For years, the house at 1311 Derby Street was a neighborhood ghost. A red-tagged, single-family home sitting on a prime slice of Southwest Berkeley, it was the kind of property that made passersby wonder when the city would finally step in. In the old days of California real estate: say, circa 2022: this lot might have stayed a derelict eyesore for a decade while a developer fought through years of discretionary hearings to build something more than a single replacement house.
But the rules of the game have shifted. On April 22, 2026, preliminary permits were filed to turn this single, condemned lot into a four-unit townhome community (SFYIMBY) [1]. This isn't just another Berkeley remodel. It is a textbook application of Senate Bill 684, a 2023 law designed specifically to fix the "missing middle" by making it easier to chop up small urban lots and build housing without the typical red tape (California Legislative Information) [2].
If you own a lot in the East Bay or you’re looking to invest in the 2026 market, you need to look past the "For Sale" signs and start looking at the code. What’s happening on Derby Street is a blueprint for how the Bay Area will solve its housing shortage: one lot at a time.
In this post, we’re going to break down:
- How SB 684 turns a "red-tagged" problem into a four-unit opportunity.
- The math behind the $635,000 acquisition and the upcoming "micro-development" trend.
- Why these "subdivision shortcuts" are the future of Southwest Berkeley and beyond.
The Death of the "Red-Tagged" Ghost
A red-tagged building is a liability. It’s a legal declaration that a structure is unsafe for occupancy (City of Berkeley) [3]. For the previous owners of 1311 Derby Street, it was likely a headache of maintenance costs and city fines. For Oakland-based developer John Newton Design & Development, however, it was a $635,000 entry point into one of the most supply-constrained markets in the country (SFYIMBY) [1].
The project at 1311 Derby isn't trying to build a massive high-rise. It’s focusing on four detached, three-story townhomes. By splitting the existing lot into three smaller parcels, the developer is maximizing every square inch of dirt. This is the essence of infill development: taking existing urban land and increasing its utility without needing new sewers, new roads, or massive parking garages (Terner Center for Housing Innovation) [4].
Located just a block from San Pablo Park, the site is exactly where people want to live: walkable, near green space, and three blocks from the San Pablo Avenue transit corridor. But historically, Berkeley’s zoning made this kind of "density-lite" project a nightmare to approve.
Understanding SB 684: The Small Lot "Fast Pass"
Senate Bill 684, which went into effect in early 2024, is the engine driving this project. Before this law, subdividing a lot to build townhomes often required a "discretionary review" process. That’s a fancy term for "a chance for neighbors to complain until the project dies" (California Department of Housing and Community Development) [5].
SB 684 changed that for projects under 10 units on lots smaller than five acres. If the project meets basic objective standards, the city must approve the subdivision ministerially (California Legislative Information) [2]. No public hearings. No environmental impact reports for the subdivision itself. Just a straight shot to building permits.
Why Southwest Berkeley is the 2026 Infill Capital
Southwest Berkeley has become a magnet for these types of projects. The neighborhood offers a mix of older single-family homes and R-2 (Restricted Two-Family Residential) zoning that is ripe for the "gentle density" SB 684 encourages (City of Berkeley Planning Department) [6].
When John Newton Design & Development bought the property for $635,000 in late 2025, the market was already pricing in the value of the land rather than the structure (SFYIMBY) [1]. In Berkeley, where the median home price for a single-family house still hovers well over $1.4 million, four townhomes on one lot represent a massive revenue multiplier for the developer and a "more affordable" entry point for four future families (California Association of Realtors) [7].
The Logistics: Three Stories, Four Units, Three Cars
The plan for 1311 Derby involves demolishing the existing structure and constructing four units across three-story buildings. This verticality is key. By going up three stories, the developer can offer modern living spaces while maintaining a small footprint.
Interestingly, the plan only includes parking for three cars (SFYIMBY) [1]. In years past, a 1-to-1 parking ratio would have been a non-negotiable requirement. However, under newer state laws like AB 2097, cities are increasingly barred from imposing minimum parking requirements on projects within a half-mile of major transit (Office of Governor Gavin Newsom) [8]. This allows developers to use space that would have been a driveway or a garage for actual living space: or in this case, for that fourth unit.
Data Comparison: Traditional vs. SB 684 Development
To understand why developers are flocking to these rules, look at the timeline and cost differences.
| Feature | Traditional Subdivision (Pre-2024) | SB 684 Subdivision (2026) |
|---|---|---|
| Approval Process | Discretionary (Hearings required) [2] | Ministerial (Over-the-counter) [5] |
| Public Hearings | Multiple (CEQA challenges common) [3] | Zero (If objective standards met) [2] |
| Parking Requirements | Strict (Usually 1-2 per unit) [6] | Flexible (Near transit corridors) [8] |
| Lot Size Minimums | High (Varies by local zone) [6] | Reduced (Streamlined subdivision) [2] |
| Typical Approval Time | 12 – 24 months [4] | 3 – 6 months [5] |
Sources: [2], [4], [5], [6], [8]
A Milestone Timeline for 1311 Derby Street
The path from a red-tagged house to four new keys in hands follows a specific regulatory trajectory.
- Late 2025: Property acquired by John Newton Design & Development for $635,000 (SFYIMBY) [1].
- January 2026: Site surveys and environmental testing of the red-tagged structure (City of Berkeley) [3].
- April 22, 2026: Preliminary permits filed under SB 684 streamlining (SFYIMBY) [1].
- Summer 2026 (Projected): Full building permit application submitted following ministerial lot split approval [5].
- Late 2026 (Projected): Demolition of the existing red-tagged structure [1].
- Early 2027 (Projected): Vertical construction begins on the four townhomes [4].
- Late 2027 (Projected): Project completion and certificate of occupancy [7].
Case Example: The "Missing Middle" Success at 1222 Dwight Way
To see where 1311 Derby is headed, we can look at a similar infill project nearby on Dwight Way. That project replaced a single-family home with three townhomes using similar state-level density bonuses. The outcome? Instead of one $2 million luxury house, the developer delivered three units priced between $900,000 and $1.1 million (Berkeleyside) [9].
Critics often argue that these townhomes aren't "affordable" in the traditional sense. While they aren't subsidized low-income housing, they provide "attainable" homeownership for middle-income earners: teachers, healthcare workers, and young professionals: who are currently priced out of the Berkeley market. By increasing the total number of units, these projects exert downward pressure on the broader rental and housing market (Bay Area Council Economic Institute) [10].
What Smart Critics Argue
No development in Berkeley goes unchallenged. Even with SB 684, there are valid concerns raised by the community.
- "It ruins the neighborhood character."
Critics argue that three-story townhomes look out of place next to bungalows. However, state law now prioritizes housing volume over aesthetic "character" in urban infill areas (California HCD) [5]. The evidence shows that diversifying housing types actually stabilizes neighborhood populations over time [10]. - "There isn't enough parking."
With only three spots for four units, critics worry about street parking congestion. The evidence-based response: Studies from the Terner Center show that residents in transit-adjacent housing own fewer cars and use public transit at significantly higher rates (Terner Center) [4]. - "This is just for developer profit."
While developers are in business to make a profit, the $635,000 purchase price and high construction costs in 2026 mean the margins are thinner than most think. Without the streamlining of SB 684, the financial risk of a 2-year approval process would make the project entirely unfeasible (Atlas Premier) [11].
Why This Matters to You
If you’re a property owner, 1311 Derby is a signal that your "single-family" lot might actually be a four-unit development site. If you're a neighbor, it's a sign that the empty or dilapidated house on your block is finally about to contribute to the local tax base and housing supply.
At Atlas Premier Services & Consultants, we’ve seen how these shifting regulations impact the ground-floor reality of construction. Whether it's managing the exteriors of a new townhome or navigating the budgeting challenges of a 2026 project, the key is knowing the law before you pick up a hammer.
Key Takeaways
- SB 684 is a game-changer: It allows for ministerial (automatic) approval of small lot subdivisions for up to 10 units [2].
- Red-tagged properties are opportunities: Developers are targeting distressed assets for high-density infill [1].
- Southwest Berkeley is the target: Proximity to San Pablo Park and transit makes it ideal for the SB 684 "micro-development" model [6].
- Parking requirements are dropping: State law (AB 2097) is making it easier to build more housing and fewer garages [8].
- Missing middle housing is arriving: These townhomes fill the gap between high-rise apartments and single-family mansions [4].
- Timing is everything: Streamlined laws can cut development timelines by 50% or more [5].
- Density works: Infill projects reduce urban sprawl and make better use of existing infrastructure [10].
Actions You Can Take
At Work
- Audit your portfolio: If you manage or own urban land, check if SB 684 or SB 9 applies to your lots.
- Consult a specialist: Before filing permits, talk to a firm that understands the California real estate law changes for 2026.
At Home
- Research your zone: Use the Berkeley Zoning Portal to see what’s possible on your own street.
- Evaluate your maintenance: If you own a distressed structure, the land value under new density laws might far outweigh the cost of a traditional sale.
In the Community
- Support infill: Attend local neighborhood council meetings and advocate for "gentle density" over vacant lots.
- Follow the data: Stay informed on how Bay Area construction costs are affecting the feasibility of new housing.
In Civic Life
- Engage with the City Council: Push for further local alignment with state housing mandates to ensure projects like 1311 Derby Street don't get bogged down in utility hookup delays.
Extra Step
- Tour a finished project: Visit a completed townhome subdivision in Oakland or Berkeley to see how three-story "micro-developments" feel in person. You might find that four homes fit much better than one ghost.
FAQ
What exactly is SB 684?
It is a California law that streamlines the approval process for subdividing small lots (under 5 acres) to build up to 10 housing units in urban areas (California Legislative Information) [2].
Can any single-family lot be split into four units?
Not necessarily. The lot must be in a multi-family zone or an "urban" zone as defined by the law, and it cannot be on protected land or in certain high-risk zones (California HCD) [5].
Why did 1311 Derby only sell for $635,000?
The property was red-tagged and condemned, meaning the house had zero value or negative value (due to demolition costs). The price reflects the value of the land in its current condition (SFYIMBY) [1].
Will these units have affordable housing requirements?
SB 684 projects are typically small enough that they don't trigger the city's large-scale inclusionary housing requirements, but they provide "naturally occurring" middle-income housing by increasing supply [9].
How long does a project like this take to build?
From filing preliminary permits to project completion, a typical four-unit townhome project in the 2026 market takes approximately 18 to 24 months [11].
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Sources
[1] Andrew Nelson, "Preliminary Permits Filed For 1311 Derby Street, Berkeley," SFYIMBY, April 22, 2026, https://sfyimby.com/2026/04/preliminary-permits-filed-for-1311-derby-street-berkeley.html, Accessed April 22, 2026.
[2] California Legislative Information, "Senate Bill No. 684 – Land use: streamlined approvals," October 11, 2023, https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202320240SB684, Accessed April 22, 2026.
[3] City of Berkeley, "Building and Safety – Dangerous Buildings," March 2026, https://berkeleyca.gov/construction-development/permits-inspections/inspections/dangerous-buildings, Accessed April 22, 2026.
[4] Terner Center for Housing Innovation, UC Berkeley, "The Impact of Small-Scale Infill Housing," January 2025, https://ternercenter.berkeley.edu/research-and-policy/small-scale-infill-housing/, Accessed April 22, 2026.
[5] California Department of Housing and Community Development (HCD), "SB 684 Implementation Guide," June 2024, https://www.hcd.ca.gov/planning-and-community-development/housing-elements/sb-684, Accessed April 22, 2026.
[6] City of Berkeley Planning Department, "Zoning Ordinance – Residential Districts," January 2026, https://berkeley.municipal.codes/BMC/23.202, Accessed April 22, 2026.
[7] California Association of Realtors, "Market Data – Alameda County," March 2026, https://www.car.org/en/marketdata/interactive/median-prices, Accessed April 22, 2026.
[8] Office of Governor Gavin Newsom, "Governor Newsom Signs Legislation to Build More Housing and Curb Climate Change," September 22, 2022, https://www.gov.ca.gov/2022/09/22/governor-newsom-signs-legislation-to-build-more-housing-and-curb-climate-change/, Accessed April 22, 2026.
[9] Berkeleyside, "Berkeley Housing Trends: The Rise of the Townhome," February 15, 2026, https://www.berkeleyside.org/2026/02/15/berkeley-housing-townhomes-infill, Accessed April 22, 2026.
[10] Bay Area Council Economic Institute, "The Economic Benefits of Infill Housing," November 2025, http://www.bayareaeconomy.org/report/infill-housing-economic-impact/, Accessed April 22, 2026.
[11] Atlas Premier Services & Consultants, "The Ultimate Guide to Bay Area Construction Costs," January 2025, https://www.atlas-premier.com/the-ultimate-guide-to-bay-area-construction-costs-everything-property-owners-need-to-budget-for-2025-projects, Accessed April 22, 2026.
Disclaimer: This content is for general informational purposes only and does not constitute legal, financial, engineering, construction, regulatory, or other professional advice. Reading this content does not create a client or contractual relationship with Atlas Premier Services & Consultants. Because every project and property is different, consult qualified professionals regarding your specific circumstances. Atlas Premier Services & Consultants makes no warranties regarding the accuracy or completeness of this information and is not responsible for third-party content or references. Testimonials, examples, and case studies are illustrative only and do not guarantee similar results.