Buying a Home with Built-In Investment Opportunity: Unpacking California’s New ADU Law for Los Angeles

By: Brad Greiner, CEO of Open Air Homes and OpenAiRE Brokerage


OpenAiRE is excited to dive into the revolutionary development in California’s real estate sector: the opportunity to buy and sell Accessory Dwelling Units (ADUs) as condominiums. With this transformative change, homeownership in Los Angeles and across the state gets a fresh, innovative boost. 


Understanding ADUs and Their Potential

For the uninitiated, ADUs (often called “granny flats”) have historically been available only for rental purposes. As outlined in the LA Times, these structures could be anything from a renovated garage or a cozy backyard home to an unused section of a larger residence. They provide homeowners a means to generate rental income, but, up until now, there wasn’t an option to sell them outright.


The Game Changer: Assembly Bill 1033

Introduced by Assemblyman Phil Ting, Assembly Bill 1033 has freshly minted its position into California law. It allows homeowners in participating cities (in California) to construct an ADU on their property and then sell it as they would a condominium. This gives homeowners added avenues for building on their property, and in Ting’s words, “the hope is, it would create more homeownership.”  

WIth home prices continuing to rise, AB 1033 would give younger first time homeowners a better shot towards homeownership.  

However, it’s important to note that local jurisdictions need to adopt this approach for it to become a viable option in their respective areas.  It is our estimate, that many cities will see the benefits of adopting AB 1033, as it would encourage a younger generation to migrate into the cities that do adopt this new bill. 


What Does This Mean for Current and Prospective Homeowners?

The introduction of this legislation has some significant implications:

  1. Dual Property Potential: With the new rules, a single property can hold two ownership units – the main residence and the ADU.
  1. New Responsibilities and Benefits: Like condominiums, homeowners will need to ensure utilities are notified about the creation of the ADU. Properties with ADUs will also form homeowners associations to manage shared spaces and costs.
  1. Diverse Financial Opportunities: This legislation can benefit retirees, offering them a way to unlock the equity in their homes without having to leave the home they love. They can construct an ADU, sell it, and use the proceeds to enhance their retirement. At the same time, young families might find ADUs an affordable entry point into homeownership in California’s competitive real estate market.


ADUs: A Growing Trend Towards More Mixed Use Housing 

The success of selling ADUs as condominiums isn’t restricted to California. Places like Oregon, Texas, and Seattle have seen a surge in ADU constructions once regulatory barriers were lifted. Seattle, for example, experienced a significant jump in ADU permits issued after easing restrictions in 2019.


OpenAiRE’s Take on This Development

For homeowners in Los Angeles looking to buy a property, this presents a golden opportunity. Not only can they secure a home for themselves, but they can also invest in an ADU, which they can then sell, rent, or even use for personal needs. Developing an ADU can offset homeownership and development costs, offering a new financial strategy for those in the real estate market.

Further, the younger generation often feels priced out of the housing market in Southern California especially, yet also tend to have an environmental mindset when it comes to their purchases.  What we see developing is a younger generation that is comfortable living in the smaller space of an ADU, similar to how the youth have shown an interest in the “Tiny Home” movement. Assembly Bill 1033 gives younger people an opportunity at homeownership, and as soon as interest rates begin to come down as this Bill goes into effect, we believe it will have significant traction. 

Los Angeles’s sprawling landscape means a plethora of neighborhood choices. By choosing to buy a home equipped with an ADU or the potential for one, you can make an informed decision that aligns with both your living preferences and financial goals.

With OpenAiRE by your side, delve into this promising real estate trend and explore opportunities that can reshape your property investment strategies.