San Jose became the first city to approve the separate sale of accessory dwelling units (ADUs) in July 2024, opening a modern path for homeownership in the Bay Area. This decision, enabled by state-approved legislation, allows ADUs to be sold as individual condominium units. California Assembly Bill 1033 (AB1033), which permits local cities and counties to let homeowners sell an ADU separately from the main house, went into full effect on January 1, 2024, after being passed on October 11, 2023.
Mayor Matt Mahan highlighted the significance of this move, stating, “We’re unlocking homeownership opportunities at lower price points.” He added that the city is actively using innovative policies to create affordability. Former Assembly member Phil Ting created AB1033, which facilitated the permitting of 30,000 ADUs statewide in the year it became effective.
The first such condominium conversion in San Jose was a 749-square-foot, two-bedroom, one-bathroom home on Josefina Street, owned by Daniel Aflakian. This unit sold for $530,000 following its conversion in August 2025, a process overseen by Bay Area real estate developer AlphaX RE Capital. While ADU condos offer amenities similar to single-family homes and resemble them, their units are smaller than typical condominiums.
The overarching goal of this legislative change is to support more accessible ownership opportunities in a state where only about 15% of households can reasonably afford to purchase a median-priced single-family home. Mayor Mahan emphasized that ADUs inherently offer affordability and can now provide a highly accessible form of homeownership. He expressed hope that other California cities would follow San Jose’s example.
Under AB1033, once an ADU is sold, it acquires its own legal title and a separate property tax bill. However, owners share common areas of the underlying land, such as a driveway, necessitating a formal maintenance agreement or a homeowners association (HOA). The implementation of AB1033 in San Jose involved a collaborative effort among the public works, building and code enforcement, and city planning departments, aiming to simplify the development of more homes.
This streamlined process allowed AlphaX RE Capital to navigate permitting in approximately 60 days. The firm has completed the initial ADU condo conversion and plans to introduce two more units to the market in the fall, with aspirations to build hundreds more in the future. Jia Li, AlphaX RE Capital’s chief assessment management officer, noted that the ultimate aim for this new property type is to integrate it more fully into the housing ecosystem. The use of preapproved plans could facilitate the completion of such projects in under a year. Other cities, including San Francisco, Santa Cruz, Berkeley, Santa Monica, and San Diego, have also adopted these new rules.
Earlier state legislation in 2016 removed many barriers to ADU construction, allowing homeowners to build them in their backyards, but did not permit their separate sale until AB1033.
San Jose continues to experience exceedingly high housing prices, influenced by tech-driven demand and low mortgage rates, making it one of the most expensive cities to live in the U.S. Median home prices in the city exceed nearly $2 million. ADU condominiums are expected to offer a more affordable alternative compared to standard houses.
For residents interested in renting, these new ADU condos are projected to cost between $1,500 and $2,300 for a studio/junior apartment, $2,400 to $3,000 for a one-bedroom apartment, and $3,000 to $3,600 for a two-bedroom apartment. Crucially, there will be no HOA fees associated with these ADU condos, making them a more cost-effective option than purchasing a traditional house in San Jose.
The city has consistently recorded high housing costs, with the needed annual household income for homeownership down to $423,840 in 2024. The median income in San Jose, at $176,401, is approximately $250,000 less than what is required to afford a typical home. Neighboring cities like Berkeley and San Francisco also see median home sale prices exceeding $1.5 million to $1.7 million, while Santa Cruz stands at about $1.47 million.
To further support homeowners navigating the ADU conversion process, San Jose’s Building Division created an "ADU ally position" in 2024. This position developed an ADU Universal Checklist, suggested by other municipalities, which consolidates complex legal information and streamlines the permitting application process across multiple city departments. The city hopes this new sales option will encourage more property owners to convert their properties into ADU condos, thereby expanding homeownership opportunities for its residents.
