SF Homeowners Could Soon Sell ADUs as Condos

San Francisco could be one step closer to becoming the third city in the Bay Area to allow accessory dwelling units to be sold as condominiums, if the Planning Commission votes to move it forward on Thursday.

City supervisor Joel Engardio, a Democrat who authored the legislation, said that the local take on a state law passed in 2023 would create more entry-level housing and allow multi-generational families to stay in their homes.

“ADUs are an affordable housing option that does not require the purchase of land, major new infrastructure, structured parking or elevators,” the Sunset supervisor told The Real Deal via email.

The legislation was “consciously crafted” to encourage the creation of new ADUs, secondary housing units on a residential lot, as opposed to incentivizing the legalization of unpermitted existing ADUs, he said, so it should not displace existing tenants. In fact, he said, one reason he advanced the condo legislation is that some of his constituents have expressed interest in investing in ADUs on their properties but do not want to be landlords.

Engardio added that his district’s longtime residents often face the hard choice of deciding whether or not to sell their homes because they need to get money out of the property, and this legislation could give them another option.

“I believe San Francisco can help unlock opportunities to build generational wealth, allow seniors to age in place, and keep extended families united by allowing ADUs to be sold separately from existing dwelling units,” he said.

San Jose and Berkeley have already taken advantage of AB 1033, the state law from former San Francisco Democratic Assemblymember Phil Ting that allows California ADUs to be sold separately from their primary residence. Though the legislation has been in effect since the start of 2024, each municipality must choose to opt in.

Engardio said it’s too soon to look at best practices from those municipalities because San Jose just passed its implementation ordinance in June, while Berkeley is still going through the process of approving its own implementation legislation, though the initial legislation allowing ADU condos passed last spring. The East Bay city should be taking up the implementation issue at its Planning Commission meeting in March, followed by a Planning Commission public hearing in May, according to its Planning Department. If those dates hold, it should go before the Berkeley City Council in June or July.

The San Francisco Planning Commission will decide Thursday whether or not to recommend the legislation’s passage to the Board of Supervisors’ Land Use & Transportation Committee, Engardio said, likely appearing on the committee’s calendar sometime in mid-March.

His goal is to “secure robust support from my colleagues on this legislation,” before it goes to the full board, ideally in the next couple of months. It would then undergo its own implementation process to determine the particulars before it could be used by owners.

“As more cities opt in and authorize separate sales of ADUs, we’ll be able to identify what’s worked best to reduce impediments to new ADU construction,” Engardio said.

Opposition to the legislation has been lodged by neighborhood group Sunset-Parkside Education and Action Committee, who asked that it be tabled indefinitely. Engardio said he was aware of the request from the committee’s leader, Eileen Boken, a longtime neighborhood activist, but not the reason for the opposition. Boken did not reply to a request for comment.

The Sunset is a perfect spot for ADU condos because there are so few condo developments there and the city’s condo conversion lottery is still on hold even after the end of a 10-year moratorium, said Janice Lee, an agent in Coldwell Banker’s Sunset office. Currently, ADUs in the neighborhood are typically added within the existing building envelope, but more owners would likely take advantage of the west side’s larger lots to build legal standalone units if the legislation passes, she said.

“If you get the long Sunset lot, that’s probably 3,000 square feet as opposed to 2,500,” she said, referencing the standard San Francisco lot size. “There’s probably some room to build.”

A standalone ADU in the Sunset could bring in at least half a million dollars, she said, even if it doesn’t have a parking spot and has to be accessed via the ground floor of the main house or a side tradesman’s entrance. There are very limited options at that price point in the popular neighborhood, where homes sell for about $1,000 per square foot, or a median price of $1.6 million.

“Where are you going to find a standalone one-bedroom for $500,000?” she said.

Compass agent Matt Fuller, who has been following the legislation, agreed that the Sunset is a prime spot for ADUs, but could see it taking off in other neighborhoods as well. Buyers in the city are already used to living in relatively small spaces, and adding ADUs into a backyard doesn’t usually create the same neighborhood concerns about increasing density that often spring up around new condo construction in the city.

“I don’t think it changes the neighborhood character in such a way that it goes from being a single-family kind of neighborhood to being this other feel, and everyone’s like, ‘Oh, it’s ruined our neighborhood and we can’t park,’” he said. “These kinds of units are already out there and if becoming a condo lets people sell them off and retain ownership of their main house, that’s flexibility, and that’s generally not a bad idea in real estate.”

If passed, the legislation would be more likely to benefit single-family and smaller two- to four-unit multifamily owners, according to Jackie Todesco, senior vice president of asset management at Avalon Bay, which has been adding ADUs to its Bay Area apartment portfolios for the last few years. Even if big multifamily owners like Avalon Bay are less likely to use the legislation, ADU condos would still be a good option to have during the underwriting process and for long-term planning, she said.

“The more optionality owners have to add value, the better it is for their assets and the broader communities in need of additional housing,” she said.