California Passes Law to Allow ADU's to Be Sold as Condominiums

California has passed a new law, AB 1033, that will allow accessory dwelling units (ADUs), also known as granny flats, to be sold as condominiums. This is the first time in California that ADUs will be available for purchase, and it is expected to create more affordable housing options in the state.

What these types of dwellings are: ADUs are small, separate housing units located on the same property as a single-family home. They can be converted garages, backyard cottages, or even unused portions of the main house.

How AB 1033 will affect homeowners: Under the new law, they will be able to construct an ADU on their land and sell it separately, following the same rules that apply to condominiums. This will give homeowners more options for building on their property and could create more homeownership opportunities, according to Assemblyman Phil Ting (D-San Francisco), who drafted the legislation.

Here’s how the new rules will work in participating cities:

• As with new condominiums, homeowners building ADUs must notify the local utilities, including water, sewer, gas and electric, of the creation and separate conveyance of the unit.

• Each property will also have to form a homeowners association to assess dues to cover the cost of caring for the property’s exterior and shared spaces, such as the driveway, a pool or a common roof.

• Similar to condominiums on one property, the home and the ADU will have two different property taxes.

• Supporters of the new law believe that it will benefit both homeowners and new buyers. Homeowners can earn supplemental income by selling their ADU, and young families can buy an affordable starter home.

Why is AB 1033 important: The law is expected to have a positive impact on the California housing market. A report released in March found that in Seattle, which removed regulatory barriers that discouraged property owners from constructing ADUs in 2019, the city issued nearly 1,000 ADU permits, more than four times the number permitted in 2018.

Local governments need to opt in to the ADU-as-condominium approach for it to be an option in their cities.

The passage of AB 1033 is a significant step forward in California's efforts to address its housing crisis. By making ADUs more accessible and affordable, the law is expected to create more housing options for Californians of all income levels.