Condo Conversions: Cousin Mikey And The Development Cap

I just received a call from my friends’ cousin Mikey, who was planning to move into my basement in the wake of a condo conversion in his apartment building.

Cousin Mikey, I just found out, isn’t moving in after all. His landlord informed him and the other 100 tenants in his downtown pre-war apartment complex that they could, in fact, keep their homes. The developer changed their mind, deciding that condo conversions are just too saturated in this market.

Apparently Mikey isn’t the only one living with the tug of war between tenants and developers.

Seattle’s real estate market has seen condo conversions drop sharply since a peak in 2006 because of changes in our housing market, including demand for rentals, housing costs and developers’ ROI.

This week, the House is considering a bill that proposes three things for Washington state:

  • Developers must give tenants 180 days notice prior to development and are not allowed to start construction during the notice period.

  • Monetary assistance would be granted to qualified tenants--qualifications would be determined by the tenants' earnings. Developers would have to pay tenants up to three times the monthly rent to cushion moving out and into a new building.
  • Local governments would be given the faculty to put a cap on the number of apartment/condo conversions in the city.The city of Seattle is supporting this legislation.

I’d like to make one point clear before discussing this any further. I agree with the first two proposals. It’s the last that I take issue with, and it’s the last that deserves serious discussion.

Seattle is notorious for being one of the most expensive cities in the U.S. in which to buy real estate. It’s also one of the best cities in which to live, in my humble opinion, but still one of the most expensive.

Why, then, would our local government seek to put a cap on how many condominiums the city can build/convert? Because, in their minds, the city needs to stabilize the increase in development and give the market back to renting tenants who cannot afford to buy.

I suppose I see both sides of the argument, but as a single girl living in the city, if the condo shoe fits, I’ll wear it--just as soon as I find that right shoe. Er, condo.

What happens to the person who enjoys the benefit of home ownership but doesn’t want to move to the suburbs? Or can’t afford to buy in the suburbs? They are stuck renting.

There is a huge and stable market here for (semi) affordable homes among gen x and gen y-ers alike– and those (semi) affordable homes? They are condominiums, not single family suburban residences.

Investors should keep a close eye on this legislation because if the local government adopts this cap, it will not only affect landlord/tenant state laws, but limit the amount of properties available to purchase.

But, good for Cousin Mikey. And, good for me. I mean, I’m a Led Zeppelin fan, but...c’mon.

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4 comments:

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