San Jose allows sale of backyard homes as condos

With the average house in San Jose costing more than $1 million, the city has jumped at implementing a new state law that could bring more homes to market.

San Jose is the first city in California to opt into a law passed by the state Legislature last year that allows residents to sell their accessory dwelling units (ADU), also known as in-law quarters and granny units. The city wants these ADUs to go on the market as condos. Its objective is to use these backyard homes to increase the city’s affordable housing stock, but unlike ADUs developed by nonprofits that come with an affordability restriction, other homeowners can sell their ADUs at market rate.

“We are hopeful that the smaller size of ADUs will make them somewhat more affordable by design than the traditional single family residence,” Martina Davis, division manager with San Jose Planning, Building and Code Enforcement, told San José Spotlight.

With more than 6,300 homeless people in the city, San Jose ranks as the fourth highest in the U.S. for number of homeless people per capita based on a recent survey. And for every one person that gets housed, nearly two become homeless in Santa Clara County as people are priced out of their homes.

“We are losing people to displacement because they can’t afford rent, and we are also losing people who are ready to buy a home and are just priced out of the market,” Matthew Reed, director of policy at SV@Home, told San José Spotlight.

The average home in San Jose costs nearly $1.5 million, a 13% increase from the previous year according to Zillow. In order to comfortably afford a mortgage, per Zillow homebuyers need to make more than $450,000 a year— a bracket that a majority of households don’t fall into. The median household income in San Jose is roughly $133,835, according to 2022 U.S. census data.

“It’s important to acknowledge that the city is being proactive… and being willing to embrace the range of potential solutions to address the full of breadth of housing needs that we have,” Reed said.

A typical detached ADU costs anywhere from $250,000 to $350,000 to build and takes one to two years to complete. The median price of a condo in San Jose is selling for $725,000, according to Redfin.

ADUs have contributed to more than 20% of the city’s new housing stock over the past five years after San Jose streamlined the building process  through working with one of the city’s 21 preapproved vendors. From there, permits can be approved within an estimated three months after submission, with construction starting within a year of approval, or the permit will expire. The city has built more than 1,400 new in-law units since 2019.

“ADUs are one very small, but very important component in addressing the lack of housing in our community. So anything we can do to foster their construction and if that means fostering their sale as well, then by all means,” Catalyze SV Executive Director Alex Shoor told San José Spotlight. “But we can’t build ourselves out of this crisis with ADUs.”

Contact Joyce Chu at [email protected] or follow @joyce_speaks on X, formerly known as Twitter.