Current California state law prevents ADUs from being sold separately from the primary residence. Assembly Bill 1033 recently passed by the legislature and now on the governor’s desk would remove that ban. AB 1033, drafted by Assembly member Phil Ting, proposes to to allow the sale and condoization of ADUs built on a residential property. Individual cities and counties would have latitude to decide if they want their residents to have the option to sell their ADUs.

What Is Condoization?
Condoization involves determining the individual units that will make up a single property and allocating ownership of these separate units to different owners. This allows two or more distinct parties to legally own discrete parts of the same property without subdividing (i.e. splitting) the lot. Therefore, a condoized ADU is one which is part of a co-owned property, with one party owning the primary residence and the other party owning the ADU. The ADU is thus considered a separate entity from the main home, able to be sold separately. Currently, California properties having ADUs are not permitted to be condoized – AB 1003 proposes to change that.

What AB 1033 Could Mean for California?
AB 1033 could have several positive impacts for Californians. Firstly, it will provide more affordable housing opportunities for low-to-mid income first-time home buyers. AB 1033 would allow ADUs to be sold independently from the primary residence, opening up a reservoir of reasonably priced homes for first-time homebuyers. After all, ADUs are a much more affordable housing option than a 2,000+ square ft home. Household sizes have shrunk to all-time lows since the 60s when many of these homes were built. A large fraction of families just don’t have a need for five-bedroom houses anymore.

AB 1033 would also be advantageous to current homeowners who could use the sale of an ADU to help finance its construction. It would allow homeowners who do not want to be landlords to simply build the ADU as a for sale, thus allowing more families a chance at homeownership.

Finally, from a social perspective, it could increase gentle density in many cities. Unlike high density (e.g., mid- and high-rise residential buildings), gentle density refers to the development of single-family type units (e.g., ADUs, duplexes, etc.) within single-family zoned neighborhoods. Gentle density helps maintain the residential character of existing neighborhoods while offsetting the growing housing demands.

ADU Condoization Precedents
The AB 1033 approach already has a proven track record in other locations. Notable precedents include the cities of Seattle WA, Austin TX, Portland OR, and Princeton NJ. These jurisdictions have been permitting this approach for several years and, in so-doing, helping to alleviate the ongoing housing crisis.

Case Study: Seattle
With a median house price in Seattle of $1.2M, increasing numbers of ADUs have been built in recent years to alleviate their housing shortage. Accordingly, almost 1,000 ADUs were permitted in 2021, an increase of 250% over the previous year. Approximately 1/3 of these new ADUs are being permitted as condos results of a heightened effort on Seattle’s part since 2019 to loosen ADU regulations. This will provide a wider, more financially accessible array of housing opportunities. It is to be noted that condoized ADUs are not always cheap – the median price for a condoized ADU in Seattle is currently approximately $732,000. But compared to a 1.2M price for full-sized homes in the area these ADUs are still saving homeowners hundreds of thousands of dollars.