June 20, 2024

San Jose Becomes the First City to Allow the Sale of ADUs as Condos


Image courtesy of Acton ADU

On June 16th, 2024, San Jose became the first city in the state to allow homeowners with Accessory Dwelling Units (ADUs) to sell these backyard homes separately as condominiums. The city’s action was made possible by the passage of AB 1033 in last year’s legislative session, which gave local jurisdictions the authority to adopt local ordinances permitting these sales. 

Allowing the sale of ADUs will mean that homeownership opportunities will be able to open up at sales prices well below the current market and in neighborhoods throughout the city. Currently, homeowners can only rent their ADUs. Homeowners will be able to stay in their homes and still receive the benefits of a one-time sale.  The new law will also allow families to build homes for family members in their backyards to create additional wealth-building opportunities for multiple generations to now be able to stay in their neighborhoods.

This is a good policy. Putting these smaller, denser homes on the market will increase the supply of “naturally occurring” affordable housing. These are not going to be inexpensive new homes, but if the opportunity catches on, they will be sprinkled throughout currently exclusive single-family neighborhoods. 

The action last week once again puts San Jose at the forefront of ADU streamlining and development. Since the passage of ADU streamlining legislation in 2018, the city has dedicated planning staff to support homeowners through the permitting process and has offered preapproval for a select group of prefabricated models. In 2023, San Jose permitted over 460 ADUs, up from around 330 in 2020.

This new law was only one of the pieces of ADU streamlining legislation over the last 5-6 years. Each of these has made building ADUs incrementally more feasible and accessible. 2023 also saw new rules allowing increased building heights and easing restrictions on front setback requirements.  Earlier legislation significantly reduced front and side setbacks as well as parking requirements. 

ADU production has been increasing every year throughout the county, and in a number of cities, it now makes up the largest share of new construction activity. SV@Home will continue to advocate for local adoption of the new ownership opportunities and track the many jurisdictions in the county that have included ADU streamlining as a new policy in their state-mandated Housing Element updates.

Our Director of Policy, Mathew Reed, shared what this opportunity will mean for our communities with KTVU. Watch here: https://www.ktvu.com/video/1472265?anvt=2