Why Not Condos?

System - Monday, June 4, 2018

One of the most common questions I hear about the Downton Long Beach real estate market is why are all the beautiful new residential buildings in development are apartments and not condominiums. There are many reasons including cost of builder financing, differences in the entitlement process, our tax laws benefiting rental development over condos and of course, the liability associated with the recent wave of construction defect lawsuits are some of the primary causes.

Below is a link to an urbanize.LA article that is probably the best article I have seen describing these factors.

I do think it will be a shame not to see some of these projects become condos. Although condos do often get a bad rap, there are many advantages to having them in our communities. Condos provide the opportunity for homeownership to more people. Condo owners are very likely to be residing in the condominium. Homeownership helps create a higher sense of community as the residents are more invested. Homeowners also tend to stay longer. Individual home ownership, such as in condos, helps keep keeps the wealth that is created remaining in the community rather than to some outside entity or investment fund. Home ownership gives people greater property rights than that of tenants as well as the pride of ownership. There are lots of reasons, so I hope we see some of these luxury "apartments" convert to condos as time goes on.

Many of the high rise condos in downtown Long Beach and along Ocean Blvd initially started out as apartments or at least something other than condos. The iconic International Tower at 700 E. Ocean Blvd. and the Harbor Place Towers at 525 E. Seaside Way both started out occupied with tenants. The Aqua at 388 and 488 E. Ocean was initially slated to be luxury apartments but was transitioned to condos before the sale and is now the largest condominium community on Ocean Blvd and in Downtown Long Beach for that matter. Furthermore, the historic Villa Riviera, the tallest private building in Southern California back at its completion in 1929, was designed to be "luxury cooperative apartments" (a term for condos back in the day) but due to the great depression had to be operated as an "apartment hotel." It was eventually sold individually in the 1960s and now is fully converted to condos. The Ocean Corridor and the rest of Downtown Long Beach have many other similar stories.

In summary, I would like to make a few points. One is that market forces along with government influences are why there is the current rush toward apartments. Developers of these properties are all subject to the same, and that is why they build so much of the same product. However, over time, real estate generally does seem to migrate to the highest and best use. Additionally, condos are all too often given a bad rap. Which is unfortunate, because they are a form of housing that is owned by, at least comparatively, the little guy. They are homes just like Single Family Residence. I would even go as far as saying the residents of condos are the foundation of our cities. So we might as well embrace them and encourage their development.