The climate is ripe for adding housing in San Francisco, and that extends to the city’s efforts to make adding an accessory dwelling unit (ADU) to a property easier. But whether you should move ahead with “legalizing” an existing in-law apartment—or creating one—depends upon what type of property you own.
If you own a building with three or more units, adding another one won’t really introduce new use restrictions on the building or resale complications.
However, that’s not the case with a two-unit building or a single-family house. Adding an ADU to either of those property types can introduce some twists:
Use restrictions: Adding an ADU to a house or two-unit building may change the legal description of the property. In the case of a house, your property may subsquently be subject to rent control and eviction limitations. Adding a third legal unit to a duplex can turn it into a three-unit building, which has implications for condo conversion.
Resale value: A single-family home and a two-unit building are arguably worth more with an additional legal unit, particularly when it comes to future owners looking for a multi-generational property or rental income.
Loan options: A buyer qualifying for a single-family home loan may not qualify for a two-unit building loan because part of that loan relies on a unit generating income. If he or she can qualify, the interest rate will likely be higher. And refinancing may be more complicated if the property changes from one category to another. It’s definitely important to check with your existing lender to see what you can expect if you add a legal ADU.