SB 1117 amends Government Code section 66311.5 to require that impact fees for accessory dwelling units (ADUs) larger than 750 square feet be assessed only on the portion of the ADU that exceeds 750 square feet of interior livable space. The bill preserves the existing exemptions for ADUs at or below 750 square feet and junior ADUs (JADUs) at or below 500 square feet, and it clarifies what counts as an "impact fee" for purposes of these rules.
Practically, the bill reduces the fee burden on homeowners and builders who add ADUs that exceed the 750-square-foot threshold and forces local agencies, special districts, and water corporations to revise fee schedules and administrative practices. The legislation also declares the issue one of statewide concern (applying to charter cities) and states that no state reimbursement is required for the mandate.
At a Glance
What It Does
The bill changes the fee calculation for ADUs so that any impact fees for units over 750 square feet are charged only on the square footage exceeding 750, rather than on a proportion tied to the primary dwelling. It also keeps connection fees and capacity charges separate and clarifies the inclusion of certain fees in the term "impact fee."
Who It Affects
This directly affects local agencies, cities (including charter cities), counties, special districts, water corporations, homeowners and developers building ADUs or JADUs, and school districts that collect mitigation under the Education Code.
Why It Matters
By trimming fee obligations on larger ADUs, the bill lowers marginal costs for adding housing at the parcel level, which can change project economics for homeowners and small builders and reduce revenue streams local governments rely on to pay for infrastructure expansions.
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What This Bill Actually Does
SB 1117 tightens the legal rule that prevents local governments and certain utilities from treating small ADUs as new residential uses for fee purposes. Under current law, ADUs of 750 square feet or less (and JADUs of 500 square feet or less) are exempt from impact fees; for larger ADUs fees were to be charged "proportionately".
This bill rewrites that proportionality rule: when an ADU exceeds 750 square feet, the fee can only be based on the ADU square footage above 750. In short, the bill creates a floor of 750 square feet that is always fee-free and limits fee exposure to the increment beyond that point.
The measure also clarifies the scope of "impact fee" by folding fees listed in Section 66477 into the definition while explicitly excluding connection fees and capacity charges from that label. Separate rules already limit when a jurisdiction or utility can demand a new or separate utility connection for an ADU; SB 1117 keeps those limits in place for ADUs created under specific ministerial approval paths and allows proportionate connection fees only in other cases, measured either by square feet or by drainage fixture unit (DFU) values and capped at the reasonable cost of providing service.There is a narrow cross-reference to the Education Code: ADUs or JADUs under 500 square feet remain treated for school mitigation purposes as not increasing assessable space by 500 square feet.
The bill makes an express statewide-importance finding so that its fee rules apply in charter cities and declares that no state reimbursement to local agencies is required because local authorities have the power to levy fees sufficient to cover the mandate.
The Five Things You Need to Know
The bill requires that any impact fees for an ADU larger than 750 square feet be charged only on the ADU square footage that exceeds 750 square feet of interior livable space.
ADUs that are 750 square feet or less and JADUs that are 500 square feet or less remain exempt from impact fees.
The statutory term "impact fee" for this section now explicitly includes fees listed in Section 66477 but expressly excludes connection fees and capacity charges imposed by local agencies, special districts, or water corporations.
Local agencies or utilities may not demand a new or separate utility connection for specified ministerially approved ADUs unless the ADU was built with a new single-family house or the ADU is separately conveyed; otherwise connection fees may be charged proportionately using square footage or DFUs and must not exceed the reasonable cost of service.
The bill declares the policy a matter of statewide concern (applying to charter cities) and states that no state reimbursement to local agencies is required under Article XIII B of the California Constitution.
Section-by-Section Breakdown
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Fee determination reference
This subsection reaffirms that fees for ADU and JADU construction are governed by Government Code Chapters 5 and 7 (the Mitigation Fee Act framework). Practically, that means any new local fee or change to compute fees under this statute must comply with the proportionality, nexus, and reasonable cost rules the Mitigation Fee Act requires.
When ADUs are not treated as new residential uses for connection fees
Subsection (b) prevents a local agency, special district, or water corporation from treating an ADU or JADU as a new residential use for purposes of calculating utility connection fees or capacity charges—unless the ADU was constructed together with a new single-family dwelling. That preserves the longstanding rule that adding an ADU to an existing lot generally shouldn't trigger full connection fees as if a separate house had been built.
Impact fee exemption and new calculation rule
This is the core change: the subsection keeps the exemption for ADUs ≤750 sq ft and JADUs ≤500 sq ft but revises the rule for larger ADUs so that any impact fees are charged only on the area exceeding 750 sq ft. For administrators that previously applied a proportional share based on the primary dwelling's size, this requires a new base for calculation—measure the ADU, subtract 750, and apply the fee to the remainder.
Definition of 'impact fee' and Education Code interaction
Subsection (c)(2) clarifies that the term "impact fee" follows the Mitigation Fee Act's definition but expressly adds fees referenced in Section 66477; it also confirms that connection fees and capacity charges are not "impact fees" under this rule. Subsection (c)(3) cross-references the Education Code: ADUs or JADUs under 500 sq ft are treated as not increasing assessable space by 500 sq ft for school mitigation calculations, preserving the smaller-unit carve-out in school fee assessments.
Limits on requiring separate utility connections
This subsection prohibits demanding a new or separate utility connection (or associated connection fee/capacity charge) for ADUs created under the ministerial paths described in 66323, unless the ADU was built at the same time as a new single-family dwelling or the ADU is separately conveyed. That limits when utilities can impose additional hookup costs on these ministerially approved ADUs.
When new connections and proportional connection fees are allowed
For ADUs not covered by the ministerial-path protections, this subsection allows jurisdictions and utilities to require a new connection and impose a proportionate connection fee or capacity charge. It specifies proportionate measurement may be by square footage or DFU values, ties the charge to the actual burden on the system, and caps the fee at the reasonable cost of providing service—creating both a method and a ceiling for connection-related fees.
Statewide-importance finding and reimbursement clause
Section 2 declares the subject matter a statewide concern so the statute applies to charter cities. Section 3 states that no state reimbursement is required because local agencies can impose fees sufficient to cover the mandated program, which addresses potential constitutional reimbursement obligations.
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Explore Housing in Codify Search →Who Benefits and Who Bears the Cost
Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- Homeowners adding ADUs: Owners building ADUs slightly larger than 750 sq ft will pay fees only on the incremental square footage, lowering out-of-pocket development costs and improving project economics.
- Small ADU developers and contractors: Reduced fee exposure on larger ADUs improves margins and may increase demand for ADU construction work.
- Prospective renters in ADUs: Lower development costs can translate into more ADU production over time, increasing small-unit rental supply in single-family neighborhoods.
- School fee payers in some districts: The retained rule treating ADUs/JADUs under 500 sq ft as not increasing assessable space preserves a pathway to avoid school mitigation fees for very small units, benefitting homeowners who build tiny units.
Who Bears the Cost
- Cities and counties: Local jurisdictions will likely collect less in impact fees for larger ADUs and must revise fee schedules and administrative practices to implement the new calculation.
- Special districts and water corporations: Entities that fund infrastructure through development fees may see reduced revenue and will need to update rate studies and fee methodologies.
- Ratepayers or taxpayers: If fee revenue declines, jurisdictions may need to substitute other funding sources to finance capacity upgrades—putting the cost on broader taxpayers or utility ratepayers.
- Planning and permitting offices: Local staff will bear implementation burdens—revising fee ordinances, recalculating current fee schedules, and defending new methodologies in public hearings or litigation.
Key Issues
The Core Tension
The central tension is between lowering upfront barriers to creating ADUs—in service of housing supply and affordability—and preserving the fee-based financing mechanism that pays for the infrastructure and capacity ADUs consume; the bill reduces one cost but transfers the fiscal and administrative burden onto local governments, utilities, and potentially other ratepayers.
The bill solves a clear fairness question—shielding the first 750 square feet of an ADU from impact fees—but creates implementation and funding questions. Converting from a proportional formula tied to the primary dwelling to a "fee-only-on-excess" model will require local fee studies to be redone, fee ordinances to be amended, and accounting changes in fee collection systems.
That administrative work has a cost and a timing gap: jurisdictions may need to decide whether to apply the new rule to pending permits and how to treat projects sized near the cutoffs.
There is also a substantive trade-off about cost allocation. Charging only on the footprint above 750 square feet treats the first 750 as a public good or de minimis burden, which improves affordability but reduces the fee-paid share of system expansions.
Utilities and special districts may argue the approach under-recovers the marginal cost of new demand, particularly in systems near capacity. The bill tries to limit that risk by preserving proportionate connection fees in some cases (and capping them at the reasonable cost), but the split between "impact fees" and "connection/capacity charges" can be a source of disputes and litigation.
Finally, the bill leaves open practical questions: how to measure interior livable space consistently, how to calculate DFU-based proportional charges across mixed plumbing fixtures, and whether existing bonded fee commitments constrain a jurisdiction's ability to reduce assessed fees.
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