Build, Rent, Sell: How Condo-Conversions of ADUs Could Change the Housing Game 

‍What AB 1033 Actually Does 

AB 1033 builds on years of ADU policy liberalization, but it makes a bold addition: cities and counties may opt into permitting separate sale of ADUs as condominiums. Under this arrangement, a property owner can legally divide their lot into at least two dwelling units, each with a distinct title, even though the structures are on a single parcel. For example, a homeowner with a backyard cottage could sell that unit separately while retaining ownership of the main house. 

The mechanics work through California's existing condominium map process. The homeowner must file a condominium map with their local planning department, meet building code requirements, and ensure that each unit has separate utilities, addresses, and legal access. Once completed, the ADU becomes its own real estate asset that can be sold like any other condo. 

This is a dramatic departure from previous ADU laws, which explicitly restricted ADUs to remain part of the same legal parcel as the main home. It marks a philosophical shift: from seeing ADUs purely as accessory units to recognizing them as potential entry-level homes for buyers in an impossibly expensive market. 

Who's Opting In So Far? 

Because AB 1033 is opt-in legislation, cities are not required to adopt it. As of spring 2025, only a handful of California cities have taken steps to allow condo-converted ADUs, but momentum is building. San Jose, known for its aggressive pro-housing policies, has been among the first large cities to consider implementation. Others, including Sacramento and Oakland, have convened discussions about whether to follow suit.

Resistance is strongest in wealthy suburban jurisdictions, many of which have already pushed back against state ADU mandates. Some local officials raise concerns about infrastructure, homeowner disputes, and the loss of single-family "neighborhood character." 

Still, housing advocates argue that AB 1033 provides a rare tool for expanding affordable homeownership opportunities, especially in urban infill locations where land is scarce and expensive. 

Opportunities: Homeownership, Wealth-Building, and Equity 

One of the most compelling arguments in favor of AB 1033 is its potential to expand access to homeownership. California has one of the lowest homeownership rates in the country, particularly among younger and non-white residents. By creating smaller, more affordable units that can be owned rather than rented, condo-converted ADUs could open doors that have long been closed. 

For homeowners, the ability to sell an ADU creates a powerful wealth-building opportunity. Rather than relying solely on rental income, they can realize significant capital gains from selling the unit. This is especially attractive for long-time homeowners who are asset-rich but cash-poor. They could downsize into the ADU and sell the main home, or vice versa, using the proceeds to retire or fund family expenses. 

From a city planning perspective, this approach makes better use of existing land and infrastructure. It adds density without sprawl, supports 15-minute neighborhoods, and creates a mix of housing types in areas previously dominated by single-family zoning. 

Challenges: Legal Complexity, Financing, and Oversight 

Despite its promise, the practical implementation of AB 1033 is fraught with complexity. The condo-mapping process is notoriously detailed and bureaucratic, often involving surveys, legal descriptions, CC&Rs (Covenants, Conditions & Restrictions), and ongoing HOA responsibilities. 

Financing is another major hurdle. Mortgage lenders are still adapting to the idea of stand-alone ADU condos, especially when they're located behind another home on the same lot. Fannie Mae and Freddie Mac have yet to release standardized guidelines, which means buyers may face limited options and higher rates. 

Homeowners will also need to provide separate utility hookups, fire-rated walls (if attached), and legal ingress and egress for each unit. These requirements can be cost-prohibitive and will likely limit the total number of properties where ADU sales are feasible. 

Then there's the question of long-term oversight. Will HOAs be required? Who manages shared driveways or shared water lines? How are disputes between two unit owners on a single parcel resolved? These issues mirror challenges already present in small condo buildings but may feel especially acute on lots with only two or three units.

Policy Recommendations 

To make AB 1033 successful and equitable, several additional policies could be adopted: 

1. Statewide Guidance: The California Department of Housing and Community Development (HCD) should publish clear, accessible guidelines for cities, homeowners, and lenders to streamline condo conversions. 

2. Local Incentives: Cities that opt into AB 1033 could waive or subsidize mapping fees for low- and moderate-income homeowners, especially in communities of color that have faced historic disinvestment. 

3. Model Legal Tools: Standardized CC&Rs, maintenance agreements, and disclosure templates could help avoid legal confusion and disputes. 

4. Targeted Financing Programs: State-backed loan products or grants could ease the up-front burden of utility separations or construction upgrades. 

5. Homeowner Education: Outreach is key. Most homeowners won’t know this is an option without proactive education and technical assistance. 

Looking Ahead 

AB 1033 doesn’t mandate change—it offers a new menu item for cities willing to try something bold. And while it won't solve California’s housing crisis on its own, it adds another tool to the state’s growing infill development toolkit. 

If implemented thoughtfully, condo-converted ADUs could help bridge the gap between renters and owners, between density and neighborhood preservation, and between innovation and accessibility. It reimagines what ownership can look like in the 21st century: smaller, smarter, closer to home. 

As more cities explore this new option, the outcomes of early adopters will serve as a critical test case. Will these units truly become attainable starter homes? Or will legal and financial barriers keep them as a boutique solution for a lucky few? The answer depends on how policymakers, advocates, and the market come together in the years ahead. 

One thing is clear: the backyard isn’t just a place for extra space anymore. It could be the next frontier of homeownership.

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