Condo Craze Fizzles

Condo Craze Fizzles

Condominium conversions slow as rental properties become more attractive.

The craze began in December 2003 like a shock wave — 492 rental properties would be going condo. “Conversion” was the word, but eviction was the effect for many renters who were unable to buy. By May 2005, the city of Alexandria lost more than 2,000 rental units. For many in Alexandria, the experience was difficult.

“It really caused a lot of turmoil,” said Melodie Barron, a division chief in the Office of Housing. “Housing in this city is not cheap, and people were told they had 60 days to make a choice.”

In March 2005, renters at the Alexandria Apartments on Reynolds Street were given an option — buy one of 344 condominium units or move into one of 1,524 rental units in a new project known as EOS 21. By the time that Park Center registered with the General Assembly to go condo in September 2005, residents of its 574 rental units faced a stark choice: buy or move. Some of them posted comments on an apartment-rating Web site that fosters communication between apartment dwellers.

“I was not told about condo conversion,” one Park Center resident wrote. “If I knew, I wouldn’t have moved in.”

THE CONDO CRAZE in Alexandria converted more than 3,000 units in less than three years. But less than eight months after applying to go condo, Park Center scrapped its condominium project — opting to revert its property to rental apartment units. Some officials at City Hall see Park Center’s retreat as a sign of future trends.

“We probably have come to the end of this wave,” Barron said. “This also happened in the late 1980s when several condo projects were shelved.”

Urban planners say that housing trends are cyclical, with supply and demand forming peaks and valleys over the decades. To illustrate that point, Ralph Rosenbaum — a demographer in the city’s Department of Planning — turns to a listing of “residential properties authorized” from the city’s 2005 statistical profile. It shows several prominent peaks in the mid-1960s, the mid-1970s, the late 1980s, the late 1990s and our recent spike.

“Is Park Center a bellwether?” asked Rosenbaum. “It’s tough to say. Sales have certainly slowed, but housing trends could also be influenced by interest rates and prices.”

According to the Department of Planning, the city has 1,518 condominiums that are under construction, 320 condominiums that have been approved and 2,349 potential condominiums that are under review. The future may see some of these projects reconsidering their development strategies. As early as last summer, Deputy City Manager Mark Jinks predicted that Alexandria’s market would be experiencing a slowdown.

“I think you’ll see a lot of these condo conversions becoming rental properties,” Jinks told City Council members at last year’s annual retreat.

THE GROUND RULES guiding the conversion process are laid out in the Virginia Condominium Act, which was passed in 1975 and was signed into law by Gov. John Dalton. It was a response to the condo conversion craze of the mid-1970s, when state leaders were looking for a way to exercise some control over everything from maintenance to parking to bookkeeping.

“There’s nothing worse than a condominium owners association trying to decide who gets to sit on the board of directors,” said Frank Mann, who represented Alexandria in the General Assembly at the time. “What do they know about maintenance?”

The act sets standards for a “horizontal property regime,” also known as a “condominium project.” Mann said it was designed to give the General Assembly broad control over maintaining public health, fighting traffic congestion and coordinating comprehensive planning. The bill’s language was scrutinized closely by then-Democrat Party chairman Bill Thomas, a veteran Richmond lobbyist who is now represents the Virginia Homebuilders Association.

“It was really long and complicated — something only a lawyer could love,” said Mann, who voted for the bill. “The legislature decided, and I think correctly, to lay some ground rules.”

FOR RENTERS, the craze is a threat to their ability to live in Alexandria. During the spring campaign, Councilman Ludwig Gaines spoke about this issue frequently during the spring City Council election season. In some of the most passionate language of the campaign, Gaines decried the loss of rental units.

“The moving vans are already here,” he said at one forum. “We are losing a vital part of Alexandria as each one leaves.”

According to a recent study of the issue by the Office of Housing, afford ability is still the main barrier to ownership. Last year, the condominium assessments increased by 23 percent — with the average condo going for $287,765. The Office of Housing estimates that a family would need to have an annual income of $86,627 to afford that kind of a purchase.

“While individual circumstances vary, for most current residents, the cost of purchasing will entail a substantial increase in monthly housing payments above the cost of renting,” wrote City Manager Jim Hartmann in a May 18 memo on the subject of condo conversions. “The low inventory of for-sale homeownership units and the continuing competitive sales climate in the city add to the difficulties that first-time homebuyers face.”

Those who advocate for the rights of renters say that a potential slowdown in the condominium market could be a good thing for those unable — or unwilling — to purchase in the event of a conversion. Annabelle Fisher, a longtime renter, said that she thinks city leaders should pay more attention to apartment dwellers.

“Renters pay property taxes for the owners of apartment buildings, and I often feel frustrated when our local elected officials leave us out of the equation as if our tax dollars mean nothing,” Fisher said. “For those building owners who have decided to delay condo conversion, the question is this: When do they plan to attempt a conversion again?”