Council approves ordinance allowing separate sale of ADUs and directs annual report on affordability impacts

The Santa Cruz City Council voted unanimously to adopt an ordinance permitting condominium mapping and the separate sale of accessory dwelling units (ADUs) along with a council directive requiring annual analysis of the policy’s local affordability impacts.

The action responds to debate about whether selling ADUs as separate condominiums could accelerate investor purchases and reduce housing affordability for local residents. Councilmember O’Hara, who opened discussion at second reading, said the ordinance’s intent was to diversify housing stock but acknowledged concerns expressed in prior meetings about possible investor prospecting.

What the council ordered Councilmember O’Hara and others secured a council directive — accepted as a friendly amendment and included as part of the council’s action — that requires staff to deliver an annual report analyzing the local effects of ADU condominium mapping and separate sales. The report must, at a minimum, track: - Number of ADUs sold as condominiums - Number of ADUs sold as owner‑occupied condominiums - Average sale price and median sale price of ADU condominiums - Housing affordability indicators, such as price‑to‑income ratios, resident residual income and housing quality metrics - A comparative analysis, if available, using data from other jurisdictions such as San Jose and Seattle

Planning staff confirmed they are able to collect the requested information and will incorporate it into an annual monitoring report. The council voted to approve the ordinance and the appended reporting directive; the clerk recorded unanimous affirmative votes.

Why it matters The council has repeatedly cited the need to expand housing options but members said they also wanted clear monitoring to detect any unintended consequences, such as investor purchases that remove ADUs from local resident occupancy. Councilmember O’Hara said the motion seeks data to determine "whether further action should be taken to limit the potential of investor prospecting."

Next steps Staff will produce the first annual report using available data and return it to Council as directed. If the monitoring shows troubling trends — for example, a high share of ADUs sold as investor condos — the council retains authority to consider further policy options.

No changes to enforcement or immediate compliance deadlines were included in the council’s action; the ordinance text governs the legal changes and the reporting requirement is intended as an ongoing monitoring tool.