San Diego County Approves ADU Condo Sales Under AB 1033 - What Property Owners Need to Know About Selling Granny Flats Separately

If you built an accessory dwelling unit in San Diego County during the recent ADU boom, you may soon have a powerful new option for accessing that equity: selling your granny flat as a separate condominium unit while keeping your primary residence. On December 5, 2025, the San Diego County Planning Commission unanimously approved regulations that would allow property owners in unincorporated areas to sell detached ADUs separately under Assembly Bill 1033, a landmark state law creating new pathways to homeownership and wealth building in California.

The unanimous vote represents a critical step toward implementation, with the Board of Supervisors expected to cast the final vote in March 2026. If approved, San Diego County would become only the second county in California—after San Francisco—to opt into AB 1033's ADU sales program, joining cities like San Diego, San Jose, and Santa Cruz in offering this innovative housing solution.

For the 1,552 homeowners who obtained ADU permits in unincorporated San Diego County between 2021 and 2024—compared to just 159 permits in 2020—this regulatory change could unlock hundreds of thousands of dollars in previously inaccessible equity. Whether you're planning retirement, need cash for another investment, or simply want to monetize your ADU without becoming a landlord, understanding how AB 1033 works and what the conversion process involves is essential for making informed decisions about your property.

What AB 1033 Changes for ADU Owners in San Diego County

Assembly Bill 1033, which took effect statewide on January 1, 2024, fundamentally changed California property law by eliminating the longstanding prohibition against selling ADUs separately from primary residences. Previously, homeowners could only sell an ADU separately in extremely limited circumstances, such as when developed by a qualified nonprofit organization. The new law creates a legal framework allowing local governments to permit the separate sale of ADUs as condominium units under specific conditions.

The critical distinction is that AB 1033 is an opt-in law, meaning each jurisdiction must actively choose to implement it through local ordinances. The state law provides the authorization, but cities and counties control the actual implementation, including specific requirements and procedures for ADU condominium conversions.

In San Diego County's unincorporated areas—communities like Valley Center, Alpine, Ramona, Julian, and Fallbrook—county supervisors must approve the ordinance before property owners can begin the conversion process. The Planning Commission's December 5th approval included an important expansion: while county staff initially recommended allowing only detached ADUs to be sold separately, commissioners directed that the ordinance permit sales of both attached and detached ADUs, maximizing opportunities for homeowners.

Commissioner Kevin Sabellico advocated for this broader approach, while Commission Chair Ronald Ashman noted the potential benefits for transit-adjacent areas like Spring Valley and Bostonia, stating that "flexibility, I think, could serve the public" in these developing communities. However, Ashman also acknowledged concerns, recognizing "the little bit of chaos that can be kind of created by introducing these structures into established communities."

How AB 1033 Works: Converting Your ADU to a Condominium

Converting an ADU into a separately saleable condominium unit is not a simple administrative process—it requires full compliance with California's Subdivision Map Act and the Davis-Stirling Common Interest Development Act, the state laws governing condominiums and homeowners associations. Understanding these requirements is crucial before pursuing conversion.

The Legal Framework

Under AB 1033, separate property interests must be created as condominiums pursuant to the Davis-Stirling Act and in conformity with the Subdivision Map Act. This means your property will be legally subdivided, with the ADU and primary residence becoming distinct condominium units within a common interest development—even though they share the same physical parcel.

The condominium plan must include a description or survey map of the property, a three-dimensional description identifying common areas and each separate unit, and certificates signed by all parties with legal interests in the property. This brings us to one of the most challenging aspects of ADU conversions: lender consent.

The Lender Consent Requirement

Before you can record a subdivision map and condominium plan, every lienholder with a claim on your property must provide written consent. This includes the holder of your primary mortgage, any second mortgages, and any other recorded liens. Lenders must clearly state that they approve recordation of the condominium plan and that you've satisfied their terms and conditions.

This requirement poses a significant challenge because lenders can refuse consent entirely or impose additional conditions. Since the conversion changes the legal description of the property and modifies the loan collateral from a single-family home to a condominium unit, lenders may require loan modifications, charge fees, or demand that you meet specific equity or loan-to-value thresholds. Some lenders may simply decline to participate, effectively blocking the conversion until you refinance or pay off the existing mortgage.

Utility Notifications and HOA Formation

Property owners must notify all local utilities—including water, sewer, gas, and electric providers—about the ADU's creation and separate conveyance. This ensures utilities can properly manage and bill services for each unit independently, though separate meters are permitted but not required under California law.

Perhaps surprisingly, converting your ADU to a condo requires establishing a homeowners association (HOA) to manage maintenance costs for the property's exterior and shared spaces. Even though you initially own both units, the Davis-Stirling Act requires HOA governance structures for all common interest developments. This means drafting Covenants, Conditions, and Restrictions (CC&Rs), establishing HOA bylaws, and setting up maintenance fee structures—requirements that add legal complexity and cost to the conversion process.

Timeline: From Planning Commission Approval to Final Implementation

San Diego County property owners should understand that AB 1033 implementation will happen in phases, with multiple decision points and potentially lengthy timelines before conversions can actually occur.

March 2026: Board of Supervisors Vote

The Planning Commission's December 5, 2025 unanimous approval advances the ordinance to the San Diego County Board of Supervisors, which is expected to vote on final adoption in March 2026. The Board first directed staff to evaluate AB 1033 feasibility on March 13, 2024, then authorized development of a local program on October 9, 2024, suggesting strong supervisorial support for implementation.

However, the Board could still modify the ordinance, add additional restrictions, or delay implementation to address community concerns—particularly from rural areas where infrastructure capacity remains a significant issue.

The 2-3 Year Conversion Process

Even after the ordinance takes effect, individual property owners face a lengthy conversion timeline. County analysis indicates that formal conversion of ADUs into condominiums could take two to three years due to state requirements for private access, off-street parking, and utility connections that must be met before subdivision maps can be recorded.

This timeline includes:

• Site evaluation and planning (2-4 months): Assessing whether your property meets all requirements for separate access, parking, and utilities
• Survey and mapping (1-3 months): Hiring licensed surveyors to create the condominium plan and three-dimensional legal descriptions
• Lender negotiations (3-6 months): Securing written consent from all mortgage holders and lienholders, potentially requiring loan modifications
• HOA formation and legal documentation (2-4 months): Drafting CC&Rs, bylaws, and establishing the homeowners association structure
• Utility notifications and infrastructure upgrades (3-12 months): Coordinating with utility providers and completing any required physical improvements
• County review and map recordation (2-6 months): Submitting the subdivision map for county approval and final recording

Properties requiring significant infrastructure improvements—such as separate utility connections, dedicated parking spaces, or independent access driveways—will face the longest timelines and highest costs.

San Diego County vs. City of San Diego: Understanding the Differences

Property owners should understand that San Diego County's unincorporated areas and the City of San Diego have different AB 1033 implementation timelines and potentially different regulations, despite geographic proximity.

City of San Diego's Head Start

The City of San Diego approved AB 1033 implementation as part of a comprehensive package of 25 ADU reforms on June 18, 2025, with the ordinance taking effect on August 22, 2025. This means city homeowners have been able to pursue ADU condo conversions for several months already, providing early case studies for how the process works in practice.

San Diego's ADU reforms also included significant regulatory changes beyond AB 1033, such as capping the number of ADUs allowed per property at seven units (down from unlimited) and updating infrastructure and fire safety requirements to address community concerns about mega-ADU developments—particularly controversial projects in neighborhoods like Pacific Beach.

For areas within the Coastal Zone, however, city implementation requires additional certification by the California Coastal Commission, expected in 2026, creating a two-tiered system within city boundaries.

County Implementation Differences

While San Diego County's ordinance is modeled on similar principles, the county faces unique challenges that don't affect city properties. Unincorporated areas often have limited infrastructure—particularly sewer systems and water service—that can complicate ADU conversions requiring separate utility connections.

Valley Center provides a clear example of these infrastructure challenges. Dori Rattray, chair of the Valley Center Community Planning Group, warned planning commissioners that her community already has a strained sewer system that additional housing density could worsen. Valley Center also faces complications from wildfire risk and emergency access concerns, with the area classified as a Tier 3 High Fire-Threat District—the California Public Utility Commission's highest wildfire risk category.

These rural infrastructure constraints may result in county ordinances with more stringent requirements for ADU conversions in certain community planning areas, potentially limiting where separate sales are practically achievable despite legal authorization.

Financial Implications: What Your ADU Could Be Worth

The financial case for ADU condo conversion depends on multiple factors, including construction costs, current property values, market demand for smaller units, and your specific financial objectives. Understanding the numbers helps determine whether conversion makes sense for your situation.

ADU Construction Costs and Added Value

San Diego County homeowners who built ADUs between 2021 and 2024 typically invested between $100,000 and $300,000 in construction costs, depending on size, finishes, and whether the unit was attached or detached. Construction costs in Southern California run higher than state averages, with local builders commonly quoting $300,000 or more for detached units with quality finishes.

However, ADUs have proven to add significant value to properties. Research shows that properties with ADUs in San Diego are valued approximately 25-35% higher on average than comparable homes without ADUs, with some high-demand markets seeing increases up to 50%. A 2025 Federal Housing Finance Agency study analyzing data from 2013 to 2023 found that properties with ADUs appreciated 22% more than properties without them over the ten-year period.

One San Diego homeowner who built a 500-square-foot ADU for approximately $200,000 saw their total property value increase by roughly $300,000, meaning the ADU more than paid for itself in equity before considering any rental income or separate sale potential.

Potential Sale Prices for Converted ADU Condos

While the San Diego County market for separately sold ADU condominiums doesn't yet exist—since AB 1033 just received Planning Commission approval—we can look at comparable scenarios and early data from cities like San Jose, which pioneered AB 1033 implementation and certified California's first ADU condo conversion in 2024.

ADU condominiums typically appeal to first-time homebuyers, downsizing seniors, and investors seeking affordable entry points into desirable neighborhoods. In San Diego's high-cost housing market where the median single-family home price hovers around $875,000 as of December 2025, a 500-800 square foot ADU condo priced at $250,000-$400,000 could attract significant buyer interest.

Location drives value significantly. ADUs in coastal communities like Pacific Beach, La Jolla, and Mission Beach—where property values have increased 4-5% recently even amid broader market softness—could command premium prices. Coastal neighborhoods experienced price increases of 5% in La Jolla and 4.5% in Pacific Beach, driven by high demand for oceanfront properties and desirable amenities.

Conversely, rural ADUs in areas with infrastructure limitations may prove harder to sell separately, as buyers face ongoing challenges with sewer capacity, water availability, and wildfire insurance costs that urban ADUs don't encounter.

Tax Implications of Separate Sales

Property owners should understand that converting an ADU to a separately saleable condominium creates distinct tax consequences. Once converted, the primary home and ADU have separate property tax assessments, which are billed independently. The ADU's assessed value will be established at the time of conversion or sale, potentially at current market rates rather than the lower Proposition 13-protected basis of your original property.

When you sell the ADU condo, you'll trigger capital gains tax on any appreciation from your construction cost basis to the sale price. Unlike selling your primary residence—which enjoys a $250,000/$500,000 capital gains exclusion—selling the ADU as a separate unit won't qualify for this exclusion unless you've lived in the ADU as your primary residence for at least two of the five years before sale.

Consulting with a tax professional before pursuing conversion is essential for understanding your specific tax situation and optimizing the timing of conversion and sale.

The Cash Buyer Advantage: Why Quick Equity Access Matters

The 2-3 year timeline for ADU condo conversion creates strategic decisions for property owners: should you invest the time and money required for conversion, or explore faster alternatives for monetizing your ADU investment?

Challenges of the Conversion Process

Beyond the lengthy timeline, ADU condo conversion involves significant out-of-pocket costs before you ever list the unit for sale. Expenses typically include:

• Professional surveying and mapping: $3,000-$8,000
• Legal fees for HOA formation and CC&R drafting: $5,000-$15,000
• Lender consent fees and potential loan modifications: $1,000-$5,000+
• Infrastructure improvements (separate utilities, parking, access): $10,000-$50,000+
• County processing and recordation fees: $2,000-$5,000

Total conversion costs can easily reach $25,000-$75,000 or more, particularly for properties requiring substantial infrastructure upgrades to meet separate conveyance requirements.

Lender consent presents another major obstacle. If your existing mortgage holder refuses consent or imposes unacceptable conditions, you may need to refinance your entire mortgage—potentially at higher interest rates than your current loan—just to proceed with conversion. For homeowners with favorable low-rate mortgages originated in 2020-2021, refinancing could mean permanently losing a 3% mortgage in exchange for current rates above 6-7%.

The Cash Buyer Alternative

For many property owners, selling the entire property—primary residence and ADU together—to a cash buyer offers compelling advantages over the complex, expensive, and time-consuming condo conversion process:

Immediate equity access: Cash buyers can close in as little as 7-14 days, putting your full property equity in hand rather than waiting 2-3 years for conversion completion.

No conversion costs: Avoiding surveying fees, legal costs, HOA formation expenses, and infrastructure upgrades preserves $25,000-$75,000+ that would otherwise go to conversion professionals.

No lender consent barriers: Selling the property as-is eliminates the lender consent requirement entirely, avoiding refinancing risks and consent denials.

Simplified transaction: One sale, one closing, one set of transaction costs—rather than the complexity of managing a two-unit condominium development and marketing the ADU separately.

No HOA management obligations: Selling to a cash buyer means you never have to establish an HOA, draft CC&Rs, or manage the ongoing administrative burden of common interest development governance.

For homeowners facing retirement, relocation, or financial pressure, the cash buyer path delivers immediate results without the uncertainty, cost, and complexity of AB 1033 conversion. The property's value already reflects the ADU's contribution—studies show 25-35% value increases from ADU construction—so you capture that equity immediately through the sale price rather than waiting years to realize it through separate ADU sales.

Rural Area Concerns: Infrastructure Challenges in Valley Center and Beyond

The Planning Commission's December 5th hearing revealed significant tensions between statewide housing policy goals and local infrastructure realities, particularly in San Diego County's rural unincorporated communities.

Sewer and Water System Capacity

Valley Center exemplifies the infrastructure constraints facing many unincorporated areas. The community has long struggled with limited sewer service due to challenging geology, with most areas relying on septic systems rather than public sewer connections. Dori Rattray's warning to planning commissioners that additional housing density could strain existing systems reflects real capacity limits that ADU proliferation could exacerbate.

From 2021 through 2024, unincorporated San Diego County issued 1,552 ADU permits—representing 30% of all residential permits during that period. In 2024 alone, ADUs accounted for 45% of permitted housing units in unincorporated areas. This dramatic shift toward ADU-driven housing production has occurred faster than infrastructure planning cycles, creating mismatches between housing density and utility capacity in some communities.

For ADU owners considering condo conversion in rural areas, these infrastructure limitations create practical barriers. If your property lacks public sewer service, requires well water, or depends on septic systems, finding buyers willing to purchase a standalone ADU condo becomes significantly harder—regardless of legal authorization to sell separately.

Fire Safety and Emergency Access

Valley Center's classification as a Tier 3 High Fire-Threat District illustrates another rural challenge: wildfire risk and emergency response capacity. Valley Center Fire Protection District serves a large geographic area with limited resources, and concerns about emergency access to properties with multiple units reflect real firefighting and evacuation constraints during wildfire events.

San Diego County has experienced increasingly severe wildfire seasons, with Public Safety Power Shutoffs (PSPS) becoming routine during high wind events in backcountry communities. Property owners in fire-prone areas face escalating homeowners insurance costs—up 70% in some cases over recent years—and some struggle to obtain coverage at any price.

These wildfire-related challenges affect ADU marketability. Potential buyers of standalone ADU condos in rural high-fire-risk areas must independently secure homeowners insurance, which may be prohibitively expensive or unavailable, limiting the buyer pool for separately sold units.

Commissioner Acknowledgment of Concerns

Despite ultimately voting unanimously for AB 1033 implementation, planning commissioners acknowledged these rural concerns as legitimate. Commission Chair Ronald Ashman's comment recognizing "the little bit of chaos that can be kind of created by introducing these structures into established communities" reflected awareness that state housing mandates don't always align with local infrastructure capacity.

The Board of Supervisors' March 2026 vote may include geographic limitations, phased implementation, or additional requirements for rural areas to address these infrastructure and safety concerns while still complying with state law's directive to facilitate housing production.

What Homeowners Need to Know Before Pursuing ADU Sales

If you're considering AB 1033 conversion once San Diego County's ordinance takes effect, careful planning and realistic expectations will help you make informed decisions.

Assessment Checklist: Is Your Property Conversion-Ready?

Before investing time and money in conversion planning, evaluate whether your property meets practical requirements:

Separate access: Does your ADU have independent access from a public street or alley without crossing through the primary residence? Subdivision Map Act requirements typically mandate separate access for condominium units.

Parking compliance: Does your property provide required parking for both units? While California ADU law relaxes parking requirements for units within half a mile of public transit, condo conversion may trigger different standards.

Utility separation capability: Can your property accommodate separate utility meters and connections without major infrastructure investment? Properties sharing electrical panels, water lines, or sewer connections may require expensive upgrades.

Lender flexibility: Have you contacted your mortgage lender to gauge their willingness to consent to subdivision? Some lenders categorically refuse, while others have established programs for approving conversions.

Market demand assessment: Is there likely buyer interest in a standalone ADU condo in your location? Urban areas with strong first-time homebuyer demand offer better prospects than rural locations with infrastructure limitations.

Cost-Benefit Analysis

Create a realistic financial model comparing conversion versus alternatives:

Conversion scenario: Total costs ($25,000-$75,000+) plus 2-3 years of opportunity cost, compared to projected ADU sale price minus selling costs, capital gains taxes, and ongoing HOA obligations for your retained primary residence unit.

Rental scenario: Continued rental income from the ADU (averaging $1,900-$3,600 monthly in San Diego depending on size and location) versus conversion costs and complexity.

Whole-property sale scenario: Selling both primary residence and ADU together as a single transaction, capturing the 25-35% value increase from ADU construction immediately without conversion costs.

For many homeowners, particularly those planning to relocate or downsize, selling the entire property delivers better net proceeds than the conversion path.

Timeline Planning

If you decide to pursue conversion, develop a realistic timeline:

• March 2026: Board of Supervisors expected vote
• Spring 2026: If approved, ordinance takes effect (likely 30-90 days after adoption)
• Summer 2026: Earliest possible start for conversion applications
• 2027-2028: Completion of conversion process for most properties
• 2028-2029: ADU listing and sale as separate condo

This timeline assumes no complications. Properties requiring major infrastructure upgrades, facing lender consent delays, or encountering county processing backlogs could extend well beyond three years.

Conclusion: Weighing Your Options in San Diego County's Evolving ADU Landscape

The San Diego County Planning Commission's December 5, 2025 unanimous approval of AB 1033 regulations represents a watershed moment for the 1,552 homeowners in unincorporated areas who obtained ADU permits between 2021 and 2024. If the Board of Supervisors follows through with expected approval in March 2026, property owners will gain unprecedented flexibility to monetize ADU investments through separate condominium sales—a third option beyond rental income or whole-property sale.

However, this new flexibility comes with significant complexity, cost, and time requirements that make AB 1033 conversion a poor fit for many property owners. The 2-3 year conversion timeline, $25,000-$75,000+ in professional fees and infrastructure costs, lender consent obstacles, and HOA formation requirements create substantial barriers between regulatory authorization and actual implementation.

For homeowners planning to retain their primary residence long-term, can afford upfront conversion costs, successfully navigate lender consent requirements, and have strong market demand in their location, AB 1033 conversion could unlock substantial equity while preserving homeownership of the main house. Urban and suburban properties with good infrastructure access present the best conversion candidates.

Conversely, homeowners facing retirement, relocation, or immediate financial needs may find that selling the entire property—primary residence and ADU together—delivers better results with far less complexity. Properties already reflect ADU value in market prices (typically 25-35% increases from comparable homes without ADUs), meaning you capture that equity immediately through sale proceeds. Cash buyers can close in 7-14 days, avoiding conversion costs, lender consent barriers, and years of waiting.

Rural property owners in areas like Valley Center face additional challenges from infrastructure limitations, wildfire insurance costs, and utility capacity constraints that may make separate ADU sales impractical regardless of legal authorization.

As San Diego County moves toward final implementation, property owners should carefully evaluate their specific circumstances, financial goals, and property characteristics before committing to the conversion path. The promise of AB 1033 is real—new opportunities for equity access and entry-level homeownership—but the practical realities of subdivision requirements, condominium law compliance, and infrastructure limitations mean this innovative policy tool won't be the right solution for every ADU owner.

Whether you're considering AB 1033 conversion or exploring alternatives like whole-property sale to access your ADU investment, understanding the full picture of requirements, costs, timelines, and market conditions empowers informed decision-making about your most valuable asset.

If you're ready to discuss your options for monetizing your San Diego County property with an ADU—whether through AB 1033 conversion planning or a straightforward cash sale—professional guidance can help you navigate this complex landscape and choose the path that best serves your financial goals.