Real Estate

Berkeley Eyes ADU Condo Sales, Aims for Affordable Homes

Berkeley set to be California's first city allowing ADU sales as condos, aiming to boost affordable homeownership.

By Doug Elli

5/16, 15:44 EDT

Key Takeaway

  • Berkeley may be the first city to allow selling ADUs as condos under new state law AB 1033, aiming to make homeownership more accessible.
  • The move could benefit teachers, nurses, and enable parents to transfer property to their children, amidst a housing affordability crisis.
  • Over 410 ADUs built in Berkeley since 2019; the law also poses challenges for lower-income homeowners and requires HOA approval for conversions.

Berkeley Pioneers Condo-Style ADU Sales

Berkeley is on the verge of becoming California's first city to allow homeowners to sell their backyard granny flats, or accessory dwelling units (ADUs), as condominiums. This groundbreaking move follows the enactment of Assembly Bill 1033, authored by Assemblyman Phil Ting, D-San Francisco. The bill empowers cities to permit the sale of ADUs separate from the primary residence, aiming to make homeownership more accessible and affordable. Berkeley's City Council has directed staff to draft an ordinance in line with AB 1033, signaling a significant shift in the city's housing strategy and potentially setting a precedent for other cities, including San Jose, which is considering similar measures.

A Step Towards Affordable Homeownership

The initiative to legalize the sale of ADUs as condos is seen as a beacon of hope for achieving affordable homeownership in California, particularly in high-cost areas like Berkeley. With the median home value nearing $1.5 million, the prospect of purchasing a 500-square-foot ADU could open doors for many, including teachers, nurses, and other essential workers, to own a piece of the California dream. This innovative approach not only addresses the acute housing shortage but also offers a viable pathway for residents to build equity and secure housing stability. The potential for parents to transfer ADU-turned-condos to their adult children further underscores the multifaceted benefits of this policy in fostering generational wealth and equity.

The ADU Boom and Housing Crisis

California has witnessed a surge in ADU construction, with nearly one in five new homes being an ADU, reflecting the state's aggressive push to alleviate its housing crisis. Berkeley alone has seen the construction of 410 ADUs from 2019 to 2023, highlighting the growing popularity and acceptance of these units as a partial solution to housing shortages. However, the implementation of AB 1033 and the subsequent sale of ADUs as condos raise important considerations, including the financial feasibility for lower- and middle-income homeowners and the need for approval from homeowners associations. These challenges underscore the complexity of addressing California's housing crisis through legislative and market-driven solutions.

Navigating New Territory

The move to allow ADU sales as condos introduces a new dynamic in California's real estate market, raising questions about how these properties will be treated in terms of ownership and regulation. The distinction between single-family home status and tenant-in-common agreements, where ownership is shared, presents a novel scenario for real estate brokers and potential buyers. As Berkeley leads the way with this innovative housing strategy, the implications for the broader real estate market, homeownership accessibility, and community development are profound. This pioneering approach reflects a significant shift towards more flexible and inclusive housing policies, with the potential to influence other cities and states grappling with similar housing affordability challenges.