In California, You Can Now Sell Your ADU
October 17, 2023By Anjulie Rao
In recent years, cities across California have turned to backyards to increase housing stock. After pre-approving plans of architect designed accessory dwelling units (ADUs) in 2021, earlier this year, Los Angeles rolled out a free version to make it even easier to build a backyard home, whether as an in-law unit or rental.
This week, California passed legislation—Assembly Bill 1033—that now allows homeowners to sell an ADU built on their property, allowing them to leverage existing equity.
Los Angeles company Cover builds customizable prefab ADUs.
As reported by the Los Angeles Times, the bill requires cities to opt into the program. Property owners in participating cities will then be able to sell their ADU following the same rules as a condominium, namely that homeowners will need to notify utility providers and form a homeowners association for property maintenance. Taxes would be paid separately.
The legislation could be a major benefit to senior citizens on a fixed income who often can’t afford to move, whether because of high interest rates or capital gains taxes incurred by selling a long-time home. The "typical homeowners [adding ADUs] are retirees who have paid off their mortgage," Meredith Stowers, a San Diego loan officer specializing in ADUs, tells the Times. Individuals living on social security could sell their ADU, or downsize by building one to live in, and sell their home.
In Seattle, where homeowners can already sell their ADUs as condos, those units sold at lower prices than single-family counterparts. A report by the City of Seattle cited by the Times provides a short snapshot of 14 properties: each sold at between $500,000 and $800,000. While the bar for affordability is low—one 748-square-foot property included in the report sold for $610,000 in 2022—the legislative move will expand options for Californians, benefiting longtime homeowners and those interested in becoming one.