Berkeley Could Allow Homeowners to Sell ADUs as Condos

Berkeley could become the state’s first city to allow homeowners to sell their backyard granny flats as condominiums, based on a new state law.

The City Council ordered staff to craft an ordinance authorizing the sales of accessory dwelling units or ADUs, based on Assembly Bill 1033, enacted this year, the San Francisco Business Times reported.

AB 1033, authored by Assemblyman Phil Ting, D-San Francisco, allows cities to let residents sell ADUs as condos separate from their primary home.

“I think it’s a great opportunity for people to buy their first home that’s relatively affordable and get their piece of the California dream,” Ting said.

Berkeley looks to be the first city to opt in to AB 1033, Louis Mirante, vice president of public policy at the Bay Area Council, a business-backed advocacy group that sponsored the law, told the Business Times. It was also designated by the state last month as a “pro-housing city.”

San Jose may also implement the law. The City Council asked planning officials in December to bring them options for opting into AB 1033, with staff slated to present recommendations in June.

Berkeley Councilwoman Rashi Kesarwani, who led the city’s push to adopt AB1033, said she expects the ordinance legalizing ADU sales to come before the City Council “within a year.”

She sees teachers, nurses and other healthcare workers in the market to buy 500-square-foot homes in Berkeley, where the typical home ihs a value of nearly $1.5 million, according to Zillow.

Parents could also transfer an ADU-turned-condo to their adult children, allowing them to build equity.

“Housing costs have grown so high, so rapidly that the shortage of homes … it affects everyone, now, regardless of income,” Kesarwani told the Business Times.

Some 410 ADUs were built in Berkeley from 2019 to 2023, including 90 last year, according to the California Department of Housing and Community Development. San Jose built 1,310 ADUs since 2019, including 330 last year.

Granny flat construction has exploded in California, with nearly one in five homes built being as an ADU, according to the state housing department, and new laws make it easier to build the units.

Though lawmakers have pushed ADUs as a partial solution to the state’s housing crisis, not everyone will be able to use AB 1033 even if their city implements it. Building an ADU can be expensive for lower- and middle-income homeowners.

The new law also requires a homeowner who’s part of an existing homeowners association to get permission from the HOA before converting the ADU into a condo.

AB 1033 also raised questions among real estate brokers, who asked if they would be treated as single-family homes, or with a tenant-in-common agreement, where two or more parties share ownership of a property, according to The Real Deal.

— Dana Bartholomew