ADUs Sold as Condos? Might Soon Be Reality in SF

San Francisco is on the verge of becoming the third Bay Area city to allow accessory dwelling units (ADUs) to be sold as condominiums. New legislation, currently pending approval from the Planning Commission, could be a game-changer in the city’s ongoing efforts to address its housing shortage while providing new financial opportunities for homeowners.

Supervisor Joel Engardio, who authored the proposal, argues that permitting the sale of ADUs as independent units could help alleviate San Francisco’s affordability crisis by increasing housing supply. 

The move builds on the success of California’s Assembly Bill 1033, which allows municipalities to craft their own rules for ADU sales. San Jose and Berkeley have already implemented similar laws, with San Jose’s taking effect in mid-2024.

ADUs, often built as separate, smaller units on a homeowner's property, have grown in popularity due to their ability to increase density without requiring large-scale new development. Still, the up-front investment often doesn't pencil out for the property owner, if the ADU can only be used as a rental. Or even if the finances are appealing, many in San Francisco would simply not choose to be landlords. 

The potential to sell ADUs as separate condos could broaden the appeal of ADU construction. 

Depending on which source you consult, San Francisco has permitted construction of +/- about 1,000 ADU units so far, most of which were approved after the city passed legislation to streamline the permitting process. 

The potential for ADUs to be sold individually as condominiums increases their market value, especially in an expensive city like San Francisco where even small units can command high prices.

This legislation could also provide a new form of entry-level housing in a city where affordability is a growing issue. For first-time buyers, especially those struggling to find housing at a reasonable price, the availability of standalone condos in ADUs offers a unique opportunity to enter the market. Making it easier to sell ADUs could give more people a chance to own property in San Francisco.

Additionally, the move could help homeowners, particularly seniors, generate income by selling the ADU or by downsizing to a smaller home. 

The city has worked to encourage new construction with its “pre-approved designs” and streamlined permitting process, which could help lower costs and make building an ADU more attractive.

As the Planning Commission considers this proposal, San Francisco may be setting the stage for a new chapter in its housing market, one that leverages ADUs as an innovative solution to the city’s housing crisis. 

Does your property qualify for an ADU addition? Check the basic eligibility guidelines for San Francisco here. 

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