The law of the land

Before you commit to the path of building an accessory dwelling unit ("ADU") on your property, you need to determine if you can meet your local building code. The good news is that the State of California recently passed laws that eased restrictions and made it cheaper to build ADUs. There are requirements for zoning, setbacks, dwelling size and location, so if your property is not big enough, you may be out of luck, unless you are interested in building an attached ADU. If you have enough space (say, a quarter of an acre or more), you should be good to go.

These restrictions may not be accurate for all areas, but generally, you should allocate 4 to 6 feet for setbacks around the fence (you will have to install a fire sprinkler system if you opt for the 4-feet setbacks). The distance from the primary residence should be around 10 feet or so (not 100% sure now, it could be 8 feet, but you probably would not want to go any closer than 10 feet). The ADU size can be the smaller of up to 1,200 square feet or 50% of the primary residence. Your new building should be of the same style as your primary residence (don't ask Frank Gehry to design your ADU if you live in an 1800's Victorian).

In my case, I could build an ADU of up to about 900 square feet. 

If you live in the unincorporated Sacramento area, check the Frequently Asked Questions posted by the Sacramento County Planning and Environmental Review (PER). The city of Sacramento has a similar page and so should every municipality in California.

You can stop by the office of give them a call and they will tell you what you can and cannot do. They can also give you a fee summary based on the size of your expected dwelling. And while at it, ask the county (or city) to check you parcel map dimensions and make sure you understand where your property lines go. It is not uncommon for fences to be built on the wrong sides of property lines (this thing alone caused me extra $5K in assessment fees, materials, and labor costs to move the fence, not to mention the hassle of dealing with the neighboring HOA which did not make the process easy).

I do not belong to an HOA, but our subdivision has the CC&Rs on file with the county, so I was a bit worried if they would be an obstacle, but based on my research, it generally should not be a problem. There may be more up-to-date information available now, but the following two articles cover the topic pretty well:

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