insights & Frameworks

• Flexibility drives feasibility. SB 1123’s 66% density rule makes more projects pencil.
  
  

• Assume worst-case costs. Always budget for utilities, fees, and inspector surprises.
  
  

• Livability matters. Cramming density kills design and resale value.
  
  

• Stability builds confidence. Lock your entitlements early using SB 330 to prevent mid-project changes.
  
  

• Transparency creates opportunity. Developers like Matt who share information help raise the entire industry standard.
  
  

Best Quotes from Matt Baran

“People want their own piece of dirt. That’s what makes development work.”

“One of the biggest mistakes people make is dividing the lot by the number and thinking it fits. You have to lay it out.”

“Assume worst-case scenarios. That’s the only way to keep your project alive.”

“If you cut regulatory costs in half, that’s the difference between profit and no deal.”

“We’re finally seeing what we were doing 15 years ago become state law. That’s exciting.”

Common Questions About SB 1123 and SB 684

1. What’s the difference between SB 684 and SB 1123?
SB 684 first allowed small-lot subdivisions up to 10 units statewide but required full density usage. SB 1123 modified it to include single-family zones and allow 66% density flexibility.

2. Can I apply these laws to a property that already has a home?
Yes, if it’s in a multifamily zone or if the existing home is uninhabitable. Otherwise, the property must be vacant for single-family eligibility.

3. How many units can I build under SB 1123?
Up to 10 fee-simple units per site, depending on lot size and density calculations.

4. What are “remainder parcels”?
They let you carve off a separate parcel from your main lot and calculate density on the remaining land — giving you more flexibility to avoid disqualification.

5. Do ADUs count toward density limits?
It depends on the city. Some, like Berkeley, don’t count ADUs against density, allowing even more units per site.

Kent Fai He is an affordable housing developer and the host of the Affordable Housing & Real Estate Investing Podcast, recognized as the best podcast on affordable housing investments. Through detailed conversations like this one with experts like Matt Baran, Kent helps investors and city leaders learn how to turn policy into real housing solutions.

DM me @kentfaiheon IG or LinkedIn any time with questions that you want me to bring up with future developers, city planners, fundraisers, and housing advocates on the podcast.