Accessory Dwelling Units (ADUs) have been one of California’s most talked-about housing solutions — but now, they’re about to shift from rental units to a whole new form of ownership. In 2024, the City of San José became the first large municipality in California to officially approve ADU condominiums under the newly enacted AB 1033, allowing homeowners to legally sell their ADUs as separate properties.
This change could reshape everything from home equity options to the Bay Area’s housing supply. Whether you’re a homeowner considering your next move or a first-time buyer priced out of the market, this new legal framework opens up real possibilities.
AB 1033, signed into law in late 2023, allows cities in California to opt into a program where homeowners can sell an ADU as a separate condominium. While the state opened the door, it’s up to individual municipalities to pass ordinances supporting the move — and San José became the first major city to do it.
This opens the door for new homeownership models that don’t rely on traditional single-family homes — a huge shift in a region like the Bay Area, where land is scarce and prices remain sky-high.
Homeowners who have already built an ADU (or plan to) can now explore new financial opportunities by selling that unit separately — if the structure meets the necessary zoning, utility, and legal conditions.
Creating a separately deeded ADU isn’t as simple as listing it for sale. There are specific technical and legal requirements that must be met, including:
Some prefabricated ADUs — especially modern, plug-and-play units — already meet many of these requirements. If you’re curious about the difference between prefab and site-built units, explore our guide on Prefab vs. Custom ADUs to see which option may fit a future sale model better.
This policy gives homeowners the ability to tap into the value of their property without selling their entire home. That can be a powerful tool for retirement, debt reduction, or funding major life goals.
For buyers, ADU condos may be priced significantly lower than traditional homes — making them more attainable. This is especially true for shockingly affordable prefab ADUs, which often cost a fraction of what the average Bay Area home does. Learn more in our post: Shockingly Affordable ADUs in 2025.
Upgrading your ADU with sustainable features before selling it may increase its value and make it more appealing. If you’re considering a green retrofit, check out our Top 5 Green Energy Upgrades for ADUs and don’t miss the Bay Area’s 2024–2025 Tax Credit & Rebate Programs.
Of course, with opportunity comes complexity. Homeowners should carefully consider:
For a deeper dive into funding options and what you can expect in 2025, visit How to Finance Your ADU.
In July 2024, a home near Downtown San José became the first in the state to sell an ADU as a condo under AB 1033. The 450 sq. ft. unit was newly built in the backyard, met all legal requirements, and sold for under $450,000 — far below the median price of a San José single-family home.
The project took roughly 10 months, including time to secure approvals, create a condo map, and legally separate the utilities. According to city officials, several more applications are now pending — meaning this model is likely to scale quickly.
San Francisco, Oakland, and Berkeley have all voiced interest in exploring ADU condo options. As housing pressures continue, local governments are watching San José closely to see how the program plays out.
If successful, expect other municipalities to adopt similar ordinances — potentially opening up hundreds (or thousands) of new entry-level homes without building massive new developments.
Here’s a quick checklist for homeowners considering this route:
✅ Is your ADU up to code with a private entrance and separate utilities?
✅ Can you afford (or finance) the cost of conversion paperwork and legal setup?
✅ Are you in a city that supports AB 1033 (like San José)?
✅ Have you assessed the tax and long-term ownership implications?
The rewards can be big — but so can the headaches. Take time to research, review your local policies, and run the numbers. Our ADU financing guide is a great place to start.
San José’s ADU condominium model is the first of its kind in California, and it could open doors for both homeowners and buyers alike. By converting ADUs into separate, deeded homes, the city has taken a bold step toward solving the affordability crisis without adding more high-rise towers or massive suburban sprawl.
If this works — and early signs are promising — the Bay Area may finally have a scalable way to add density, preserve neighborhood character, and expand homeownership.
Whether you're just starting to design your ADU or exploring a potential condo conversion under AB 1033, our team at Arch General Construction can help you every step of the way.
From site assessments and permitting to custom builds, prefab installations, and green upgrades — we have the experience and resources to deliver a compliant, high-quality ADU that fits your goals.
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