California law permits homeowners to sell Accessory Dwelling Units (ADUs) as condominiums.
California Homeowners Can Now Sell ADUs as Condos Under New Law
Starting next year, California homeowners will have the opportunity to sell accessory dwelling units (ADUs) built on their property as condominiums. This new law aims to address the state’s affordable housing crisis by increasing the availability of affordable homes.
The bill, known as Assembly Bill 1033 and authored by Assemblyman Phil Ting, was signed by Gov. Gavin Newsom on October 11. It allows cities to adopt local ordinances that permit the separate sale of ADUs from the primary residence. Previously, only ADUs built by qualifying nonprofits could be sold separately, and only to low-income individuals earning below 80 percent of the median area income.
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“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,” said Assemblyman Phil Ting.
Prior to 2017, ADUs accounted for less than one percent of permitted new construction in California. However, a new state law has allowed ADUs to be built on single-family lots, resulting in approximately 10 percent of new construction being ADUs, with around 9,600 units built in 2022.
A survey conducted in the Bay Area found that ADU rent prices were affordable for those earning the median area income, which was around $128,000 in 2022.
Studies have shown that homeownership is the primary way American households accumulate wealth, with homeowners having a net worth around 60 times larger than renters. However, the median home price in California is almost $800,000, making it affordable for only around 17 percent of households in the state.
The bill received support from various pro-housing nonprofits, activists, government officials, and the City of San Jose. The Bay Area Council, a business association advocating for the Bay Area and a co-sponsor of the bill, believes that it will help offer starter homes to California families.
However, the California Association of Realtors (CAR) opposed the bill, arguing that it should have included an owner occupancy requirement. CAR believes that local governments should have the option to impose such requirements to ensure that homeownership opportunities actually increase.
What potential positive effects are expected from allowing ADUs to be sold as condominiums?
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The new law allows homeowners to sell ADUs as condos to anyone, regardless of income level. This means that homeowners can now generate additional income by selling these units on the market. It also incentivizes homeowners to invest in ADUs as a way to create affordable housing options while also generating revenue for themselves.
ADUs, also known as granny flats or in-law units, are small, self-contained residential units that are typically located on the same property as a primary residence. They can be converted garages, basements, or standalone structures. ADUs provide an additional housing option for individuals and families, and they can help alleviate the shortage of affordable housing in California.
Prior to the passage of this new law, ADUs could only be rented out or used by family members. Homeowners could not sell ADUs as separate properties, limiting their ability to monetize their investments. This new law changes that and allows ADUs to be sold as individual condominium units.
The decision to allow ADUs to be sold as condominiums is expected to have several positive effects. First, it will increase the supply of affordable housing on the market, providing more options for homebuyers. Second, it incentivizes homeowners to invest in ADUs, leading to an increase in the construction of these units. This will create jobs in the construction industry and stimulate economic growth.
Furthermore, the ability to sell ADUs as condos enables homeowners to generate additional income. This can be particularly beneficial for homeowners who may be facing financial difficulties or looking to supplement their income. Selling an ADU as a condo allows homeowners to capitalize on the value of their property and potentially make a profitable sale.
However, there are some concerns regarding the potential impact of this new law. Critics argue that allowing ADUs to be sold as condos could result in a reduction in the overall availability of affordable housing. Instead of being rented out or occupied by low-income individuals or families, these units may be purchased by higher-income buyers who may not have the same need for affordable housing.
Additionally, there may be challenges in implementing this law at the local level. Cities will need to adopt local ordinances that allow for the separate sale of ADUs. This process may be time-consuming and could vary from city to city, leading to inconsistencies in the implementation of the law.
In conclusion, the new law in California allowing homeowners to sell ADUs as condos is a significant step towards addressing the state’s affordable housing crisis. It increases the supply of affordable housing on the market, provides homeowners with an opportunity to generate additional income, and stimulates economic growth. However, it is essential for cities to carefully consider the potential impacts and implement the law in a way that ensures the continued availability of affordable housing for those who need it most.
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