I’m not typically one to go on about property owner’s rights vs government(s) ability to control code enforcement and reasonable use of property without infringing on others. I think active involvement in zoning, environmental protection, etc are way too important for market forces only. But when the politicians start butting in without thinking about the unintended consequences it’s time to speak up.
For the last couple years we’ve all heard a lot of complaints about the shortage of affordable home ownership in and around Seattle. At the same time, it’s been a dismal market for landlords as the rental market has been very low. Given that situation, wouldn’t you do what a lot of apartment owners are doing — go condo. Better return for the owner and it increases the supply of available equity housing in the market.
From an article in the Seattle Times, Condo Wave leaves renters battered, apparently State Senator Ken Jacobson believes those evil property owners shouldn’t be allowed to put their real estate to it’s highest best use. Apparently we must stand up for low-rents, tenant rights over landlords and above all no more development. Let potential homeowners look farther away from the city to live — they can afford it. Ok, I’m exaggerating and ranting – but figure out the obvious. They’re not eliminating housing — just switching it to the ownership market.
If you live in Washington State, please be sure to check out the Seattle Times article and contact Senator Jacobson with your opinion on his proposed legislation. A hearing is scheduled for Thursday in the Senate Consumer Protection and Housing committee, so don’t wait.
The real question for me is, “Why is rent so much less profitable than selling?” Or put another way, “Why is it so much cheaper to rent than to sell?”
Of course those apartment owners want to convert and sell. They would be stupid not to in this market.
I am against any sort of regulation in this space. It is my understanding that rent control in the Bay Area is one of the things that has propped up housing prices there for so long.
Robert
Is the Sen. Jacobsen proposed bill SB 5031 ? If so, I am missing the part of the legislation that is prohibiting MF owners from converting to condominiums.
It has been a ‘dismal market’, but that would not describe the current situation locally.
What specifically to you object to in his proposed bill? I read the article a couple of days ago and I don’t remember anything about stopping or preventing owners from putting their real estate to its highest use.
Mark / Herb – Let’s start with that yes, “I’m exagerating and ranting a bit here” as I stated in my post. 🙂 Nothing is actually stopping the development but it would increase the costs signifigantly. Going from there, I am curious to see the actual bill or perhaps one of you can clarify it’s intent.
My comments are based upon the newspaper article (ohh..that’s always a risky option), most specifically the objective of requiring the property owner to delay construction until everyone has moved out. Time is money as the man says, and requiring an owner and/or developer to tie up all their funds in a property and wait until the final day of the final lease is very costly. Most projects all based upon a rolling schedule — as leases expire they start in renovating units and going to market.
So let’s be conservative and say your project is on a 10-unit building at an amazing 6.5% rate with 20% down purchased at the tri-county average of $115K per-unit — your looking at $4900+/mo interest while the building sits there. That’s counting the opportunity cost of your 20% down. I suppose you could argue you are still recieving rents — but that’s going down as tenants move out.
Thank God for the lobbying ability of SKCAR or next we’ll have our own case of eminent domain and have an apartment the city (county) doesn’t want to have torn down taken from the “capitalist” owner and converted to housing for the homeless. That scares the heck out of me.
Converting to condos is only market balance. As one who’s suffered with low rents over the last few years, I’m glad to see the market adjust. I’ve got 4 conversions coming up. Better turn them in before any legislation!
Robert,
I don’t believe that we’ll ever see a bill that allows tenants to live out the lease period in such as way as to financially devastate the owner. I wouldn’t base my judgment on the newspaper article. I do, however, believe that some kind of protection is appropriate for tenants. I can put myself in the shoes of both the renter and the owner. I think at least 60 days notice with something closer to $1000 in move out assistance would not be unreasonable. I’ve talked to a couple of people who have been kicked out of apartments they’ve been living in for many years. Especially for older adults on a tight budget, it’s very tough on them.
I haven’t seen the bill, but I don’t think it’s unreasonable to ask that the developer wanting to convert a an apartment building take into account honoring current leases into the his budget and timeline.
You can always bribe the tenents with a few grand if you want them out earlier, but tenants should have every right to expect the owner, new or not, to honor a lease. I was once tossed out of my apt. 2 months before I was scheduled to move out of town, and it cost me thousands, and untold headache moving twice.
The sort of attitude displayed in this post is what gives developers a bad name.
I totally agree that existing leases should be honored. But restricting any improvements before the “last tenant” is pretty extreme.
As long as it doesn’t cause undue hardship on the tenant, I agree.
People looking to move outside of the city. Maybe they can afford it, but not for long. Depending on the current market in that outside town. My hometown and county is very small but yet we’re in the middle of four larger counties and towns. I wrote a political article on my personal blog a while back about some some of the struggles we’re facing in our town here: http://derekburress.com/greene-county-tax-revaluation-concerns/
Our market is very slow too – not much growth so imagine what will happen if everyone started moving out of the city into the rural areas.
As for the legislation, I am into this political stuff, so keep me updated.
It would be interesting to see what kinds of protections current apartment complex lease documents offer the renters. One of my readers recently had a lot to say about living through the Tobira conversion (as you can see in her comment, she was pretty disappointed).
http://www.seattlecondoreview.com/2006/10/empress_buildin.html
There are several things to say here, but the most important is that this proposed legislation (from what I have read in the media), does far TOO LITTLE to protect tenants. Also, it needs to be statewide, not just limited to Seattle.
FIrst, nobody builds an apartment complex for renting counting on 100% occupancy. If you think that, where were you brainwashed? Did you pass WASL?
Second, the housing market is creating HYPER-INFLATION. So much so that businesses will not see Washington as a “friendly” market. Imagine a minimum wage of $15 per hour to sling hamburgers at McDonald’s so workers can afford a roof over their head.
Look at the President’s comments during the State of the Union address. Finally the government is addressing the issue of affordable Health Insurance since 46 million Americans can’t afford it. Why? More and more low paying manufacturing jobs are being created in the U.S. every day. Our labor costs are substantially cheaper than China and India! NOT !!!!!!
All local companies are hiring recent college grads because they can work cheaper and are more “portable.” If they need to relocate due to lay-offs, etc., then they are the least impacted.
Look what’s happening to California. It’s become so expensive that more people are leaving the state than moving in!!
If anything, the land use laws need to be changed, if that’s causing the “market imbalance.” Economics is about the efficient use of resources, so there has to be something driving up the prices. Yes, there’s the supply and demand mechanism, so something has to be restricting supply. We have never lived in a purely capitalistic society, so comments about capitalism are really null and void.
Also, look at Seattle (and the North Gate area). Townhomes are popping out everywhere and it’s more cluttered than cities on the East Coast (NYC, Boston, Philly). It still doesn’t address the issue affordable housing if you can’t afford to own.
I think this legislation comes far too late and doesn’t address this issue of creating “affordable housing.”
Is there less risk for a builder in popping up an apartment building vs. a condo? Do condo owners have more rights or warranties than a renter? Or to rephrase…does the builder have more of an obligation to the owner than a renter?