HCD Guidance Clarifies SB 1123’s Expansive Reach
The California Department of Housing and Community Development (“HCD”) has issued a Letter of Technical Assistance to the City of San Diego that clarifies the expansiveness of the eligibility criteria in the Starter Home Revitalization Act (Senate Bill (“SB”) 684 (2023) as amended by SB 1123 (2024)). The letter interprets the statute’s “vacant” lot condition in a way that allows an existing structure to remain on a designated remainder parcel, while treating the balance of the property as “vacant” for SB 1123 eligibility purposes.
Background: The Evolution of SB 1123
In 2023, SB 684 created a streamlined ministerial approval process for the subdivision of up to 10 parcels for residential development, but was limited to multifamily zones (among various other eligibility criteria). In 2024, SB 1123 expanded the law to apply in single-family zones, but only if the lot was “vacant,” which meant “having no permanent structure, unless the permanent structure is abandoned and uninhabitable.” (See our previous Client Alert Big Support for Smaller Housing: Three Bills That Reduce Entitlement Friction for Housing Projects for more information on SB 1123.) In 2025, Assembly Bill (“AB”) 130 authorized the designation of a remainder parcel as part of SB 1123, which remainder parcel does not count against the 10-parcel maximum, and which can retain existing land uses or structures.
HCD’s Letter of Technical Assistance
HCD’s October 7, 2025, Letter of Technical Assistance to the City of San Diego clarifies that a single-family zoned lot with an existing home can still qualify as “vacant” for SB 1123 eligibility purposes if the proposed subdivision creates a designated remainder parcel for the portion of the lot with the existing home. HCD explains that AB 130 expressly allows remainder parcels to retain existing land uses or structures. “Accordingly, once a remainder parcel is designated to retain an existing use, the site area outside of the remainder parcel may be considered ‘vacant’ for purposes of eligibility under” SB 1123.
Read HCD’s Letter of Technical Assistance here.
Why It Matters
HCD’s interpretation reduces the limits created by the “vacant” lot requirement, potentially opening up many more single-family zoned properties to the SB 1123 streamlined ministerial approval process, so long as an existing structure is isolated on a remainder parcel (and the other eligibility criteria for SB 1123 are satisfied).
While HCD is statutorily charged with enforcing SB 1123, the letter constitutes guidance rather than binding law. Courts typically defer to HCD’s interpretations of state housing reform laws, but statutory interpretation ultimately rests with the judiciary. It remains to be seen whether local jurisdictions or the courts will agree with or adopt HCD’s reading of the “vacant” lot requirement. As described in our recent Client Alert Senate Bill 808 and Assembly Bill 712 Enhance Remedies Against Local Agencies that Violate State Housing Laws, given recent statutory expansions of HCD’s enforcement mechanisms, including the greater potential for fines against cities and counties that disregard specific HCD guidance, a city or county may hesitate to depart from HCD guidance even when it disagrees with it.
Our Land Use and Natural Resources Team is experienced in entitling housing development projects and engaging HCD to resolve questions of housing law compliance. If you have any questions concerning SB 1123, or if you would like assistance engaging with HCD on housing implementation issues, please contact the authors or any member of the team.
