San Diego County ADU Separate Sale Public Review: July 2, 2026 Deadline

Introduction: Why the July 2, 2026 Deadline Matters for San Diego County ADU Policy

On March 4, 2026, the San Diego County Board of Supervisors unanimously adopted Assembly Bill 1033 (AB 1033), enabling homeowners in unincorporated areas to sell accessory dwelling units (ADUs) separately through condominium conversion. The ordinance took effect April 4, 2026, opening a new market where ADU condos in premium locations can sell for $450,000 to $500,000.

But the story doesn't end there. When the Board approved the ordinance, they directed county staff to return within 120 days—by July 2, 2026—with additional policy recommendations designed to promote first-time homebuyers and protect existing tenants. These parameters could fundamentally reshape who can buy ADU condos, what restrictions apply to sellers, and whether investor demand remains strong.

The public review period is open now through late May 2026, with final recommendations scheduled for a Board of Supervisors hearing in late summer 2026. If you own property in unincorporated San Diego County, plan to build an ADU, or are considering selling an existing ADU as a condo, understanding what's under review—and how to participate in the process—is critical to protecting your investment strategy.

What's Being Decided: First-Time Homebuyer Protections Under Review

The March 4, 2026 Board of Supervisors meeting made clear that policymakers want AB 1033 to serve first-time homebuyers, not just real estate investors. District 4 Supervisor Monica Montgomery-Steppe voiced the core concern: "My main concern is that investors will buy ADUs and they will continue to rent them out."

County staff have been tasked with developing policy options to ensure ADU condos create homeownership opportunities rather than simply shifting rental properties from one investor to another. The policy options under consideration include:

First-Time Homebuyer Purchase Preferences: Mechanisms to give first-time buyers priority access to ADU condos when they come to market. This could take the form of notification requirements, waiting periods before investor purchases are allowed, or outright preferences in the condo conversion approval process.

Down Payment Assistance Programs: Integration with existing county and state down payment assistance programs to make $450,000-$500,000 ADU condos accessible to buyers who might otherwise be priced out. Because ADUs are typically smaller than single-family homes—most range from 600 to 800 square feet in coastal areas—they offer a lower-cost entry point into homeownership.

Deed Restrictions for Homeownership: Potential requirements that converted ADU condos be sold to owner-occupants rather than investors, at least for initial sales. This would mirror affordable housing deed restrictions but apply to market-rate units.

Income-Qualified Purchase Windows: Some jurisdictions exploring AB 1033 have discussed income limits for initial buyers, ensuring middle-income households benefit before units reach the open market.

These provisions would directly impact investor demand. If owner-occupancy requirements become mandatory, the pool of potential buyers shrinks—eliminating out-of-state investors and local landlords seeking rental income properties. However, this could strengthen the market for first-time buyers who've been priced out of traditional single-family homes, potentially stabilizing long-term demand even as investor interest declines.

Tenant First Right of Refusal: Implications for Current Landlords

One of the most consequential policy options under review is a tenant first right of refusal (TROFR), which would give current ADU tenants the first opportunity to purchase the unit when an owner decides to pursue condominium conversion.

Here's how a TROFR typically works:

1. Notice Requirement: When a property owner decides to convert and sell an ADU, they must notify the current tenant in writing, providing details about the proposed sale price and terms.
2. Response Period: The tenant receives a defined period—often 30 to 90 days—to decide whether to purchase the ADU at the stated price.
3. Financing Contingencies: The tenant must secure financing and meet standard buyer qualifications, but gets exclusive negotiating rights during the response period.
4. Owner Sale Option: If the tenant declines or cannot secure financing, the owner may proceed with marketing the ADU condo to other buyers.

Strategic Implications for Landlords:

If you currently rent an ADU and are considering condo conversion as an exit strategy, a TROFR requirement changes your calculus:

• Tenant Leverage: Tenants gain negotiating power. If your tenant can't afford to buy but knows you want to sell, they may request lease extensions or other concessions as a condition of waiving their purchase rights.
• Reduced Competition: Other buyers can't make offers until the tenant's option period expires, potentially delaying your sale by 30-90 days.
• Pricing Pressure: If the tenant exercises their right to purchase, you lose the opportunity for competitive bidding that might have driven the price higher.
• Tenant Relationships: Converting and selling becomes more complicated if tenant relationships are contentious. Some landlords may choose to wait until units are vacant before pursuing conversion.

Why Policymakers Support TROFR:

The rationale is straightforward: tenants who've lived in an ADU often have the strongest interest in staying, and displacement concerns arise when rental properties are sold to new owner-occupants. By giving tenants purchase rights, the policy aims to minimize displacement while expanding homeownership opportunities.

For builders advising clients, understanding whether TROFR will be mandatory is essential. If your client plans to build an ADU specifically to sell it as a condo within a few years, renting it in the interim becomes a riskier proposition if future tenants gain purchase rights.

Owner Occupancy Requirements: Investment Strategy Impact Analysis

Owner occupancy requirements represent the most direct constraint on investor participation in the ADU condo market. While California law generally prohibits owner-occupancy requirements for ADU construction (per Government Code §66323), the question under review is whether San Diego County can impose occupancy requirements on ADU condo buyers after conversion.

There are several potential approaches:

Initial Owner-Occupancy Period: Requiring buyers to occupy the ADU as their primary residence for a defined period (e.g., one to three years) before renting or reselling. This is common in affordable housing programs and ensures the unit serves homeownership rather than investment purposes.

Permanent Owner-Occupancy: Deed restrictions requiring that the ADU remain owner-occupied indefinitely, with resale limited to other owner-occupants. This maximizes homeownership but reduces liquidity and may depress values.

Primary Residence Requirement: Mandating that either the original home or the ADU must be owner-occupied by the property owner at all times. This prevents scenarios where both units become rentals but allows flexibility in which unit the owner occupies.

No Occupancy Restrictions: Allowing ADU condos to be bought and sold freely, including by investors who intend to rent them out. This maximizes market liquidity but may not achieve the Board's goal of promoting first-time homeownership.

Table: Owner Occupancy Scenarios and Market Impact

Policy Option	Investor Demand	First-Time Buyer Access	Resale Liquidity	Rental Supply Impact
No Restrictions	High - investors compete actively	Moderate - compete with investors	High - unrestricted resale	Neutral - units can be rented
1-3 Year Occupancy	Moderate - investors with long-term horizon	High - investors temporarily sidelined	Moderate - restricted initially	Slightly reduced - delayed rentals
Permanent Owner-Occupancy	Low - investors excluded	Very high - only owner-occupants buy	Low - restricted buyer pool	Reduced - units exit rental market
Primary Residence Requirement	Moderate - landlords can buy if occupying main home	High - owner-occupants prioritized	Moderate - some buyer restrictions	Slightly reduced - one unit must be occupied

Strategic Considerations for Builders and Investors:

If you're advising clients on whether to build ADUs with the intent of selling them as condos, the occupancy rules will determine market dynamics:

• Investor-Friendly Rules (No Restrictions): Strong demand from landlords seeking rental income, cash buyers looking for appreciation, and real estate portfolios. Pricing remains competitive due to broad buyer pool.
• Owner-Occupancy Rules: Demand shifts to first-time buyers, move-down seniors, and multi-generational families. Pricing may be lower due to reduced investor competition, but sales volume could remain strong if financing programs support first-time buyers.

For property owners considering ADU construction, the timing question becomes critical: Do you build now under current rules, or wait to see if first-time buyer programs create stronger demand?

Coastal Considerations for Pacific Beach and La Jolla: Property owners in Pacific Beach near Tourmaline Surfing Park and Crystal Pier, Bird Rock, and coastal La Jolla near Kate Sessions Park face additional ADU construction factors beyond the AB 1033 policy review. Coastal Development Permits, California Coastal Commission review, and height restrictions in coastal zones can extend permitting timelines by 2-4 months. If you're planning an ADU in Mission Beach or other coastal areas, factor these requirements into your construction schedule and budget planning.

Bird Rock ADU Market Dynamics: In Bird Rock, where property values and ADU construction costs are among the highest in San Diego County, owner-occupancy restrictions could significantly impact investor interest. Bird Rock homeowners who've built detached ADUs specifically for condo conversion would face reduced buyer pools if only owner-occupants can purchase. However, the neighborhood's appeal to downsizing retirees and first-time luxury buyers may offset reduced investor demand.

Tourmaline Surfing Park Area Considerations: Properties near Tourmaline Surfing Park often attract buyers seeking coastal lifestyle amenities. ADU condos in this area have strong appeal to both investors (for short-term rental potential) and owner-occupants (for personal coastal access). Understanding how occupancy requirements affect this dual-market dynamic is critical for property owners planning ADU development near Tourmaline.

June Hearing Schedule and July 2 Deadline

Understanding the timeline is essential for anyone who wants to influence the final policy recommendations.

Key Dates:

• May 1-31, 2026: Draft Options for ADU Zoning Ordinance Amendment available for public review. Documents are posted on the San Diego County Planning & Development Services website at sandiegocounty.gov/pds/longrangeplanning/ADU-ZO.html.
• Late May 2026: Public comment period continues. Written comments can be submitted via email to PDS.LongRangePlanning@sdcounty.ca.gov or by calling (858) 505-6677.
• June 2026 (Date TBD): Planning Commission public hearing. This is your opportunity to provide oral testimony on the policy options under consideration. Spanish interpretation is available; other languages can be provided with 72 hours notice.
• July 2, 2026: Staff deadline to submit final recommendations to the Board of Supervisors. This is the 120-day deadline from the March 4, 2026 Board action.
• Late Summer 2026: Board of Supervisors public hearing to consider final recommendations. The Board will vote on whether to adopt additional policy parameters for AB 1033 implementation.

What Happens After July 2:

The July 2 deadline is when county staff must complete their analysis and finalize recommendations—it's not the end of the public process. After staff submit recommendations, the Board of Supervisors will schedule a public hearing, likely in August or September 2026, where they'll consider public testimony before voting.

However, your most effective opportunity to shape policy is during the current review period (May 2026) and the Planning Commission hearing (June 2026). By the time the Board hearing occurs, staff recommendations will already be solidified, and changes become more difficult.

How to Submit Public Comments: Step-by-Step Guide

If you're a property owner, builder, real estate investor, or first-time homebuyer with an interest in how these policies are decided, participating in the public review process is straightforward.

Method 1: Written Comments

Email your comments to PDS.LongRangePlanning@sdcounty.ca.gov with the subject line: "Public Comment - ADU Separate Sale Policy Options."

Your comment should:

• Identify yourself and your connection to the issue (e.g., "Pacific Beach property owner considering ADU construction")
• State your position clearly (e.g., "I support first-time homebuyer purchase preferences" or "I oppose owner-occupancy restrictions")
• Explain your reasoning (e.g., "As a small-scale landlord, owner-occupancy requirements would eliminate my ability to build ADUs as retirement investments")
• Be concise—one to two pages is ideal
• Include your contact information if you want follow-up from staff

Written comments can be submitted anytime through the July 2 deadline, though earlier submissions (May-June) have greater impact as staff are still developing recommendations.

Method 2: Phone Comments

Call (858) 505-6677 to speak with planning staff. This is best for clarifying questions about the policy options under review or confirming how to submit formal comments.

Method 3: Oral Testimony at Public Hearings

To speak at the Planning Commission hearing (June 2026) or Board of Supervisors hearing (late summer 2026):

1. Visit publiccomment.sandiegocounty.gov and complete the "Request to Speak" form when the meeting agenda is posted (typically 72 hours before the meeting).
2. Select whether you'll attend in person or remotely by phone.
3. When the ADU agenda item is called, you'll have 3 minutes to present your comments.
4. Focus on one or two key points rather than trying to cover everything. Written comments can provide additional detail.

Method 4: eComment System

For agenda items once they're posted, you can submit comments directly through the county's eComment system at sandiegocounty.gov/ecomment. These comments are included in the public record and distributed to all Board members before the hearing.

Tips for Effective Public Comments:

• Be Specific: Rather than general support or opposition, explain how specific policy options would affect your situation.
• Use Data: If you're a builder, cite how many ADU projects you've completed and how policy changes would affect future projects. If you're an investor, explain your typical investment criteria and how restrictions would change your calculus.
• Acknowledge Trade-offs: Policymakers respect comments that recognize competing interests. For example: "While I understand the goal of promoting homeownership, owner-occupancy restrictions would eliminate the investment capital that funds ADU construction in the first place."
• Suggest Alternatives: If you oppose a policy option, propose an alternative that achieves the same goal. For example: "Instead of mandatory owner-occupancy, consider offering property tax incentives for owner-occupants while allowing investor purchases."

Policy Scenarios: Best-Case and Worst-Case for Builders and Investors

Let's examine how different policy outcomes would affect key stakeholders.

Scenario 1: Investor-Friendly Policies (No Additional Restrictions)

What it looks like: The Board declines to adopt owner-occupancy requirements, TROFR provisions, or first-time buyer preferences. AB 1033 operates as originally adopted, allowing free-market ADU condo sales.

Winners: Real estate investors, property owners seeking maximum sale price, builders who serve investor clients

Impact: Strong investor demand keeps ADU condo prices high ($450K-$500K+ in coastal areas). Property owners can sell to the highest bidder without restrictions. Builders see robust demand from clients planning to build-and-sell ADUs.

Losers: First-time homebuyers competing against all-cash investors, tenants facing displacement when ADUs are sold, policymakers seeking to expand homeownership

Scenario 2: Balanced Approach (Soft Preferences for Homeowners)

What it looks like: The Board adopts notification requirements giving first-time buyers early access to listings, plus tenant TROFR with reasonable timelines (30-45 days), but no mandatory owner-occupancy restrictions.

Winners: First-time buyers gain some advantage, tenants get purchase opportunities, investors can still participate

Impact: Modest cooling of investor competition during notification/TROFR periods, but market remains liquid. Prices may dip slightly ($425K-$475K) due to reduced bidding wars. Builder demand remains strong.

Losers: Investors face delayed purchase timelines and less certainty, sellers may experience longer marketing periods

Scenario 3: Homeownership-First Policies (Strong Restrictions)

What it looks like: The Board adopts mandatory 2-3 year owner-occupancy requirements, permanent tenant TROFR, and income-qualified purchase windows for initial sales.

Winners: First-time homebuyers (reduced competition), housing advocates, tenants (displacement protection)

Impact: Investor demand collapses as return-on-investment timelines extend beyond acceptable ranges. Prices drop to levels affordable for owner-occupants ($375K-$425K). Builder demand may decline if property owners perceive ADU construction as less profitable without investor exit strategy.

Losers: Real estate investors (excluded from market), property owners (lower sale prices), builders (reduced project volume)

What's Most Likely:

Based on the Board's March 4 direction and Supervisor Montgomery-Steppe's comments, Scenario 2 (balanced approach) appears most probable. The Board wants to promote homeownership without completely eliminating investor participation, which provides the capital and market liquidity that makes ADU development financially viable.

Expect some form of first-time buyer notification system, tenant TROFR with 30-60 day windows, and possible incentives (e.g., reduced fees, expedited permits) for owner-occupants—but probably not mandatory owner-occupancy restrictions that would eliminate investor purchases entirely.

Strategic Timing: Should You Build Now or Wait for Final Policies?

If you're considering ADU construction with the intent of selling the unit as a condo, the July 2 policy review creates a strategic timing question.

Arguments for Building Now (May-June 2026):

1. Current Rules Locked In: Projects permitted before policy changes take effect may be grandfathered under existing rules, avoiding potential restrictions on future sales.
2. 8-14 Month Construction Timeline: ADU construction typically takes 8 to 14 months from design through completion. If you start now, your ADU will be ready in early 2027—after final policies are adopted but with the project initiated under current rules.
3. Rental Income During Policy Uncertainty: Even if you plan to eventually sell, you can rent the ADU for $2,500-$3,500 monthly in coastal areas while policy details are finalized. This generates income while you wait for clarity.
4. Locking in Construction Costs: San Diego construction costs increased 8-10% in early 2026 due to tariffs and labor shortages. Permitting now locks in today's pricing before further escalation.

Arguments for Waiting (Until Late 2026):

1. First-Time Buyer Programs May Expand Demand: If the Board adopts down payment assistance programs or other first-time buyer support, the pool of qualified buyers could increase, potentially supporting stronger prices despite reduced investor competition.
2. Avoiding Tenant Complications: If TROFR is adopted and you rent your ADU during construction/policy uncertainty, you may inadvertently give your tenant purchase rights that complicate future sale plans.
3. Design for Target Market: Knowing the final buyer profile (investors vs. owner-occupants) allows you to tailor ADU design. Owner-occupants prioritize different features (e.g., storage, private outdoor space) than investors (who focus on rental income maximization).
4. Avoiding Regulatory Risk: If new policies are more restrictive than expected and not grandfathered, projects started before policy adoption could face unexpected constraints.

Recommended Approach:

For most property owners, the best strategy is to begin preliminary steps now while monitoring policy developments:

• May-June 2026: Conduct ADU feasibility analysis, engage an architect for preliminary design, participate in public comment process to advocate for your interests.
• July-August 2026: Once the Board adopts final policies, finalize design and submit permit applications. This positions you to start construction by fall 2026 under known rules.
• 2027: Complete construction and list the ADU condo with full clarity on buyer restrictions, tenant rights, and market conditions.

This approach balances moving forward with prudent risk management, ensuring you're not caught off-guard by policy changes while also not delaying unnecessarily if policies end up investor-friendly.

Location-Specific Timing Considerations: For Bird Rock and coastal La Jolla properties within the Coastal Zone, add 60-90 days to your timeline for California Coastal Commission review. Similarly, properties near Tourmaline Surfing Park often require view corridor analysis and public access assessments. Mission Beach properties face the most stringent coastal development permit requirements, sometimes adding 4-6 months to project timelines. Factor these location-specific delays into your decision about when to start the ADU permitting process.