What happens to my property value when I split my lot?

When we discuss the BuildCasa lot-splitting process with prospective clients, we hear one question over and over: How would dividing my property affect my current home’s value? 

It’s a valid question! For the vast majority of Americans, the value of their home constitutes most of their net worth. It seems logical that the home would lose a lot of value by losing 40 percent of the lot via an SB 9 subdivision. But we’ve found that even after that 40 percent reduction in lot size, the owner’s remaining parcel only loses about 5 percent of its value on average. 

First, let’s do a quick overview of the splitting process. The new California law SB 9 is meant to add badly needed housing to urban neighborhoods across the state, creating opportunity for middle income families to buy starter homes in the communities in which they want to live. Under the law, property owners across the state are able to split their lots into two separate parcels of land. That newly created parcel can then be developed with a single-family home, duplex, townhouse, or neighborhood-appropriate condos, by either the owner or a builder who buys the lot. 

It’s important to clarify that when you undertake this process, you’re not splitting your total real estate assets in half; you’re selling a piece of your lot of land. A rough rule — at least in cities, where parcels are small — is that the land that your house sits on makes up about 30 percent of your property value. When you split your lot with SB 9, you’re still keeping at least half of that land. 

Say you’d estimate a loss of 15 percent to the remaining parcel with your house on it. Our first post-split reassessments have shown that in practice, those parcels lose between 1.8 and 9.4 percent of their pre-split value. This is because homebuyers value homes based on the square footage of the house, and in the majority of cases, the post-split property retains a nice outdoor space. 

And when you split the lot, you’re actually creating a new, more valuable asset. That’s the average scenario for BuildCasa clients, according to early appraisal analysis. So far, all our clients’ total property value has increased with a lot split by 15-40 percent. 

Let's look at some real examples:

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Our early data suggests a promising trend: That adding density and new housing to existing neighborhoods is an opportunity, not a loss, for the homeowners in the community. As BuildCasa helps more and more property owners with lot splits, we’ll keep you updated with how that trend progresses.

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