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Bay Area real estate news and trends

Berkeley is on the verge of becoming California's first city to allow homeowners to sell accessory dwelling units (ADUs) as condominiums. This initiative is based on Assembly Bill 1033, enacted this year, which permits cities to let residents sell their ADUs independently from their primary homes.

The New Ordinance

The Berkeley City Council has directed staff to draft an ordinance that would authorize these sales, aligning with AB 1033, authored by Assemblyman Phil Ting. Ting sees this as a significant opportunity for affordable homeownership, allowing more people to achieve the California dream. The ordinance is expected to be presented to the City Council within a year.

Potential Impact

If implemented, the new law could open up the market for first-time homebuyers, including teachers, nurses, and other essential workers, to purchase 500-square-foot homes in a city where the typical home value is nearly $1.5 million. This move is part of Berkeley's broader strategy to address the housing crisis, earning it the designation of a "pro-housing city" by the state.

ADU Market Dynamics

The construction of ADUs has surged across California, with nearly one in five new homes being an ADU. Berkeley built 410 ADUs between 2019 and 2023, reflecting a statewide trend driven by laws that make it easier to build these units. San Jose is also considering adopting AB 1033, with recommendations expected in June.

Challenges and Considerations

Despite the potential benefits, the cost of building an ADU can be prohibitive for lower- and middle-income homeowners. Additionally, homeowners within existing homeowners associations (HOAs) will need to secure permission from their HOA before converting an ADU into a condo. Real estate brokers have also raised questions about whether these units will be treated as single-family homes or as part of a tenant-in-common agreement.

Conclusion

Berkeley's move to allow the sale of ADUs as condos represents a significant shift in addressing the housing shortage. This initiative could provide more affordable housing options and help residents build equity. As the city prepares to implement this ordinance, it will be crucial to navigate the challenges and ensure that the benefits reach those who need them most.

For more details, you can read the full article on The Real Deal.

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