On October 10, 2025, the Governor approved Senate Bill 543 (McNerney) (“SB 543”), which, among other things, now prohibits school districts from imposing school impact fees on accessory dwelling units (“ADUs”) containing less than 500 square feet of assessable space. This new law goes into effect January 1, 2026.

Current Application of School Impact Fees to ADUs

Existing law authorizes school districts to impose school impact fees on ADU permits, for any size, as “new residential construction.”

Specifically, Education Code section 17620 authorizes school districts to collect school impact fees on specified categories of residential construction, including: (i) “new residential construction,” and (ii) “other residential construction, only if the resulting increase in assessable space exceeds 500 square feet.” (Ed. Code, § 17620(a)(1)(B) & (C).)  Courts have distinguished these two residential construction categories based on whether the construction creates a new dwelling unit, or whether the construction is the remodel of an existing residential home resulting in no change in use of the space. (Warmington Old Town Associates, L.P. v. Tustin Unified School District (2002) 101 Cal.App.4th 840, 854.) A remodel, or “other residential construction,” is exempt from school impact fees if the increase in assessable space is less 500 square feet.

Construction of an ADU is the creation of a new dwelling unit—leading to student generation, and thus has been subject to the imposition of school impact fees. California law defines an ADU as “an attached or a detached residential dwelling unit that provides complete independent living facilities for one or more persons and is located on a lot with a proposed or existing primary residence.” (Gov. Code, § 66313(a).) In other words, an ADU, no matter its size, is assessable space that serves as a new residential dwelling unit, independent of the primary home on the property, and, therefore, an ADU has been effectively  “new residential construction” subject to a school district’s residential fee rate for the entire assessable square footage of the ADU permit.

Impact of SB 543 on School Districts

SB 543 overturns the court’s analysis with respect to ADUs less than 500 square feet in size. SB 543 amends the Government Code to explicitly state that an ADU or junior ADU with less than 500 square feet of assessable space shall be considered “other residential construction that does not increase assessable space by 500 square feet”—thus,  as of January 1, 2026, ADUs less than 500 square feet of assessable space will be exempt from payment of school impact fees.  Key takeaways:

• Although school districts will no longer be able to collect school impact fees on new ADUs under 500 square feet, school districts may continue to impose fees on new ADUs over 500 square feet.
• School districts should closely monitor and track construction permits for small projects on the same property which are submitted in piece-meal to avoid payment of fees.
• As the construction of ADUs as a means of low-cost housing continues to rise, school districts should carefully consider how student enrollment resulting from ADUs not subject to developer fees may impact school facilities, and address this accordingly in their facilities master plans and fee expenditure commitments.

This bulletin is for educational purposes only and does not constitute legal advice. However, DWK attorneys in our Business and Property group are available to assist your district with any questions you may have regarding the impacts of SB 543 to your school impact fee program. Please do not hesitate to contact a DWK attorney in our BPC practice group for guidance.