Can Fewer Stair Save Your Project?

The Real Estate Espresso Podcast

Can Fewer Stair Save Your Project?

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Can Fewer Stairs Save Your Project?

Welcome to the Real Estate Espresso podcast, your morning shot of what’s new in the world of real estate investing. I’m your host Victor Menasce.

On today’s show we’re talking about a new bill in California. Well, not really new, it’s called California AB 835. Why a bill that sounds like building code trivia could materially shift the multifamily market over the next cycle.

This law was signed into law in October 2023, and it directs the State Fire Marshal to research and develop recommendations for building standards that would allow for a single-stair tower in multifamily buildings above three storeys, and then to report back their findings to the legislature and the California Building Standards Commission.

So this is not yet a statewide code change that suddenly makes single-stair buildings legal everywhere tomorrow. It’s a state-driven pathway to rewrite a very specific rule that has shaped apartment design for decades, and I can tell you even that many of our buildings that we design have multiple paths of egress, irrespective of travel distance.

That fire code is pretty simple. Once you go above a small building size, irrespective of travel distance, most codes require two means of egress, meaning two fully enclosed stair towers. That requirement drives a lot of floor space. It ends up increasing the core of the building, increasing the length of the hallways. The number of units that you can fit is impaired, and it can impair the economics of what’s possible on a small lot.

When you hear two stairs you might think of a safety feature. From a developer’s perspective it’s a geometry constraint. Two stair towers plus corridors and switchbacks often force you into double loading the hallway. That means units on both sides of a long corridor and a big chunk of non-rentable space. A lot of space gets lost to circulation.

Now that’s fine on a large rectangular site, but on smaller parcels like you find in many urban areas in California, on small lots, on narrow lots, on shallow parcels, odd shapes. All of these things, these geometric constraints can affect the feasibility of a multifamily building. A single stair tower building supports a smaller floor plate, and you can build a compact 6- or 12-unit building on a lot that would never support a conventional podium design.

The result is more units and a different kind of housing product. It’s part of what is often called the missing middle. This is why this new rule could shift the market. It changes the economic model of which projects are feasible. If the code changes eventually land in a way that cities adopt broadly, it expands the inventory of buildable sites in existing urban neighborhoods. And today there’s a lot of small lots that are effectively stranded.

In fact, that’s a problem. If you think about land plays, and we do this all the time, if you want to make money on land, you start with large parcels of land and you carve it up into something buildable. Or you take small parcels that are too small to be usable and you put them back together and you do what are called land assemblies. Those are difficult to do in a dense urban environment. So to unlock these parcels, increase the feasibility of the development pipeline, you want lots that previously were not buildable to be now feasible for multifamily apartments.

All of this matters because the multifamily market is set at the margins. Rents are not set by your stabilized asset, they’re set by the newest product competing for the next tenant. If you get a new wave of infill supply in high-demand neighborhoods, it can cap rent growth, but it can shift tenant preferences towards better designed units and more livable units.

And so for investors that means a couple things. Number one, development becomes possible for a broader set of operators, including smaller builders who specialize in building on small sites. Second, existing older assets that have been protected by supply constraints might face new competition.

A single-stair design can improve the yield on cost, not only because it makes the materials cheaper, but increases the amount of rentable area, makes the building overall much more efficient. When you reduce corridor area, reduce stair towers, the ratio of net rentable square footage improves. That could increase the difference in yield on cost by 75 basis points, and that difference might be enough to determine the feasibility of a project.

I want to be careful here. In California, cost structure is dominated by labor, by soft costs, by entitlement risk, impact fees, time. A single stair tower doesn’t solve all of that, but it can move the needle enough to turn a marginal site into one that’s feasible, especially in the 4- to 6-story range.

Now of course anytime that you touch the fire code you’re going to get pushback, and it’s going to be sincere and it’s going to be valid. The argument in favor of a single stair tower is that many global cities already allow this with modern fire suppression, with compartmentalization, fire doors, smoke controls, alarms, fire separations. So it’s not a given that a single stair tower actually makes a building a lot less safe.

In many cases those two stair towers are physically co-located and you get around the letter of the law without actually providing much real benefit. From an investor standpoint, the politics matter because it determines how fast this becomes real.

Now it is worth noting that in early 2026 the Fire Marshal’s report has slipped past the January 1st deadline. So that should serve as a reminder that independent of what the legislation said doesn’t mean it’s going to be implemented.

So what this means for multifamily investors are three things.

1. Sites that might have been considered too small for multifamily could become feasible. They could be meaningful for small apartment buildings.

2. The sweet spot for product could shift. You can expect more 4- to 6-storey buildings with elevators and compact footprints and potentially larger units, meaning more two-bedroom and three-bedroom units that fit families. If that arrives at scale, it changes the competitive environment for some of these older apartment buildings that appear in those same sub-markets.

Then number 3. The value-add thesis assumes limited new supply coming into the market. If the code change expands the buildable sites in the neighborhood, you may want to re-underwrite more conservatively in terms of rent growth. The risk is not that your existing building becomes obsolete, but the tenant does have more choices.

So this new rule, when it gets implemented, AB 835 is a reminder that regulatory change can move markets even without changing interest rates. If you can build more housing types on more sites you change that supply elasticity. You change who can compete. You change what works and what doesn’t. Over time you can change the trajectory of rent growth even in those supply-constrained neighborhoods.

So if you happen to be one of those folks who invest in California, by the way we do not, don’t treat it as a niche policy debate. Treat it like a potential structural shift that could affect the development feasibility.

As you think about that, have an awesome rest of your day. Go make some great things happen and we will talk to you again tomorrow.

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