California has long limited Accessory Dwelling Units (ADUs), also known as “granny flats,” to be available exclusively for rent. However, a recent legislative development, Assembly Bill 1033, has changed the game by allowing Californians the opportunity to purchase and sell these units as condominiums.

ADUs come in various forms, such as converted garages, small backyard homes, or even unused portions of the main house, as commonly seen in San Francisco. Assemblyman Phil Ting (D-San Francisco), the mastermind behind this legislation, highlighted the versatility of ADUs.

Under AB 1033, which was recently enacted into law, property owners in select cities can now build an ADU on their land and sell it as a separate entity, adhering to the same regulations applied to condominiums. This offers homeowners greater flexibility in utilizing their property, with the potential to boost homeownership rates, as Ting envisions.

It’s important to note that local governments must opt in to allow the ADU-as-condominium approach within their cities. Here’s how the new regulations will function in participating cities:

Just like new condominiums, homeowners constructing ADUs must notify local utility providers (water, sewer, gas, and electric) about the creation and separate conveyance of the unit. Additionally, each property will need to establish a homeowners association to levy dues for maintaining the property’s exterior and shared spaces, like driveways, pools, or common roofs.

One of the challenges retirees face is the financial impracticality of downsizing to a smaller house due to years of loan modifications and high rates. AB 1033 provides retirees with a way to leverage the equity in their homes, potentially leading to them adding ADUs in their backyards and selling off their primary residence.

This approach has already shown success in places like Oregon, Texas, and Seattle. When Seattle removed regulatory barriers discouraging ADU construction in 2019, the city saw a significant increase in ADU permits issued, including attached and detached ADUs, often referred to as backyard cottages.

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