Will adding an ADU/Garage Conversion change my property taxes in Los Angeles?

Published by
Mike Smith
05/11/2020

Whether you call them Granny Flats, Garage Conversions or ADUs, turning your garage into a living space is a great way to add value to your existing home while also providing affordable housing in the current tight rental market.

You may be thinking of building an ADU on your property to realize a second income. But will that change your property tax bill? The short answer is yes. But! It may not change your taxes that much.

Who determines my property taxes in Los Angeles?

The Los Angeles County Office of the Assessor is responsible for assessing buildings for property tax in the Los Angeles area.

Properties are reassessed by the County of Los Angeles when your building permits are submitted. In cases of new construction, the County Office of the Assessor will reassess the property tax on that building.

Is my ADU considered new construction?

Property tax typically is reassessed after new construction is completed on the property. Most people typically consider “new construction” to be completing an addition to your house.

However, under California property tax law, “new construction” can also mean renovating a structure to change its use. That means, if you are converting your garage into an ADU, you are changing its use. That ADU/garage conversion/granny flat would then be considered “new construction.”

How is my property reassessed after I build an ADU/Garage Conversion? 

Under California’s Proposition 13, your property tax is linked to the price you paid for your house. If you bought your house ten years ago for $340,000, your property tax is initially assessed based upon that amount.

Assessors throughout California treat ADU’s like a home addition. The existing home will not be reassessed, but the addition will be included in your property tax reassessment.

The new construction of the ADU/granny flat/garage conversion will be assessed at market value as of the date of completion, or as of the January 1 lien date for partially complete construction.

With the completion of ADU/granny flat/garage conversion, your property will be reassessed using what’s called a “blended assessment.”

What is a “blended assessment”?

  • A blended assessment means the base value of the existing house will stay the same. The additional value of your ADU/granny flat/garage conversion will be added to the existing home’s value.
  • How is the value of your ADU/granny flat/garage conversion determined? Typically, assessors use either the cost of construction or a market-based sales comparison to value the new improvements separately. Once everything is added together, there will be a 1% tax rate added to that amount.

What would a blended assessment look like on my home?

Let’s say you purchased your home in 1990 for $100,000. It now has a base value of $156,000 based on the 2% tax increase allowed by Prop 13. Now let’s say you build an ADU, granny flat, garage conversion unit valued at $75,000.

You would add $156,000 + $75,000 = $231,000.

The new assessed value of your home would be $231,000. You can expect your property taxes to be about $1,700 a year -- an increase of about $700.

How does Prop 13 determine my property taxes?

Proposition 13, commonly known as Prop 13, was passed by the voters of California in 1978 and instituted a major overhaul of property taxes in California.

Basically, Prop. 13 limits how much a property’s assessed value rises each year. It can rise only 2% or an amount equal to the state’s inflation rate -- whichever is less.

Your property tax is linked to the price you paid for your property. If you bought your property before 1976, your property’s assessed value is frozen at its 1976 level.  If you bought your property after 1976, your property tax is assessed at 1% of the sale price. There is a 2% yearly cap on property tax for future years.

As a result, California’s overall property taxes are below the national average. The average effective property tax rate in California is 0.77%, compared to the national rate, which sits at 1.08%.

Still, have questions about your ADU Garage Conversion will impact your house taxes?

Still have questions about how your property taxes will change with your ADU/granny flat, garage conversion? You can contact the Los Angeles County Office of the Assessor in several ways:

  1. To research comparable sales, verify valuations, download forms, learn how appraisals are made, and more, visit the Assessor’s website at http://assessor.lacounty.gov 
  2. You can email the Assessor with questions, comments, and suggestions to helpdesk@assessor.lacounty.gov 
  3. The Los Angeles County Property Tax Website provides general information regarding property taxes. Visit: http://www.lacountypropertytax.com 
  4. The Property Information Hotline provides quick transfers to expert staff during normal business hours. Just call toll free 1.888.807.2111. 
  5. The Automated Interactive Voice System also has information on valuations and taxes can be obtained by entering the Assessor Identification Number from a property tax bill. Call 213.974.3838 or the toll-free number above. Si desea ayuda en Espanol, llame al numero 1.888.807.2111
lagarage ADU / Garage Blueprint Plans

ADU Property Taxes in Los Angeles and You

Overall, the addition of an ADU/granny flat/garage conversion should not significantly increase your property taxes. In fact, the addition of a second income would easily make up for the slight annual increase in your property taxes.

As the property owner, you will have to decide how much to charge in rental for your new ADU/granny flat/garage conversion. In the current rental market, such units are renting for about $1,700 a month in the Los Angeles area. This would easily make up for any increases in your taxes.

Whatever decisions you make about converting your garage into an ADU/granny flat/garage conversion, let the experts at Los Angeles Garage Conversions help you through the process. With our free in-person consultations and transparent pricing, we ensure that we can be your lifelong contractor. Give us a call today at (818) 532-0482 or email us at info@lagarageconversions.com