← Market Briefs · Choice of America

San Diego County

San Diego County: How to Buy a Home With an ADU, or Add One, and Make the Numbers Work (October 2026)

By Dr. Hamid Rowshan, Choice of America

How San Diego County buyers and owners can check that an ADU is permitted, see how lenders count ADU rent, and estimate the fees and timeline to add one.

Walk almost any older neighborhood in San Diego, from North Park, Normal Heights and Clairemont to Encanto, Chula Vista and Escondido, and you will see them: converted garages, backyard cottages and second units over the garage. Accessory dwelling units (ADUs) and junior ADUs (JADUs) have become one of the main ways San Diego County households stretch a mortgage, house a parent or a grown child, or build long-term rental income on a lot they already own.

They also matter more right now. Axios San Diego reported on October 13 that prices for the county's "starter homes" (homes under $1 million) fell 1.1% from a year earlier, according to the First American Data & Analytics Home Price Index, with a median of $775,000, while higher-priced homes edged up. The same report quoted San Diego Association of Realtors president Karen Van Ness saying that mortgage rates around 7.3%, plus utilities, maintenance, insurance and HOA dues, have many lower-budget buyers pausing, and that HOA dues in some places have risen 60% to 70% since 2021. For a buyer who wants a detached home instead of a condo, a property with a legal second unit, or room to add one, can change what is affordable.

The rules have also kept moving. The City of San Diego's ADU guide (Information Bulletin 400) was updated in January 2026. The city's 2026 Land Development Code update took effect on July 15, 2026 outside the Coastal Zone, and in May 2026 the City Council amended the fee charged on projects that use the city's ADU bonus program. The state's ADU Handbook was updated in March 2026. This guide walks through what those rules mean for a buyer and an owner, how to check whether an existing unit is legal, how lenders count ADU rent, and how to run the numbers yourself.

San Diego County market snapshot (September 2026)

Measure (Realtor.com, San Diego County)September 2026
Median listing price$888,450 (down 6.3% from a year earlier)
Median days on market46 days (6.2% faster than a year earlier)
Active listings5,749 (down 1.5% from a year earlier)
New listings in the month2,326
Share of listings with a price reduction (Realtor.com price_reduced_share)20.4%
Pending listings2,137 (down 9.6% from a year earlier)
Median listing price per square foot$587
Median listing size1,507 sq ft (down 6.9% from a year earlier)

Source: Realtor.com Residential Data, county core metrics file (month 202609, FIPS 06073).

The 30-year fixed rate averaged 7.32% in Freddie Mac's Primary Mortgage Market Survey for the week of October 22, 2026. On the median $888,450 listing with 20% down ($177,690), the $710,760 loan carries principal and interest of about $4,882 a month. Property tax at the 1% base rate adds about $740 a month (before local voter-approved charges and any Mello-Roos), for roughly $5,623 before insurance and HOA dues.

How to run that payment yourself: monthly payment = L x r / (1 - (1 + r)^-n), where L is the loan amount, r is the annual rate divided by 12, and n is 360 months for a 30-year loan.

For comparison, HUD's fiscal year 2026 Fair Market Rents for the San Diego area, as published by the Housing Authority of the County of San Diego effective January 1, 2026, are $2,288 a month for a studio and $2,459 for a one-bedroom. Those are not a promise of what a particular ADU will rent for, but they show why a second unit can cover a meaningful share of a San Diego mortgage.

Step 1: Learn the difference between an ADU, a JADU and a "bonus" ADU

How to do it:

  • ADU. In the City of San Diego, an ADU is an attached or detached unit with its own living, sleeping, cooking and bathroom facilities, between 150 and 1,200 square feet, on a lot with a house or apartment building (IB 400).
  • JADU. A junior unit of 150 to 500 square feet built inside an existing or proposed house or an attached garage. It needs a separate exterior entry and at least an efficiency kitchen, and it may share a bathroom with the house. A JADU can never be sold separately from the house.
  • How many you can have. On a single-family lot in the city, IB 400 allows one house, one attached or detached ADU, one ADU converted from existing space (in the house or an existing accessory structure) and one JADU.
  • Bonus ADUs. The city's opt-in ADU Home Density Bonus Program allows extra units when an owner also builds deed-restricted affordable ADUs. On single-family lots it caps the total ADUs and JADUs at 4 on lots of 8,000 square feet or less, 5 on lots of 8,001 to 10,000, and 6 on larger lots. Since the 2025 amendments, the RS-1-1 through RS-1-4 and RS-1-8 through RS-1-11 zones are excluded unless the site is in a High or Highest Resource opportunity area, bonus units need fire sprinklers, and one parking space is required per bonus or affordable ADU outside a Transit Priority Area. Bonus ADUs are not allowed in a Very High Fire Hazard Severity Zone if the lot is on a cul-de-sac or has only one way in and out.
  • Other cities. Chula Vista, Oceanside, Escondido, Carlsbad and the other cities, plus the County for unincorporated areas, write their own ADU ordinances within state law. Always read the rules for the city the property is actually in.

Step 2: Before you offer, prove the unit is permitted

A listing that says "guest house," "granny flat" or "income unit" does not mean the unit is legal. This is the single most important check.

How to do it:

  • Ask the seller, in writing, for the building permit and final inspection for the ADU or conversion. The City of San Diego says a building permit is required to create an ADU or JADU, with no exemptions.
  • Look up the property's zoning on the city's Zoning and Parcel Information Portal (ZAPP), and pull the permit history from the city's records or the right city or county building department.
  • Compare the permitted plans with what is actually there: square footage, kitchen, bathroom, entrance. A garage converted without a permit, or a "studio" with a hot plate, may not be an ADU at all.
  • Read the seller's disclosures for unpermitted work, and write your contingency so you can cancel if the permits do not match.
  • If the unit is not permitted, do not pay a price that assumes it is. Price it as storage or a bonus room, and budget for legalizing it (Step 3).

Step 3: If the unit is unpermitted, know what legalizing involves

State law now gives owners of older unpermitted units a real path. According to HCD's March 2026 ADU Handbook, a city or county cannot deny a permit for an unpermitted ADU built before January 1, 2020 just because it violates building standards or local ADU rules, unless it finds that fixing the problem is necessary to protect health and safety or the building is substandard under Health and Safety Code section 17920.3.

How to do it:

  • Before you apply, get a confidential code inspection from a licensed contractor (you can check a license on the Contractors State License Board site). HCD's handbook notes that homeowners may do this to learn the unit's condition and likely scope of work.
  • Get a written estimate for the corrections, plans and permit fees, and treat that number as a cost of the purchase.
  • Ask the seller to legalize the unit before closing, credit you the estimated cost, or lower the price.
  • Expect permit fees, possibly school fees and other charges (see Step 6), and time.

Step 4: Check whether you can rent it, and how

How to do it:

  • Owner occupancy. State law no longer allows cities to require the owner to live on a lot with an ADU (Gov. Code section 66315, per the HCD Handbook). For a JADU, the City of San Diego requires the owner to live on site unless the JADU has its own bathroom.
  • No short-term rentals. In the City of San Diego, JADUs must be rented for more than 30 days and may not be used as short-term rentals, and HCD's handbook notes that ADUs created under state law's guaranteed-approval provisions must also be rented for terms longer than 30 days. Do not buy a property planning to run the ADU as a vacation rental without confirming the local rules in writing.
  • Tenant law. If an existing tenant lives in the ADU, read the lease, ask for the rent ledger and deposit records, and remember that the tenancy usually comes with the property.
  • Parking. In the City of San Diego no parking is required for an ADU outside the Coastal Overlay Zone, and a JADU never needs parking.

Step 5: Understand how a lender counts ADU rent

This is where many buyers are surprised. Under Fannie Mae's Selling Guide (section B3-3.8-02, updated September 2, 2026), rental income from an ADU on a one-unit home you will live in can help you qualify, but with limits.

How to do it:

  • Only one existing ADU counts, and only on a purchase or a limited cash-out refinance. You cannot count rent from a unit you plan to build later.
  • The appraiser must support the rent with a comparable rent schedule (Form 1007). If a lease is being transferred to you, the lender will want a copy.
  • The lender starts with 75% of the monthly gross rent. The rest is treated as vacancy and expenses.
  • The ADU income can be no more than 30% of your total qualifying income.
  • How the income is applied depends partly on whether you have at least 12 months of experience managing a rental. Ask your loan officer to show you the exact calculation on your file.
  • Fannie Mae's property rules (section B2-3-04) allow only one ADU on the parcel, require it to be smaller than the main house, and require a separate entrance, kitchen (with a stove or stove hookup, not just a hot plate), sleeping area and bathroom. FHA, VA and jumbo lenders have their own rules, so ask before you shop.

Run the numbers yourself (example using HUD Fair Market Rents, not a specific property):

  • If the ADU rents at the one-bedroom FMR of $2,459, the lender would start with 75%, or about $1,844 a month.
  • Because of the 30% cap, you could use all $1,844 only if your total qualifying income is at least about $6,148 a month, meaning at least about $4,303 a month from your job or other sources.
  • For a studio at $2,288, 75% is $1,716, and the minimum total income to use all of it is about $5,720 a month.
  • Then compare: the median-priced home above costs about $5,623 a month before insurance and HOA. Even a full-market ADU rent of $2,459 would cover roughly 44% of that, and your lender would count less. Plan your budget so the house still works if the unit sits empty for a few months.

Step 6: If you will add an ADU, estimate the fees and the timeline

How to do it:

  • Impact fees. According to the HCD Handbook, an ADU of 750 square feet of interior livable space or less is exempt from impact fees charged by cities, special districts and water companies. Above 750 square feet, impact fees must be proportional to the ADU's size compared with the main house (for example, a 1,000-square-foot ADU next to a 2,000-square-foot home could be charged about half the fee for a new home). School districts may charge fees on ADUs larger than 500 square feet.
  • City of San Diego charges. IB 400 lists school fees, the General Plan Maintenance Fee (since August 9, 2022), Development Impact Fees under the municipal code, Regional Transportation Congestion Improvement Program fees for projects with more than one ADU, and the Community Enhancement Fee for bonus-program projects. In May 2026 the City Council amended that Community Enhancement Fee to include the citywide park impact fee equivalent, in addition to the mobility, library and fire equivalents (Resolution R-316744).
  • Timeline. State law requires the permitting agency to approve or deny a complete ADU application within 60 days when there is already a house on the lot, and to give written, itemized comments if it denies. The City of San Diego reviews applications that use preapproved ADU plans in 30 days, though you must pay the plan's designer to license it.
  • Coastal Zone. Near the coast, most new ADUs need a Coastal Development Permit, and several of the city's newer ADU rules are not yet in effect inside the Coastal Overlay Zone because they still await Coastal Commission certification. Check this first if the property is west of I-5.
  • Size and setbacks. In the city, detached ADUs on single-family lots are limited to two stories, may generally sit up to the side and rear property lines, but must keep 4-foot side and rear setbacks if taller than 16 feet next to a residential neighbor or if the lot is in a Very High Fire Hazard Severity Zone. The fire marshal may require more.

Step 7: Plan for the property tax change

How to do it:

  • Building an ADU is new construction. The San Diego County Assessor's Office explains that only the value added by new construction is assessed. The existing house keeps its current Proposition 13 assessed value.
  • The added value is usually close to the full construction cost, so estimate about 1% of your construction cost per year in new base property tax, plus local charges, and expect a supplemental tax bill after completion.
  • If you buy a home that already has an ADU, the whole property is reassessed at your purchase price, like any purchase.

Step 8: Negotiate with the ADU facts in hand

How to do it:

  • Make the seller prove the rent: lease, rent roll, bank deposits and the permit file.
  • If the unit is unpermitted, or the appraiser cannot support the listed rent, ask for a price cut or a credit equal to the legalization estimate.
  • Use the market: 20.4% of San Diego County listings had a price cut in September and the typical listing sat 46 days. Homes that have lingered give you room to ask.
  • If the seller plans to sell the ADU separately as a condominium (allowed in the City of San Diego under its AB 1033 rules), understand that it must first pass final inspections and be offered for at least 30 days to buyers who will live in it. Read the recorded covenants carefully.

Mistakes to avoid

  • Paying for "income" from a unit with no permit.
  • Assuming the lender will count the whole rent, or rent from an ADU you have not built yet.
  • Planning a short-term rental where the rules require stays longer than 30 days.
  • Building an 800- or 900-square-foot ADU without checking how much the impact fees rise above 750 square feet.
  • Forgetting the Coastal Zone rules near the beach.
  • Leaving the new property tax and insurance for the second unit out of your budget.

Your checklist

  1. Confirm the city or county that governs the property and read its ADU rules.
  2. Get the permit and final inspection for any existing unit.
  3. If unpermitted, get a contractor's inspection and estimate before you commit.
  4. Confirm whether you can rent it, for how long, and whether you must live on site (JADUs).
  5. Ask your lender how ADU rent will be counted on your file (75%, 30% cap, Form 1007).
  6. Run the payment at today's rate and see how it works with and without the rent.
  7. If adding a unit, price fees by size (750 square feet is a key line) and check the 60-day approval rule.
  8. Budget for the new property tax on the added value.
  9. Negotiate with permits, rent proof and the market data in hand.

What this means day to day

For a San Diego family, an ADU can mean an aging parent living steps away instead of across town, a college graduate who can afford to stay in the county, or a tenant whose rent covers a real piece of the mortgage. It also means being a landlord, sharing a yard and keeping up two homes. Buy the unit for what it legally is, count only the rent you can prove, and make sure the main house works for your budget on its own.

If you would like help finding San Diego County homes with legal ADUs, checking a unit's permit history or running these numbers on a specific property, call Choice of America at 833-THIS-BROKER (833-842-7465), or visit our San Diego County page and choiceofamerica.com.

Dr. Hamid Rowshan, Choice of America. DRE #02004794. Company DRE #02240008.

This article is general information, not legal, tax or lending advice. ADU rules differ by city and change often. Confirm the rules for a specific property with the local building department, a lender and a tax professional.

Sources:

Talk strategy with Choice of America

Dr. Hamid Rowshan · DRE #02004794 · Company DRE #02240008 · Orange, LA, Riverside, San Bernardino & San Diego counties.

833-THIS-BROKER Request a call Choice of America All Market Briefs