ADU: Sell My Backyard Opportunities in California

The demand for accessory dwelling units has been gaining momentum in recent years, and we can track this trend through the huge amount of materials used in these projects’ construction, interior organization, and advantages description. However, the major benefit of ADU is the fact that this additional building on the same site as the main house increases the property value and, in case of sale, will make the homeowner very wealthy. Before 2023, property owners did not think of such prospects due to the complex regulations for ADU sales; however, the rules have changed.

This review will be useful both in a purely informational and practical way because today we will talk about a new law that simplifies the actions of those who want to sell accessory dwelling units, what stages this process consists of, and what financial opportunities it opens.

ADU Homeownership: Short Prehistory

There are a number of public issues that never disappear without a trace; they are permanent, and one of these problems is the housing crisis. Depending on the international and economic situation, housing prices for various types of real estate from San Diego to San Francisco can fall or rise.

This state of affairs forces homeowners to look for affordable housing options, and as the trial-and-error method showed, the accessory dwelling unit, or simply ADU, is the best one. This functional, technological, and cozy living space significantly increases property values, allows you to receive a fixed income for renting a unit, improves the quality of life of the whole family, and brings unforgettable emotions from spending time together.

Along with this, ADU and primary residence, from the legal point of view, have always been single homeownership, which means that property owners did not have the opportunity to sell ADU separately from the main home. On par with this, the same rules are applied to all configurations of accessory dwelling units, from independent backyard homes to attached drafts. The law AB 1033 turned the story around.

Assembly Bill 1033: California’s Housing Market New Era

The introduction of any new law has prerequisites, and the legislation we are talking about today is no exception. Homeowners could no longer live under the influence of the Homeowners Association (HOA) and coordinate their every action regarding the ADU. Realizing the importance of the problem, California Governor Gavin Newsom made a fateful decision by passing Assembly Bill 1033.

If you ask us to describe the essence of this legislation in one sentence, then we will say that it allows homeowners to sell accessory dwelling units freely, at their own request, and without long-term and bureaucratic approvals. However, any legal formulation has many nuances and hidden points, which we will discuss in the next part.

ADU Selling by New Law: Detailed Instruction

Let’s make it clear right away that Assembly Bill 1033 works for all tiny homes, whether we talk about converted garages or JADUs, and now let’s move on to more tricky moments:

1. Law AB 1033 allows homeowners to sell backyard homes only if they live directly in the city where the primary residence and ADU stand.
2. When it comes to allowing homeowners to sell real estate as condos, it is crucial to remember the existence of a third party. For this reason, homeowners should notify utility providers of this intention before selling the property.
3. After the previous action, local governments will create a special commission that will oversee property maintenance.
4. Despite the decreased influence of the Homeowners Association (HOA), this community will collect contributions for the cost of caring for ADU, which is important to remind every homeowner.
5. Separating accessory dwelling units from primary residences means different property taxes, so if you want to sell your ADU, then know that the new owner will pay tax for this property.

As you can see, an easy-to-understand law has many complicated aspects. For this reason, if you are thinking about selling an ADU, we highly recommend that you consult with a lawyer on this topic.

ADU New Legislation: Global Consequences

The introduction of new legislation always has consequences at both the micro and macro levels. We have already discussed in detail how this law will change the life of one property owner; now let’s take a look at how this will affect society as a whole:

• Increasing California’s housing stock. The government’s main goal when introducing AB 1033 was to increase the motivation of homeowners to buy affordable housing. The realization that you can’t sell what you bought stopped people from building ADU. Now, when you know that you can sell your ADU without obstacles, nothing will stop you from this intention, which means that the infrastructure of cities and housing stock will grow.
• Stimulating housing supply. The appearance of new ADUs will create a greater offer in the community. This will make cities across California more attractive to live in, housing easier to find, and the homeownership format more variable. Together, these factors will strengthen California’s position as one of the best states to live in.
• Increase loyalty. The ability to sell ADUs without constant control from various structures and associations creates a sense of freedom for people, which has a beneficial effect on increasing the level of loyalty in society. In turn, this trend has the most positive effect on people’s relationships, creating a strong civil society.

There is no doubt that the new AB 1033 legislation will gain increasing popularity throughout all cities of California, from Eureka to San Diego, making the lives of homeowners more flexible in the matter of property management.

ADU AB 1033 LAW & The Hidden Beneficiaries

The new wording in the housing legislation unties the hands and provides more freedom to all property owners, without exception. They are no longer dependent on the decision of any associations that are responsible for property maintenance. However, there is a category of California residents to whom this law has a special value.

Pensioners

According to the opinion that older people are not mobile, statistics show that in old age a huge part of pensioners have a desire to travel. However, this campaign may be unprofitable due to high interest rates and capital gains taxes, which they must pay when buying a new or selling an existing housing unit. The new law changes the situation, and senior citizens have room for maneuver in the matter of buying real estate.

Young people

There is a popular statement that old people and children are similar. They feel the passage of time in the same key, and they are equally naive and open to the world. Another similar point is that most young people, like the elderly, cannot afford to buy a large house or apartment in downtown Sacramento. However, they can solve the problem of housing shortage by buying real estate at lower prices, and ADU fits perfectly into this concept.

New residents of the California state

The third category of citizens is homeowners who have recently moved to California. Some of them are not ready for a complex new house construction; therefore, they prefer small temporary housing as an adaptation to a new place. An ADU with all its amenities, as in the primary residence, is the number one choice, so this is a good deal for both the property owner and the buyer, and the new law opens the way to this transaction.

This selection clearly shows that AB 1033 California law is a breath of fresh air not only for those who own an ADU, but also for those who want to purchase it. This legislation allows people to leverage existing equity without much damage, feel great social security, and also avoid getting into situations where the only solution for home buyers is to issue a multi-year mortgage.

Frequently Asked Questions — FAQ

How many cities in California adhere to Assembly Bill 1033?

We cannot say that the bill requires cities to adhere to the new wording strictly because not all residential areas in California follow it. However, the number of participating cities is growing in an arithmetic progression, and in the foreseeable future, more and more large and small towns will participate in this program.

What is the global idea behind the introduction of Assembly Bill 1033 in California?

The new legislation is a big step in overcoming the housing crisis in California. The opening of the opportunity to sell ADUs separately from the main house will encourage typical homeowners to invest in such an affordable housing unit. In turn, those who wish will have the chance to purchase an ADU using existing equity and without a mortgage.

Can I sell two units if I have several ADUs in my backyard?

The new legislation permits homeowners to sell additional housing units separately from the main residence in any quantity. You can sell your ADU as condos; the most essential thing is to notify the local authorities, utility providers, and the Homeowners Association.

Who will pay property taxes if I sell ADU separately from the main housing unit?

If homeowners sell an ADU and this unit gets a new owner, then you are officially exempt from paying taxes on this residential space. This action becomes the responsibility of the new property owners; if necessary, the tax service will conduct a dialogue with them.