AB 1033 in spring 2026: which Bay Area cities actually let you sell your ADU

I get the AB 1033 question almost weekly now. Usually it sounds like: "I have an ADU. Can I just sell it and keep the main house?" And almost every time, my answer is some version of "yes, but probably not where you live, and not without a lot of paperwork."

I've been managing ADUs across the South Bay for 12 years. 1,016 reviews on Airbnb, 4.83 stars, and 150-plus ADU tenancies under management across San Jose, Mountain View, Sunnyvale, Palo Alto, Cupertino, Campbell, Santa Clara, and Los Gatos. AB 1033 is the law that, on paper, lets a homeowner sell their ADU separately as a condo. In practice, two and a half years after it took effect, the Bay Area is still a patchwork. Here's where things actually stand in spring 2026.

What AB 1033 actually does

AB 1033 took effect January 1, 2024. It lets cities pass an ordinance that allows ADU owners to record a condo map, separate the ADU from the main house as its own legal parcel, and sell it to a third party. A two-unit HOA gets created in the process, even if your "association" is just you and your buyer arguing about whether the back fence needs paint.

Three things to be clear about. First, the law is permissive, not mandatory. Each city has to opt in by passing its own ordinance. Second, your existing mortgage lender has to consent to the condo conversion in writing, because the underlying deed is changing. Third, there are no statewide rules on what cities can require beyond the basics, so the local ordinance shapes everything: separate utility meters, easements, HOA documents, soundproofing standards, the works.

That patchwork is the whole story of where we are right now.

Where Bay Area cities actually stand in spring 2026

Here's the city-by-city picture I'm seeing as of April 2026. I've been tracking this through the planning departments and follow-up calls because the public-facing pages on most city sites still haven't caught up.

If your ADU is in San Jose, Oakland, Berkeley, San Francisco, or Santa Cruz, you have a path. If you're anywhere else on this list, you're either waiting or you're out of luck for now. Most of the holdout cities aren't ideologically opposed. They're just slow, and AB 1033 isn't at the top of any council's agenda when there are housing element fights and budget cycles eating staff time.

What "selling separately" actually requires

Even in a city that's adopted, this isn't a quick transaction. Here's the real workflow, based on the two clients I've walked through it in San Jose and the one in Oakland.

You start with a condo map. A licensed surveyor draws the new parcel boundaries (the ADU footprint plus any easements for shared driveway, utilities, common areas), and the city planning department reviews it. That alone runs $8,000 to $15,000 and takes 3 to 6 months depending on the city's backlog.

Then you need separate utility meters. Water, gas, electric, sometimes sewer. If your ADU was built sharing meters with the main house (most are, because nobody planned for this), you're looking at $15,000 to $40,000 in trenching, panel work, and PG&E coordination. PG&E in particular is a headache. New service drops in San Jose are running 8 to 14 months right now.

Then you form the HOA. Yes, even for two units. You need CC&Rs (the rules for the association), a budget, reserve studies, an HOA management plan. Most owners hire an attorney for this and pay $4,000 to $8,000 to get the documents drafted properly. A good one will future-proof the CC&Rs so that when the ADU sells to someone you've never met, the structure for shared maintenance and dispute resolution is solid.

Then your lender has to sign off. This is where I've seen deals stall. Wells Fargo, Chase, and the big banks will usually consent on a clean payoff, but they'll often require the main-house mortgage to be refinanced first, because they don't want partial collateral. Local credit unions tend to be more flexible. If your loan was originated before 2020 at a rate under 4%, the consent process can mean you give up that rate.

Finally, the buyer's lender needs to be willing to finance the ADU. Fannie Mae and Freddie Mac don't have explicit guidelines for AB 1033 condos yet, so most buyers are using portfolio lenders or local credit unions. That limits the buyer pool. We saw one Oakland deal close with about a 6.8% rate when the buyer's bank treated it as a non-warrantable condo, which is a meaningful premium over a standard purchase.

What an AB 1033 condo is actually worth

This is where the reality check comes in. The most common assumption I hear is "my ADU is worth $400,000 because that's what I spent to build it." That's not how the market values it.

In San Jose, the few AB 1033 transactions that have closed (there have been maybe a dozen so far, per the deeds my title rep has flagged) are pricing at roughly 70 to 85 percent of comparable studio or one-bedroom condos in the same neighborhood. So if a one-bedroom condo in Willow Glen is selling at $750,000, an AB 1033 ADU on a shared lot a few blocks away might trade in the $525,000 to $640,000 range. That's still serious money, and for a homeowner who built the unit for $300,000, it's a real exit. But it's not parity with stand-alone condos, and lender financing constraints are part of why.

Oakland's affordable-housing covenant pushes prices lower. The 30-year deed restriction means you can't sell to a market-rate buyer; you sell to an income-qualified buyer at a regulated price. Most Oakland owners who've looked at the math have decided to keep renting instead.

If you want to think through whether your ADU even pencils as a long-term hold versus a sale, the complete guide to renting out your ADU in the Bay Area walks through what these units actually earn on a lease.

The tax piece nobody mentions

Recording a condo map and creating a new parcel triggers a Prop 13 reset on the ADU portion. The new parcel gets a fresh base year value at current market value. If you've owned the property a long time and your old base was $150 per square foot on the whole lot, the new ADU parcel could be reassessed at $700 per square foot. I covered this in more detail in my post on property tax surprises Bay Area ADU owners get hit with, but the short version: factor the reassessment into your decision before you file the map.

You also get a one-time capital gains hit when you sell. The ADU portion isn't shielded by the primary residence exclusion (Section 121) unless you've actually lived in it for two of the past five years, which most owners haven't. Talk to a CPA before you do this. The number can be six figures on an appreciated unit.

So should you do it?

For most Bay Area ADU owners, the honest answer right now is: not yet. Either your city hasn't adopted, or the math doesn't pencil after you stack up the condo map fees, the utility separation, the HOA setup, the legal work, the prepayment hit on your mortgage, and the property tax reset.

The owners I've seen pull the trigger fall into one of three camps. They're cashing out for a major life event (divorce, downsizing, college tuition). They built a high-end ADU specifically for sale and the math was baked into the original budget. Or they're in Oakland and qualify for the affordable-housing program for ideological reasons.

If you're building a new ADU now and you think you might want this option down the road, design for it from day one. Separate meters from the start. Independent entrance with no easements through the main house yard. Soundproofing that meets condo standards. A footprint that can be platted as a discrete parcel without nibbling into the main house's setbacks. The cost difference at construction is maybe $20,000 to $35,000. The cost to retrofit later is two to four times that.

For everyone else, keep renting and watch your city. The Peninsula will get there eventually. And if you want to know what that ADU is actually earning you in the meantime, that's the conversation I have every week.

Wondering if AB 1033 makes sense for your specific property and city, or whether you're better off renting it out long-term? Request a free ADU rental analysis and I'll walk you through both sides of the math based on what I've seen across 150-plus tenancies in the South Bay.

Sources

• Assembly Bill No. 1033 — California Legislative Information
• Accessory Dwelling Units — California Department of Housing and Community Development
• San Jose Adopts ADU Condo Sales Ordinance — City of San Jose
• Oakland AB 1033 Implementation — City of Oakland Planning and Building
• San Francisco ADU Program — City and County of San Francisco
• California's 2026 Housing Laws: What You Need to Know — Holland & Knight
• Bay Area Cities Slow to Adopt ADU Sales Law — The Mercury News