In San Jose, new accessory dwelling unit (ADU) condos are for sale, which would create a modern path for homeownership in the Bay Area.
Moreover, San Jose became the first city to approve the sale of ADUs back in July 2024, in state-approved legislation that allows cities to increase the housing supply by adopting ADU condoization.
In addition, this is a great alternative to a single family home as the amenities are the same and look like single family homes, however the units are smaller than normal condominiums.
“We’re unlocking homeownership opportunities at lower price points, one ADU at a time,” San Jose Mayor Matt Mahan said. “We’re not waiting for costs to come down—we’re using innovative policies to create affordability wherever we can.”
The California Assembly Bill 1033 (AB1033) allows local cities and counties to let homeowners sell an ADU, such as a converted garage or a backyard cottage, separately from the main house or condominium.
AB1033 was passed on Oct. 11, 2023, and went into full effect on Jan. 1, 2024. The law was created by former Assembly member Phil Ting, and allowed other cities to adopt the new rules with San Jose being the first city to do so. The law made considerable advances as 30,000 ADUs were permitted that year.
The first condominium conversion was a 749-square-feet, two-bedroom, one-bathroom home on Josefina Street, owned by Daniel Aflakian, that was sold for $530,000. The conversion happened back in August 2025, overseen by real estate developer in the Bay Area, AlphaX RE Capital.
Other cities like San Francisco, Santa Cruz, Berkeley, Santa Monica and San Diego followed suit.
The barriers for construction on accessory dwelling units were lifted in 2016, allowing homeowners to build them in their backyard; however they could not sell them separately.
The goal for this change to the law was to support more affordable ownership opportunities in a state where only 15% of households could reasonably afford to purchase the median-priced single family home.
“ADUs are affordable by design and growing in popularity across the state,” said Mahan. “And now, they can offer the most accessible form of homeownership, as well. We’re offering proof of concept for California and hope that other cities follow San José’s lead.”
Under the California Assembly Bill 1033, once the property is sold, an ADU gets its own legal title and separate property tax bill. However, the owners share ownership of underlying land common areas such as a driveway, requiring a formal maintenance agreement or homeowners association (HOA).
Furthermore, AB1033 was a collaborative effort between the public works, building and code enforcement and city planning departments to assist in simplifying the development of more homes.
The streamlined process allowed AlphaX RE Capital to accelerate through permitting in approximately 60 days. In addition, they have completed the ADU and are hoping to put two more of these types of homes on the market in the fall, with plans to build hundreds more in the future.
The firm’s chief assessment management officer, Jia Li, said that the ultimate goal for this new type of property is to make it “a more normal part of the housing ecosystem.” And if the city uses preapproved plans, these projects can be completed in under a year.
San Jose has exceedingly high housing prices due to the tech-driven demand of Silicon Valley with companies like Apple, Meta and Google. In addition, homeowners have low mortgage rates ranging from 2% to 3%. It’s become one of the most expensive cities to live in the U.S.
NBC Bay Area reported, “In the Bay Area, tech companies bent on winning the race to develop artificial intelligence into a profitable business have juiced compensation to recruit talented executives and software engineers, widening the pool of high-income earners. Many of these employees have been buying homes, often outdoing rival buyers by offering well above the asking price, real estate agents say.”
San Jose has been known to have the most expensive housing market with homes exceeding nearly $2 million. However, ADU condominiums will cost less compared to standard houses.
Specifically, renting these new ADU condos would cost residents $1,500 to $2,300 for a studio/junior apartment, and $2,400 to $3,000 for a one-bedroom apartment. For a two-bedroom apartment, it would cost $3,000 to $3,600.
Also, there will not be any HOA fees associated with the ADU condos, which are cheaper than buying a house in San Jose, since median home prices exceed $2 million.
Year after year, the city topped records, as in 2024, the needed annual household income for home ownership was down 6.5% at $423,840. In addition, at $176,401, the median income in San Jose is approximately less by $250,000 than what is required to afford the typical home.
House prices in Berkeley and San Francisco are close to San Jose with the median home sale price exceeding $1.5 to $1.7 million. In Santa Cruz, the median home sale price is about $1.47 million.
In 2024, an ADU ally position was created by the Building Division to assist homeowners navigating the unit conversion process via an ADU Universal Checklist. Suggested by other municipalities, the list consolidates complex legal information and streamlines the permitting application process across multiple departments.
Hopefully, this sale will encourage other property owners in San Jose to convert their properties into ADU condos.
