Granny Units/Accessory Dwelling Units (ADUs)
Whether they are called “Granny” or “In-Law” Units, Accessory Dwelling Units (ADU’s), are one of many solutions chipping away at California’s challenge of providing affordable housing, which has reached crisis proportions in Silicon Valley.
When homeowners contemplate building an ADU, often to realize a second income, they want to know will my property taxes go up? The short answer is yes, but only on the marginal value of the ADU. Assessors throughout California treat ADU’s like a home addition. The existing home will not be reassessed. The most recent changes in laws, as of 2019, do not change the way ADU’s are assessed.
There are a few variations of ADU’s. The most common is a new structure separate from the primary house, typically with a private entrance, kitchen, and bathroom. The new construction on the ADU will be assessed at market value as of the date of completion, or as of the January 1 lien date for partially complete construction.Typically, Assessors use either the cost of construction or a market-based sales comparison to value the new improvements separately. This new assessment is added to the existing assessment.
Homeowners may not want to add a separate “Granny” Unit, but instead prefer to convert a large family room or garage into an ADU. Though no new square footage is added by a conversion, any alterations of the existing living space will be assessed at market value.
For example, if new heating, bathroom, or kitchen fixtures are added, the cost will be added to the existing property tax base of the area that is modified. Other areas of the home untouched will not be reassessed by the Assessor. However, if the area modified is “taken down to stud walls,” making it substantially equivalent to new, it may be reassessed as new.
Whether the addition is for a parent or rented to earn a little extra income, the Assessor’s determination of the new assessed value remains the same, and is treated like any other addition to a home.
Should a homeowner disagree with the Assessor’s new assessed value, there is a simple and free process to dispute the added value. It is always best to start with the Assessor’s staff. An informal review process is available to resolve any factual issues that may exist in the assessment.
It is important that property owners contact the Assessor’s office within 30 days of receipt of the annual, supplemental or corrected assessment notice before deciding to file a formal assessment appeal. Many times, a simple discussion regarding the basis for the Assessor’s decision, the information needed by the Assessor, or to resolve misunderstandings of law is all that is needed.
New Construction and Property Taxes Brochure