The Rise of Backyard Homes: California’s New Path to Housing Affordability, Assembly Bill 1033

In a groundbreaking shift, California cities are reimagining backyards as potential solutions to housing challenges. After Los Angeles gave the nod to architecturally curated accessory dwelling units (ADUs) in 2021, it further simplified the process by launching a complimentary scheme earlier this year. This initiative champions the ease of setting up a backyard dwelling, suitable as an in-law suite or a rental space.

Fast-forward to this week, and California’s legislative arena has witnessed a game-changer – the introduction of Assembly Bill 1033. This newly minted legislation empowers homeowners to not just build, but also sell ADUs on their properties, thereby tapping into their latent equity.

The Los Angeles Times sheds light on the intricacies of this bill, highlighting that its implementation rests on individual cities’ willingness to participate. For cities that come on board, their residents can put their ADUs on the market, mirroring condo-selling protocols. This means potential sellers would need to liaise with utility providers and lay the groundwork for a homeowners association to oversee the upkeep of the property. On top of this, these ADUs would be subject to separate taxation.

One demographic that stands to gain significantly from this legislation is the senior population. Many older residents, constrained by a fixed income, find it challenging to relocate due to soaring interest rates or the burden of capital gains taxes on properties they’ve held for long durations. Meredith Stowers, a San Diego-based loan officer with a focus on ADUs, shared with the Times that it’s predominantly retirees, who’ve settled their mortgages, that are warming up to the idea of ADUs. By leveraging this new law, seniors could either monetize their ADU or move into one themselves while selling their primary residence.

Looking north to Seattle, where ADUs have already earned their stripes as sellable assets akin to condos, there’s evidence of these units fetching comparatively lower prices than standalone homes. Citing a brief analysis by the City of Seattle, the Times notes a spectrum of 14 properties that changed hands for amounts ranging from $500,000 to $800,000. While the definition of ‘affordable’ might be stretching it – considering a 748-square-foot unit went for $610,000 in 2022 – there’s no denying that this legislative pivot is poised to diversify housing options. It’s a win for current Californian homeowners and those aspiring to join their ranks.

To find out more about ADUs and how you can benefit from building or selling one let the Property Nerds of the Boyenga Team guide you today.