Why California ADU Homeowners Are Not Selling

Written by:

Rudi Davis

Date:

03 Apr 2026

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California policymakers have promoted accessory dwelling units (ADUs) as a solution to the state’s housing shortage. But Wendy Rawley, Team Leader at The Wendy Rawley Team, says most homeowners who have built ADUs are holding onto their properties, limiting the number of homes available for sale. This creates a mismatch between policy expectations and actual market inventory.

ADU Owners Hold Their Properties

Rawley observes strong demand among buyers for properties with ADUs, but says these homes rarely appear on the market. “Buyer interest, for sure, but people with ADUs aren’t selling. I don’t see very many at all,” she says.

According to Rawley, most homeowners who added ADUs did so for specific family reasons. These include housing aging parents, providing space for adult children, or earning rental income. These uses tend to make homeowners less likely to move, since the ADU serves an ongoing need. “The reason they built the ADU is to use it. They’ve got mom and dad or a rental in the back, and they’re comfortable where they are,” Rawley explains.

As a result, the increase in ADU construction has not translated into more homes for sale or rent. Instead, ADUs are expanding living arrangements for existing owners. This keeps properties off the open market and creates an inventory constraint that does not appear in standard housing data.

Tax Law Discourages Family Transfers

Rawley also points to recent changes in California’s property tax laws as a factor that discourages ADU owners from selling. Proposition 13 previously allowed children to inherit their parents’ property tax basis. This made it affordable to keep family homes across generations. However, changes to these rules now restrict this benefit, especially for homes that are not the heirs’ primary residences.

“They used to be able to keep mom and dad’s home and rent it out. Now they can’t, or if they move back into mom and dad’s house, their tax rate gets readjusted,” Rawley says.

This change has led to more probate and trust sales in Rawley’s market, as heirs often choose to sell inherited properties rather than take on the higher property tax bill. The loss of this tax advantage makes it less attractive for families to keep ADU-equipped homes long-term, reducing properties available for multigenerational living or rental.

Rawley describes situations where a home bought decades ago for a modest sum is now worth over a million dollars. Previously, heirs could move in and keep the low tax rate. Under current law, however, the property tax is reassessed at full market value, making it financially unrealistic for many families to keep the property.

Policy Goals Miss the Market

The reluctance of ADU owners to sell highlights a gap between California’s policy interventions and the outcomes policymakers expected. ADUs were intended to increase housing supply and improve affordability, but if these units are not entering the sales or rental market, they do not expand inventory as planned.

Rawley’s experience suggests that ADU construction primarily benefits existing homeowners by supporting multigenerational living or aging in place, rather than increasing the number of homes available to new buyers or renters. This dynamic slows transaction activity and limits buyers’ choices for properties with additional living space.

If this pattern is widespread in California’s suburban markets, it suggests that ADU policy has been more effective at enabling families to remain together or support older relatives than at addressing the state’s broader housing affordability crisis. Whether this represents a policy success or a missed opportunity depends on which goals are prioritized. Current trends indicate that building more ADUs alone will not solve California’s inventory shortage. Policymakers may need to address these behavioral and tax-related factors if they hope to turn ADU construction into a meaningful source of new housing supply.