California SB 1116 will allow lot averaging in eligible subdivisions: individual parcels may be as small as 480 square feet on multifamily-zoned sites or 960 square feet on single-family-zoned sites, provided the averages reach 600 and 1,200 square feet, respectively. Approved September 29, 2026, as Chapter 808, the legislation applies these changes to applications local agencies receive on or after January 1, 2027. SB 1116 chaptered text

For developers, the benefit is flexibility in placing parcel boundaries. A smaller individual parcel does not establish that the subdivision qualifies—or that a house will fit within its building envelope.

How the parcel minimum and required average work together

The amended Government Code section 66499.41 distinguishes the ordinary parcel minimum from the smaller parcel permitted through averaging:

These are the state thresholds; a local agency may adopt a smaller minimum by ordinance. When averaging creates smaller parcels, no newly created residential parcel may exceed 50% of the original parcel’s size, subject to the designated-remainder provision. Section 66499.41(a)(3)

A qualifying remainder parcel must retain existing uses or structures, contain no new residential units and not be exclusively dedicated to serving the project. It receives separate treatment under the parcel-count and residential-density rules. Simply labeling an oversized new home lot a “remainder” does not satisfy those conditions. Remainder-parcel provisions

A six-parcel example: passing the average is only one test

Consider a hypothetical, otherwise eligible vacant single-family site measuring 7,200 square feet, with six proposed homes. Assume all its land is divided into six residential parcels, with no separate common-area, circulation or remainder parcel.

The proposed parcel schedule is:

• Two parcels of 960 square feet each: 1,920 square feet.
• Two parcels of 1,200 square feet each: 2,400 square feet.
• Two parcels of 1,440 square feet each: 2,880 square feet.

Together, the parcels total 7,200 square feet and average 1,200 square feet. Each meets the 960-square-foot individual minimum, and none exceeds 3,600 square feet—half the original site. For an application subject to the new provisions, this layout passes those area tests. It does not demonstrate compliance with the remaining requirements. Statutory area tests

Now redraw the same site into four residential parcels of 4,000, 1,280, 960 and 960 square feet. Their average is 1,800 square feet, above the required average. Yet the 4,000-square-foot parcel exceeds the 3,600-square-foot ceiling, so this layout fails the state averaging provision.

That distinction matters in land development decisions: dividing gross site area by 960 does not establish the permissible parcel count. The required average and individual-parcel ceiling both constrain the layout, and the final map must account for every parcel it creates.

Original zoning and project limits still control eligibility

The original lot’s zoning determines which size thresholds apply. The single-family route also requires a qualifying vacant original lot no larger than 1.5 acres. The amended vacancy definition can accommodate certain abandoned or untenantable structures, but excludes specified protected housing and housing occupied by tenants during the preceding five years. Multifamily eligibility begins with zoning that allows multifamily residential use. Original-lot requirements

The amended site tests separately examine base zoning: a ceiling of 15 permitted units, or 26,250 square feet of residential floor area where zoning specifies no maximum unit count. That assessment excludes remainder land and disregards density bonuses, zoning overlays, ADU allowances and incentive programs. Qualifying lower-income housing-element sites have a separate proportional-affordability provision, including recorded restrictions lasting at least 45 years. Section 66499.41(a)(5)

The 15-unit figure is an eligibility test, not authorization for a 15-parcel subdivision. The general project limits remain 10 parcels and 10 residential units, with specific treatment for qualifying remainder parcels and locally permitted ADUs. Urban-location, protected-housing, environmental and local inclusionary requirements also remain relevant. A successful averaging calculation does not override them. Project conditions and exceptions

Parcel area and home size are separate measurements

A 960-square-foot parcel measures land. The project separately faces an average maximum of 1,750 net habitable square feet per proposed home. SB 1116 excludes stairs and enclosed bicycle parking from that defined floor-area calculation, along with other listed exclusions. The limit applies to the average, rather than imposing a 1,750-square-foot ceiling on every home. Floor-area provision

Design rules also affect whether the six-home illustration can work:

• Front and internal setbacks: Local standards cannot require a front setback exceeding 10 feet from the original lot line or internal setbacks between new parcels, except as required by the California Building Standards Code.
• Original side and rear boundaries: For new construction, setbacks generally may reach four feet; existing structures and replacements in the same location with the same dimensions receive different treatment.
• Height: On qualifying single-family sites, a local agency may retain the height allowed by the existing zoning designation. The limit governs physical building height and cannot restrict the number of floors.

These provisions must be read together. Eliminating an internal zoning setback does not eliminate building-code requirements. SB 1116 design provisions, AB 2601’s section 65852.21 setback text

Application receipt sets the January 2027 cutoff

September 29, 2026, is the enactment date. The subdivision and associated housing-development amendments apply to applications received by the local agency on or after January 1, 2027. An application received in December 2026 does not gain the new averaging provisions merely because approval occurs in 2027. Application-date provisions

The review deadline uses a different trigger: the statute’s 60-day approval-or-denial periods run from receipt of a completed application. Preserve the agency’s receipt record and establish which statutory application is being processed. Combined application and review provisions

Two companion measures in this package of zoning and land-use changes, AB 2601 and SB 1090, were chaptered September 30, 2026. Their coordination provisions preserve the averaging changes in the combined statutory text. SB 1090 also restricts this approval route in ZIP codes 91001 and 91003 for applications submitted on or after October 1, 2026; the restriction lasts until January 1, 2030, subject to specified earlier-application and qualifying affordable-housing exceptions. AB 2601, SB 1090

Averaging does not approve infrastructure or construction

The subdivision statute requires the new parcels to be served by a public water system and municipal sewer system. Parcel-size compliance does not establish those services or building-code compliance. The combined law permits concurrent processing, while allowing building permits, grading permits or occupancy certificates to be conditioned on map approval and recording. Service and permitting requirements

Our California housing coverage follows the broader policy developments. For an acquisition relying on the new rules, have a California land-use attorney and civil engineer review the application date, parcel schedule, building envelopes and service plan together.