Getting your
Trinity Audioplayer ready...San Jose is home to the first accessory dwelling unit sold as a separately owned condo in California, city officials said, setting a potential template for a more affordable path to homeownership. But a lengthy rollout raises questions about whether the model can become a scalable solution to the state’s housing crisis — the sale comes more than two years after the state made such transactions possible.
The 749-square-foot, two-bedroom ADU on Josefina Street near downtown closed last month for $530,000. That’s about a quarter of Santa Clara County’s eye-popping $2.1 million median single-family home price in May, according to the California Association of Realtors. Real estate brokerage Redfin last month listed San Jose among the 10 most expensive U.S. housing markets, based on the share of median income needed to afford to buy a home.
ADUs, also known as in-law units or granny flats, typically have up to 1,200 square feet of living space and must include a kitchen sink, cooking appliance and separate bathroom.
The sale was made possible by a state law passed in 2023, AB 1033, which allows homeowners to convert ADUs into condos and sell them separately from the main property, rather than just renting them out. Under the law, ADU condos come with their own property tax bills, but require an HOA agreement with the primary homeowner for common elements, such as roofs or driveways.
City officials said the Josefina property is one of two ADU condos approved in San Jose, with two more under review. Officials expect more conversions in the future but declined to provide an estimate. It’s unclear how many ADU condo conversions and sales have been completed statewide. The state does not appear to track that data.
To boost ADU condo construction and sales, San Jose has sought to streamline permitting for construction and conversions. The city has also assigned two building department employees to help homeowners navigate the process.
City officials were unable to make the unit’s buyer and seller available Monday.
While ADU condos may offer a new opportunity for first-time homebuyers and others struggling to afford a home in the Bay Area, potential roadblocks remain.
For one, cities must opt in to AB 1033 to allow the conversions. And even after San Jose became the first city to greenlight ADU condos in July 2024 — the state law took effect at the start of 2024 — it took another two years to complete the initial sale.
Part of the delay may be that homeowners are still learning that selling an ADU as a condo is an option. Some may also be deterred by the need and cost of obtaining easements, subdivisions and other permitting requirements for a sale.
“These are extra steps that a homeowner has to take in addition to building an ADU,” said David Garcia, deputy director of the UC Berkeley Terner Center for Housing Innovation.
Homeowners also sometimes struggle to secure loans to build ADUs, Garcia said.
Despite the financing challenges, new state housing laws have helped spur an ADU boom statewide in recent years. In 2025, California cities and counties permitted nearly 32,000 ADUs, up from about 9,000 in 2018, according to data from the state housing department. San Jose approved 502 last year, up from 192 in 2018.
Even so, many local governments, including San Jose, are behind schedule in meeting their state-mandated housing goals, particularly for low- and middle-income housing.
Overall, the Bay Area is on the hook for approving more than 441,000 new units between 2023 and 2031. At the end of last year, a quarter of the way through the eight-year housing cycle, the region had permitted only about 14% of that goal, according to the housing department data.