There has been a lot written lately about conversions of rental apartment buildings to condominiums throughout the US. However, lately as the condo market has cooled, many conversions are running into trouble [WSJ] and many may ultimately fail to convert. Florida, with one of the most oversupplied housing stocks, is seeing a lot of conversions canceled. These conversions did not gain traction until the housing boom was reaching a mature phase about 2 years ago and by then, in many cases, there was already too much competition.
Washington, DC, has arguably one of the highest concentrations of investor condo unit inventories. Recently, a very large apartment complex that was slated for conversion to condo, will remain as a rental [WaPo]. Another large developer changed a project from condo to rental.
In this week’s New York Times, Josh Barbanel wrote an excellent piece on how the feuding between the owner and the sponsor has helped stall the conversion of a very large rental building in Manhattan. The parties are mired in litigation and recent purchasers were offered significant discounts much to the dismay of early purchasers.
Affordable housing groups in San Diego are trying to stop conversion activity until they are able to address environmental concerns. In other words, stop the development all together until the issues can be resolved.
The sudden burst of coverage of conversions in the media means two things to me:
- the oversupply of new housing, which is one of the key reasons for the slow down
- the fact that a certain element of excitement has left the housing market so there’s not much else to report