San Jose Allows Granny Flats to be Sold Separately

San Jose has become the first city in California to embrace a new state law that makes it legal for homeowners to sell accessory dwelling units (ADUs)—also known as Granny Flats, usually small backyard cottages—as condos separate from the primary house on the property.

San Jose has the final say on whether to allow its homeowners to deploy the new law, which is known as AB 1033 and went into effect in January. AB 1033 gives cities and counties the option of permitting ADU sales.

San Jose’s ordinance allowing homeowners to buy and sell ADUs separately from their primary homes will take effect on July 18, according to a report in the Mercury News.

Granny Flats traditionally have been deployed by homeowners to expand their property to create room for grandparents—as well as kids who are moving back in with their parents—or as rentals to generate some extra income.

In 2023, California homeowners added nearly 23,000 ADUs to their property, the most ever in a single year in the Golden State. By allow these smaller, denser units to be put on the market and traded, the state is hoping to create thousands of new affordable homes.

San Jose—the largest city in the Bay Area, with some of the highest average home prices in the nation—is embracing ADUs as one of many solutions that will help the city expand its housing stock, according to Mayor Matt Mahan.

“The ability to sell them as their own asset will serve an interest in the development of ADUs in the community,” Mahan told the Mercury News.

Because ADUs are smaller homes on smaller lots sizes, they are expected to trade for much lower prices than single-family homes in San Jose. Attached ADUs can be up to 1,200 SF on lots of 9,000 SF or larger; on smaller lots, the maximum size is 1,000 SF, the report said.

The median single-family home in San Jose, typically about 1,700 SF, sold for $1.4M in May, while the median listing price per square foot was $832, according to the Silicon Valley Association of Realtors.

This suggests that a 1,000 SF ADU might sell for about $832,000, assuming that housing prices remain at or near their current levels.

AB 1033 requires homeowners to establish a homeowners’ association that covers the primary unit and the ADU, with governing documents spelling out how common areas, like a shared yard, will be maintained and repaired.