San Jose Now Allows Homeowners To Sell Their ADUs—Will the Rest of the Nation Follow?

California has one of the most expensive housing markets in the country. This week, the city of San Jose took steps to change that. The Silicon Valley metro became the first to make it legal for homeowners with backyard accessory dwelling units to sell those ADUs separately from their primary residences as condominiums. This ordinance will take...

California has one of the most expensive housing markets in the country. This week, the city of San Jose took steps to change that.

The Silicon Valley metro became the first to make it legal for homeowners with backyard accessory dwelling units to sell those ADUs separately from their primary residences as condominiums. This ordinance will take effect on July 18. Will the rest of the nation follow suit with this housing trend?

How this came about

A bill passed last year in California, AB 1033, allows cities and counties to permit sales such as these, if they so choose.

The author of that bill, Assemblymember Phil Ting, wrote, “The average size of a single-family home in California is 1,860 square feet. By comparison, the average size of an ADU in California is less than one-third of that, at 615 square feet. Presuming a commensurate reduction in price, the purchase of an ADU would be affordable to lower-income households.”

But with the median list price in San Jose currently more than $800 per square foot, Washington, DC, real estate agent Cedric Stewart disagrees that these ADUs are the silver bullet to solve this area’s sky-high home prices.

“It’s great in the sense that it will increase the density and allow more people to live in the area,” he says. “But ADU prices will still be well above what they should be, so it doesn’t really solve the affordable housing issue.”

“Many homeowners who do not understand the legal requirements of HOAs are going to run into serious trouble down the line,” warns Jameson Tyler Drew, developer and president of Anubis Properties in Whittier, CA. “Imagine if every HOA only had one permanent president and two voting members. They’ve essentially just created a landlord situation again, but with much more legal red tape.”

Possible impact on resale value

Stewart also worries that converting an ADU into a condo could negatively affect a home’s resale value.

“People buy single-family homes to avoid having shared lots with others so they can use their own yard and driveways,” he says. “Now, they’ll be two-family lots. People will be concerned about who they’re sharing space with, what kind of habits and hours they keep, and who they entertain. There are legitimate quality-of-life and safety concerns to be pondered.”

Despite these challenges and concerns, Doylestown, PA, real estate agent Denise Supplee says she hopes that other states follow San Jose’s lead.

“High housing costs may be abated by providing more inventory,” she says. “I believe this could help in creating more affordable housing, but regulations would be needed so it does not get out of hand.”

Thinking about selling your ADU? Drew recommends you think long and hard about it before pulling the trigger.

“Once you sell the ADU, that’s it,” he warns. “It can be sold to whomever as many times as possible without your say-so, and it’s about 25 feet away from your living room. In my opinion, you are much better off renting it [out] than running down this complicated legal path.”

Julie Taylor is a writer, producer, and editor. Her work has appeared in Cosmopolitan, Redbook, and other publications.

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