California Cities have Adopted AB 1033: Why San Diego May Be Next

When Assembly Bill 1033 (AB 1033) was signed into law, it offered a bold new tool in California’s response to the housing crisis: the option for homeowners to sell Accessory Dwelling Units (ADUs) as separate condominiums, provided their local city or county opted in.

But AB 1033 is not a statewide mandate. It’s an opt-in law—meaning its real impact depends on how individual jurisdictions respond. While the state laid the foundation, cities and counties hold the keys to implementation.

In this post, we explore which cities have taken action, what their approaches look like, and why San Diego may be on the verge of a significant shift.

In our first blog in this series, we covered the fundamentals of AB 1033—a California law that allows cities to let homeowners sell Accessory Dwelling Units (ADUs) as separate condominiums, independent from the main residence. If you haven’t had a chance to read it, we recommend checking it out for a full overview of how the law works and what it means for homeowners, buyers, and builders.

In this blog post, we’re taking the next step: examining where AB 1033 is being adopted, how cities are interpreting the law, and why San Diego may soon play a major role in its expansion.

Early Adopters: Cities That Have Opted In

Because AB 1033 is an opt-in law, it only applies where local governments pass ordinances to allow it. A small but growing number of cities have already taken that step, each with its own approach to implementation.

San José

San José was the first city in California to adopt AB 1033, approving its ordinance in mid-2024. The city now permits the sale of ADUs as condominiums, provided the homeowner files a condominium parcel map, installs separate utility connections, and establishes a homeowners’ association (HOA) if there are shared spaces. San José has also released an official checklist and guide to help property owners navigate the process.

Santa Cruz

Santa Cruz followed in early 2025, integrating AB 1033 into its municipal code. The city allows both the main home and the ADU on a lot to be sold separately—provided they meet subdivision rules and building codes. However, Junior ADUs (JADUs) are excluded from separate sale.

These cities reflect a range of policy priorities—from streamlining conversions to maintaining neighborhood consistency. But across the board, their adoption signals a growing recognition that small, ownership-ready units can help address California’s housing affordability challenges.

Beyond formal adoption, many other jurisdictions are actively evaluating AB 1033 like Sacramento, Los Angeles, and San Francisco.

These cities are reviewing how to integrate ADU condo conversion into their housing strategies while balancing infrastructure, financing, and planning constraints.

Closer to San Diego, Encinitas and National City have signaled early interest, recognizing the potential of AB 1033 to expand ownership opportunities without significantly altering density.

San Diego’s Evolving Approach to ADUs and Ownership

While San Diego has not yet formally opted into AB 1033, the city is actively reviewing the legislation as part of broader efforts to modernize its housing policies. With one of the state’s most aggressive ADU incentive programs already in place, San Diego is well-positioned to be a leader in this next phase of housing reform.

ADU Bonus Program Adjustments

In recent years, San Diego gained statewide attention for its ADU Bonus Program, which allows homeowners to build multiple ADUs on a single lot. The program incentivized infill housing, particularly in transit-priority areas, and dramatically increased ADU construction across the city.

However, by early 2025, concerns began to surface around the scale of some developments and their impact on neighborhood character and infrastructure. In response, the city council voted to amend the program, introducing measures that place new limits on the number of bonus ADUs and tighten development requirements in certain neighborhoods. These changes signaled a shift in focus—from maximizing unit count to ensuring that ADU policy aligns with long-term urban planning goals.

It is within this evolving context that San Diego is evaluating the possibility of allowing for the sale of ADUs.

Looking Ahead: AB 1033 and the Small-Scale Neighborhood Homes Initiative

Rather than adopt AB 1033 in isolation, San Diego appears to be exploring how to incorporate it into a larger framework. City officials have referenced the forthcoming Small-Scale Neighborhood Homes Initiative—a planning effort aimed at legalizing and supporting a wider range of modest, ownership-oriented housing types, including duplexes, rowhomes, and subdivided lots with ADUs.

According to city statements and planning discussions, AB 1033 is expected to be considered as a policy tool within this broader initiative. If adopted, it could enable thousands of San Diego homeowners—many of whom already have permitted ADUs—to legally convert and sell these units as condominiums. This would expand the city’s homeownership base while preserving neighborhood scale.

City planners are currently engaging with stakeholders and reviewing best practices from early adopters like San José and Santa Cruz. A formal ordinance could be introduced as early as 2026, following the development of implementation guidelines and public outreach.

San Diego has long been a leader in ADU innovation. As the city shifts toward more nuanced and ownership-focused housing solutions, the adoption of AB 1033 could mark the next evolution in how residents create, use, and share property.

Want to explore your property’s potential? Contact Builders Now for a consultation. We’ll help you navigate current ADU policy, prepare for what’s coming next, and build smarter for tomorrow.