ADUs may no longer be accessories

During its recently concluded session, the state Legislature enacted a bill affecting accessory dwelling units (ADUs). It’s intended to help increase home ownership, but could it affect the short-term rental (STR) market, too?

Assembly Bill (AB) 1033 amends state law and permits homeowners, under specific conditions, to sell their ADU, as if it were a condominium.

An ADU can come in many forms. Often it is referred to as a “Granny Flat” or other references include second units, in-law units, backyard cottages, casitas or junior accessory dwelling units. The number of ADU permits has grown 10 times from about 1,300 in 2016 to more than 14,000 in 2019. In Riverside County, 93 ADU permits were issued in 2019.

Under current state law, they cannot be separated from the main housing structure, but AB 1033 allows local jurisdictions to enact laws that would permit the sale of these units. One of the principal requirements will be that utilities and local governments are notified of the added unit.

Assembly member Phil Ting (D-San Francisco) introduced AB 1033 in February 2023. His intent was to find another way to lower the cost of housing in California.

The Assembly’s report on AB 1033 noted, “One potential pathway to homeownership for moderate- and lower-income households could be through the sale or conveyance of ADUs. 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.”

“The lack of home ownership opportunities in most California communities for working families is contributing to the state’s growing population of renters and driving families out of state so that they can buy a home,” Ting said, introducing the legislation. “Many neighborhoods have become de-facto gated communities, with median home prices of $700K to $1M keeping out all but a small percentage of Californians from ever dreaming of home ownership … AB 1033 allows cities and counties the freedom to pursue homeownership programs and to create a path to wealth-building for families by repealing the current law prohibiting the separate conveyance of ADUs.”

The bill also requires written and recorded evidence that each lienholder consents to establishing condominiums. If a property is within a homeowner’s association, that homeowner’s association must approve creating the condominium.

After Gov. Gavin Newsom signed AB 1033, Denise Pinkston, president of the Casita Coalition, said, “Signing AB 1033 into law will help families burdened by high housing costs. Our children won’t have to move out of state to purchase a home; employers will be able to attract and retain workers who would otherwise leave our state due to lack of affordable homes; and elders who want to downsize and stay in their communities will have new options,”.

ADUs are currently permitted to be STRs in Riverside County; however, this change allowing them to be bought and sold separately may encourage more ADUs bought as a second home to rent.