March 12, 2006
Time's right for apartment owners to consider condominium conversions
By Brian Miller and Karl Dumas
While some media reports indicate a cooling in the overall Bay Area's rip-roaring housing market, this may be less true in Solano County, which continues to see strong housing price appreciation.
Of course, the increased prices have impacted some households' ability to purchase housing.
These higher real estate prices are now, however, combining with a looser rental housing market to encourage apartment owners to consider converting some of their rental units into condominiums.
"Condominium conversions" basically change the legal status of apartments from rental units to condominiums. When an apartment is converted, the property owner creates a legal parcel map on the property, which creates a unit which can be sold to individual buyers.
Condominium conversions have both positive and negative implications for the city's housing market.
Condominiums can provide an entry to homeownership for families priced out of the single-family market.
New homeowners can help strengthen a neighborhood by adding people with a direct financial stake in where they live.
At the same time, rental housing is the primary housing supply for lower income and even some moderate-income households in Fairfield. If the rental housing stock declines over time, the affordability of the overall Fairfield housing market will also decline.
The city has had a condominium conversion ordinance for years, but it has been rarely used - until this past year.
Last year, one large apartment complex, Rolling Oaks Apartments on Lyon Road, initiated the condominium conversion process. As a result, city staff are suddenly getting multiple telephone calls from property owners also interested in pursuing conversions.
One factor in this new interest is that Fairfield has seen little development of new condominium complexes during the past twenty years.
As reported in the past, liability and insurance issues have contributed to an inability to develop multifamily ownership housing. It is only now, after the 10-year time period for construction defect lawsuits has expired that prices have risen, and the market has improved for multifamily ownership units that property owners of condominiums with existing legal maps choose to sell their units.
This turn in the market can be seen in the case of several older apartment complexes, which were originally legally mapped as condominiums but kept on the rental market (for 20 years in some cases).
Casa Del Prado, located on Pennsylvania Avenue just north of Westfield Solano mall, sold all of its rental units as condominiums last year.
Redwood Villas, a small 32-unit complex on Tabor Avenue, is currently selling its units. It is our understanding the owners of an apartment complex on North Texas Street near the former Mission Village Center may be selling their units as well.
Converting a rental apartment complex to condominiums is a somewhat complicated process. Governed by Chapter 25, Article IV of the Fairfield City Code, condominium conversions must meet a variety of requirements, including legal requirements, building conditions, site amenities, parking, establishment of a homeowners' association, tenant assistance programs, and adequacy of utilities. These requirements include payment of the city's standard impact fees for parks and recreation (Quimby fees). One recent condominium conversion application would have been assessed more than $4,500 per unit upon conversion.
Given the increased interest in condominium conversions, the city of Fairfield is currently reviewing its condominium conversion ordinance.
The ordinance will potentially address several topics, including the reservation of affordable units for sale to low and moderate-income households. Other issues include ensuring that condominium conversions occur only after the condition of the buildings are fully assessed, that a plan is in place for funding adequate repairs and maintenance, and that professional management be in place.
With these changes, condominium conversions can be an appropriate way of providing ownership housing opportunities while ensuring that affordable housing units remain available for our low and moderate-income households.
Economic Notes is an update from Fairfield City Hall written by Brian Miller and Karl Dumas of the Fairfield Planning and Development Department. They can be contacted at 428-7461 or e-mail at firstname.lastname@example.org or email@example.com.
Monday, March 13, 2006
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