California's ADU market just split in two. One side is open for condo sales. The other is still drafting memos.

If you are a multifamily investor evaluating where to deploy capital in 2026, this divide is now a primary underwriting variable. San Jose approved the state's first ADU condo conversion on August 14, 2025. The unit at 410 Josefa Street completed a 29-day application review and a 60-day parcel map review. That is 89 days from submission to approval.

Los Angeles, the state's largest ADU market, has produced a council motion and nothing else.

As an ADU manufacturer operating across California, we track AB 1033 adoption because it directly affects project feasibility. This guide breaks down which cities have adopted, which are pending, and what investors need to know before committing capital.

What AB 1033 Actually Does

Assembly Bill 1033 took effect January 1, 2024. It authorizes California cities and counties to permit the separate sale of ADUs as condominiums. The law is permissive, not mandatory. Each jurisdiction must proactively adopt a local ordinance to enable these sales.

The Core Mechanics

The conversion process under AB 1033 requires five key steps:

1. Certificate of Occupancy first. The ADU must receive a COO before the condo map can be filed. You cannot run permitting and condo mapping in parallel.

2. Lienholder consent. Every lender on the property must provide written consent before you can record the condo map.

3. Condominium plan. The plan must comply with the Subdivision Map Act and local subdivision ordinances.

4. Davis-Stirling compliance. You must establish a homeowners association governing shared spaces.

5. County recorder filing. All documents must be recorded before the sale can close.

The Verdict

San Jose's experience proves these are procedural steps, not deal-killers. The city created an ADU Condominium Checklist, hired two dedicated "ADU Ally" staff positions, and processed its first conversion in under 90 days.

The AB 1033 Adoption Tracker (January 2026)

Not all cities are equal. The gap between proactive and passive jurisdictions is widening.

Cities That Have Adopted AB 1033

Cities With Pending Action

The LA Problem

Los Angeles permitted more ADUs than any other city in California. In 2023, ADUs represented 41% of all new housing permits issued by the city. The demand is proven. The production capacity exists.

And yet LA has not adopted AB 1033.

In July 2025, Council member Nithya Raman introduced a motion to adopt the law. The motion went to committee. It has not emerged. There is no draft ordinance. There is no public timeline.

The Risk: LA's inaction is not neutral. It is a competitive disadvantage. Developers and investors who want to execute AB 1033 projects are relocating capital to jurisdictions that have done the work.

Why This Matters for Multifamily Investors

The intersection of AB 1033 and SB 1211 creates a new asset class.

The SB 1211 Multiplier

SB 1211, effective January 1, 2025, removed the cap on detached ADUs for multifamily properties. Previously, multifamily lots were limited to two detached ADUs. That cap is gone. Qualifying multifamily lots can now support up to eight detached ADUs, provided the number of ADUs does not exceed the existing unit count on the property.

Think about the underutilized land on 1980s apartment complexes. Oversized setbacks. Surface parking lots. Dead lawns. Those are now buildable pads.

The Math Change: SB 1211 lets you build the units. AB 1033 lets you sell them. Instead of underwriting for rental yield, you can underwrite for sale proceeds. Instead of a 15-year hold to stabilize cash flow, you can execute a 24-month build-and-sell strategy.

The San Jose Case Study

Consider the economics in San Jose:

A household priced out of the traditional market can afford an ADU condo. You are not competing with existing inventory. You are creating a new category of entry-level ownership product.

Underwriting an AB 1033 Project: Five Critical Variables

If you are evaluating an ADU condo strategy in an adopting jurisdiction, here are the key underwriting considerations.

Variable 1: Timeline Is Driven by COO Sequencing

Unlike traditional condo conversions, AB 1033 requires the ADU to receive a Certificate of Occupancy before you can file the condo map.

The Risk: You cannot run permitting and condo mapping in parallel. This adds months to your timeline if you are building stick-built.

The Verdict: Modular construction compresses this gap. A unit installed in 30 days unlocks the condo map months faster than traditional builds.

Variable 2: Lienholder Consent Is a Gating Item

Every lender on the property must provide written consent before you can record the condo map.

The Risk: If you have acquisition debt, construction debt, or mezzanine financing, each lender must sign off. Some lenders are unfamiliar with AB 1033 and will slow the process.

The Verdict: Structure your capital stack with this requirement in mind. Use lenders who have already processed AB 1033 projects.

Variable 3: HOA Formation Is Mandatory but Manageable

The Davis-Stirling Act requires a homeowners association to govern shared spaces and maintenance obligations.

The Risk: Legal fees and paperwork add cost and time.

The Verdict: San Jose's checklist includes template CC&Rs. Budget $5,000 to $10,000 for legal fees but do not overweight this as a risk factor.

Variable 4: Not All ADUs Qualify

The ADU must have a valid COO. Unpermitted units or units with open code violations are not eligible.

The Risk: If you are acquiring a property with an existing ADU, verify permit history before committing.

The Verdict: Conduct title and permit diligence on any AB 1033 acquisition target.

Variable 5: Jurisdiction Selection Is Now Primary

The difference between San Jose (89-day processing, dedicated staff, clear checklist) and a city with no ordinance is the difference between an executable strategy and a stalled asset.

The Verdict: Prioritize markets with proven implementation capacity. Use the tracker above as your first filter.

The Modular Advantage

The bottleneck is no longer the law. The law is clear. The bottleneck is execution.

The COO-before-mapping requirement means traditional stick-built timelines destroy the economics. If you are waiting 12 to 18 months for permits and construction, your capital is trapped before the condo process even begins.

A modular unit installed in 30 days unlocks the condo map months faster. Speed is not a convenience. It is a financing necessity.

Common Questions About AB 1033

Which cities have adopted AB 1033 in California? As of January 2026, San Jose, San Diego, Santa Monica, Santa Cruz, and San Francisco have adopted AB 1033 ordinances allowing ADU condo sales. Be aware that adoption status changes frequently. The County of San Diego and Berkeley have pending ordinances expected in early 2026.

Can I sell an ADU in Los Angeles under AB 1033? No. Los Angeles has not adopted an AB 1033 ordinance. Be aware that a council motion was introduced in July 2025 but has not progressed to a draft ordinance or vote.

Does AB 1033 require a Certificate of Occupancy first? Yes. The ADU must receive a COO before you can file the condo map. Be aware that this sequencing requirement adds months to stick-built project timelines compared to modular installations.

Do I need lienholder consent for an AB 1033 conversion? Yes. Every lender on the property must provide written consent before you can record the condo map. Be aware that lenders unfamiliar with AB 1033 may delay the process. Structure financing with experienced lenders.

How long does an AB 1033 conversion take in San Jose? San Jose processed its first AB 1033 conversion in 89 days: 29 days for application review and 60 days for parcel map review. Be aware that this timeline assumes the ADU already has a Certificate of Occupancy.

Can I convert an existing ADU to a condo under AB 1033? Yes, in cities that have adopted AB 1033. Both new and existing ADUs are eligible in San Diego under Ordinance O-21989. Be aware that the ADU must have a valid COO and no open code violations.

What is the difference between AB 1033 and SB 9? AB 1033 allows ADUs to be sold as condos while keeping the lot intact. SB 9 allows lot splits to create separate parcels. Be aware that SB 9 has faced legal challenges and implementation delays, while AB 1033 is actively being processed in multiple cities.