Selling ADUs in California

Is it legal to sell an ADU separately in California? Thanks to AB 1033, it may soon be! Learn about the new law and its potential in this informative blog post.

Last updated 
February 8, 2024
Selling ADUs in California

Can ADUs Be Sold Separately?

Many people want to know, "Can you sell an ADU in California?" Until recently, the answer was a resounding "no." However, with the introduction of California AB 1033, this may soon change. This exciting new legislation has the potential to transform homeownership in the Golden State. Read on to learn more.

What is AB 1033?

California Governor Gavin Newsom recently signed Assembly Bill 1033 into state law. This new bill enables California jurisdictions to allow separate conveyance of accessory dwelling units from a primary residence. In simpler terms, it legalizes the sale of ADUs by allowing the units to be sold separately from the houses they share a lot with.

How does AB 1033 work?

AB 1033 allows the sale of accessory dwelling units as condominiums. The process involves legally detaching the ADU from the main house and drafting a condo declaration that outlines specific rules. Responsibilities are shared between property owners, and the establishment of a Homeowners Association (HOA) maintains order.

When does AB 1033 go into effect?

This question is slightly more complicated than it seems.

AB 1033 was passed and signed into law in 2023, and it went into effect January 1, 2024. So, theoretically, ADUs may now be sold separately in California.

However, that doesn’t necessarily mean you’ll be able to sell your ADU right away, or at all. The new law is not a mandate, which means that cities may choose to opt in or not. While some jurisdictions may decide to allow the separate sale of accessory dwelling units, others will likely continue to forbid it.

As of this publication, no jurisdictions in California have adopted an ordinance allowing for the separate sale of ADUs. However, many cities are reportedly in the process of drafting an ordinance. These cities include San Diego, Santa Monica, Berkeley, and San José.

It’s a good idea to attend your local City Council meetings and encourage city leadership to adopt an ordinance in alignment with AB 1033.

Why is AB 1033 important?

More accessible homeownership

The purpose behind AB 1033 is to create more affordable paths to homeownership for Californians. ADUs—also called backyard homes, granny flats, and casitas—can help add housing stock, since the state’s production of housing is not keeping up with the ever-growing demand. According to The California Department of Housing and Community Development (HCD), fewer than half of the homes needed to keep up with population growth were built over the past decade. Furthermore, new homes are often built out in suburban areas, far from jobs and other neighborhood amenities.

ADUs offer a solution. With over 44,500 ADU building permits issued in California since 2020, these versatile units have rapidly gained popularity. Now, homeowners can choose to sell their ADUs, providing a unique opportunity for both sellers and potential buyers. Because ADUs are much smaller than typical American houses, they sell for a lower price than most homes, thus lowering the barrier of entry for homeownership.

Environmentally friendly

AB 1033 also encourages responsible housing density by utilizing existing housing stock without resorting to developing new land. This environmentally conscious approach aligns with California's commitment to sustainability.

Economic stimulus

Beyond its housing implications, AB 1033 is a potential catalyst for economic growth. The law is likely to inspire homeowners to invest in ADUs, creating employment opportunities in construction and stimulating local economic development.

ADU opportunities with Otto

If you want to build an accessory dwelling unit to use, rent, or sell, contact Otto! We have extensive experience designing ADUs for all purposes and can create a custom ADU with privacy and separate conveyance in mind, with all the necessities of a primary residence.

If you’d like to learn more about ADU financing, read our ADU financing guide.

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