San Jose is the first California city to allow homeowners to sell their accessory dwelling units—known as ADUs—separately from their main property, which lawmakers say they hope will give more first-time homebuyers a chance to purchase.
“ADU ownership could provide a path for residents to buy their first home, or even allow our seniors to downsize,” said Assemblyman Phil Ting, the legislator responsible for the new law, during a July 19 press conference. “With this less expensive housing option available, increased home ownership can help build stronger communities.”
Assembly Bill 1033, authored by the San Francisco Democrat and signed into law last year, allows cities to adopt a local ordinance to permit the sale of an ADU separate from a primary residence.
Also known as granny flats, backyard cottages, and in-law units, ADU construction has increased in recent years, so much so that the state is now seeing a “backyard revolution,” according to a July 19 press release from Mr. Ting.
Recent laws have helped streamline the approval process for their construction including another by Mr. Ting, Assembly Bill 68, which has helped speed up local approvals and removed parking requirements. He also championed a grant program that covers the costs of pre-development, site prep, and design, to build the backyard homes.
According to state data, one in every five homes built in 2023 was an ADU, double compared to 2020.
Local efforts in San Jose have helped the city lead the way in ADU construction, receiving twice as many ADU applications compared to nearby cities such as Oakland and four times as many as San Francisco, according to the press release.
The city council adopted its ordinance in June that went into effect last week.
“We need to keep the American Dream alive by bringing the innovation inherent to our region into our housing policy, and this new ordinance does just that,” San Jose Mayor Matt Mahan said in the recent announcement.
He said homeownership has become “unattainable” for San Jose residents as well those throughout the state.
“San Jose will continue to lead the way, but we can’t solve this crisis alone. I am looking forward to seeing other California cities follow suit,” he said.
A survey in the Bay Area found ADU rent prices were affordable for those earning the area’s 2022 median area income, about $128,000 annually, according to a Senate analysis of the bill.
Other data showed that homeownership is the primary method that American households accumulate wealth, with studies showing the net worth of homeowners is around 60 times larger than renters: $337,000 for homeowners and only $5,700 for renters.
San Jose homeowner Joyce Higashi said besides adding value to her home, the ADU in her backyard also has provided a good source of extra income.
“The ability to sell my ADU is yet another reason this addition to my backyard was one of the smartest things I’ve done. Not only has it increased the value of my property, it also generates more rental income than I expected,” she said in the press release.
Other areas may soon follow San Jose’s lead with Berkeley, Sacramento, and San Diego County exploring their options, according to the press release.
