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An Overview of AB-1033

An overhead shot showing a Type Five backyard ADU on the property next to the main house

What condo-ization means for ADUs and for California homeowners.

If you live in California, you may have heard about the condo-ization of accessory dwelling units (ADUs). Here’s a quick overview of what condo-ization means for ADUs and for California homeowners.

What is AB-1033?

California Assembly Bill 1033 (AB-1033) is a new state law that allows homeowners to sell ADUs built on their properties. Before the law took effect on January 1, 2024, ADUs were exclusively allowed as rentals because California state law prevented them from being sold as separate housing units.

The purpose of AB-1033 is to increase housing density and provide Californians with more attainable homeownership options. ADUs are a flexible way to increase housing density. Unlike larger multifamily buildings, they fit well into many existing lots and match the character of their surrounding neighborhoods. Because ADUs are smaller than single-family homes and often make use of existing infrastructure on a property, they are typically less costly to develop and therefore a more affordable housing option.

What does condo-ization mean for ADUs?

When we think of a condo, we usually think of a type of building, but in reality, it is a form of property co-ownership. ADU condo-ization involves allocating ownership of separate units on a single property–say a house and an ADU–to distinct owners. On a property with a condo-ized ADU, one party owns the primary home, and another owns the ADU.

This ownership structure allows separate parties to legally own discrete parts of the same property without going through a lengthy, often expensive subdivision process. With the passage of AB-1033, under these terms the ADU is considered separate from the main home and can be sold separately. The primary home and ADU have two different property taxes, which are billed separately.

What are the requirements to condo-ize an ADU?

Though AB-1033 legalized the separate sale of ADUs statewide, each city or county can accept or reject the ADUs-as-condominiums approach for its residents. That means your local jurisdiction must opt into AB-1033 and adopt an ordinance to allow the separate conveyance of the primary house and ADU as condominiums.

The following Bay Area municipalities have already approved the ordinance:

  • San Jose: adopted mid-2024
  • Oakland: adopted mid-2024
  • Berkeley: approved May 2024, plans to finalize the ordinance by mid-2025

Condo-ized ADUs must follow the same rules as other new condominiums - owners must notify local utilities of the creation and conveyance of separate units, and a homeowners association must be established to manage the maintenance of the property’s exterior and shared spaces (like driveways or common roofs).

On a property with a condo-ized ADU, one party owns the primary home, and another owns the ADU.

What does AB-1033 mean for California?

On the heels of SB-9 (LINK TO POST HERE), AB-1033 offers newfound flexibility and financial opportunities for California homeowners. The law gives homeowners more options for leveraging existing equity, increasing housing supply, and boosting homeownership with more attainable options for buyers.

Homeowners who want to avoid being landlords can, for example, build an ADU and sell it to help finance its construction and earn extra income, all while giving someone else the chance to buy a reasonably-priced home.

ADUs play a pivotal role in addressing housing needs across the county, and ADU condo-iziation has a a proven track record. Cities like Austin, TX, Seattle, WA, Portland, and Princeton, NJ have benefited from condo-ized ADUs for years as a cheaper housing option in expensive markets.

As ADUs continue to play a pivotal role in addressing the state’s housing needs, the innovative possibilities legalized under AB-1033 reflect the dynamic and evolving nature of California’s real estate market.

How is AB-1033 different from SB-9, and which one is right for me?

AB-1033 and SB-9 allow homeowners to subdivide their lots and build (and sell) extra units, or even a portion of their land. Both laws aim to lessen California’s grinding housing crisis by adding extra homes that are more compact and affordably priced. Together, they create a market for approximately $750 billion of backyard land value that restrictive zoning has locked up for decades.

It is important to note that AB-1033 and SB-9 differ in some key details:

  • Housing types. SB-9 deals with duplexes and lot splits, not ADUs. While SB-9 allows homeowners to split a portion of their land as-is or build another unit on their property, AB-1033 specifically addresses condo-ized ADUs. Rather than selling a portion of a lot, AB-1099 allows homeowners to sell their ADUs as condos.
  • Eligibility. While SB-9 is a statewide requirement–meaning your city must allow you to pursue eligible developments as long as your property meets the qualifications–AB-1033 only gives cities the option to permit condo-ized ADUs. It is up to local jurisdictions whether or not they will allow it.
  • Zoning. SB-9 is restricted to lots zoned for single-family, while AB-1033 offers municipalities the flexibility to consider other lot types.

When deciding which option is best for you, consider:

  • The size of your lot. ADUs have a size restriction of 1,200 square feet and only three are allowed per lot, while SB-9 provides more flexibility with the sizes and number of homes that are classified as single-family homes or duplexes.
  • Extra costs and complexities. Lot splits under SB-9 can be an expensive and lengthy process which may add costs and time to your home redevelopment. Legal expenses and the administrative lift to establish and maintain a homeowners association for a condo-ized ADU under AB-1033 may also add cost and burden.
  • The goals of your home redevelopment. While selling a portion of your lot with a house or duplex may bring you a higher return on investment, a condo-ized ADU may better serve your friends and neighbors, like young families seeking entry-level homes or older adults that are looking to downsize.

The choice between the two depends on your specific circumstances and objectives. Both offer paths toward maximizing the value of your property while providing needed housing in your neighborhood.

How do I get started?

Contact Type Five to explore your options, discuss your home redevelopment goals, and get started on your home project!

From the desks of...

Rhey Haggerty, Guest Writer

Urban Planner

Tim Thimmaiah

Tim Thimmaiah

CEO, Co-founder

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