Condo Conversions May Be Slowing
The recent craze for converting apartment buildings to condominiums, which is drawing political heat in Los Angeles and elsewhere, may be slowed by market forces before City Hall has a chance to act.
One possible indication of a coming slump was the number of people willing to pay $1,800 for investment advice on the topic. Only about 50 signed up for a two-day West Coast Condo Conversion Conference, sponsored by the New York-based Information Management Network and held at the Hyatt Regency Century Plaza.
“Even six months ago, this room would have been packed,” said Delores Conway, director of the Casden Forecast at the USC Lusk Center for Real Estate, as she glanced around at dozens of empty chairs in the chilly auditorium.
With interest rates up, real estate prices stagnating and many new condo units coming on the market, the easy money possible for conversions two years ago is a thing of the past, Conway said. “The whole market has slowed down. The speculators are gone,” she said. “I think condo conversions are always the last part of the cycle.”
On the ground, the picture looks very different. Projects that have been in the pipeline for months or even years are now underway, pushing large numbers of renters out of their apartments. Los Angeles Housing Department records indicate that conversions have taken at least 11,000 rental units off the city’s market in the last five years.
Tenant advocates are lobbying for a moratorium on the practice.
“It doesn’t take a mathematician to see that we can’t possibly build enough affordable housing to keep up with what’s being destroyed,” said Larry Gross, director of the Coalition for Economic Survival, which formed around the successful push for rent control in 1978.
Gross organized a protest outside the conference Thursday morning, which drew more than 100 community activists and tenants, some of whom face eviction.
“I just got a notice two weeks ago that they’re going to tear down my building to put up condos,” said Gary Watts, a Screen Actors Guild member who has rented the same two-bedroom in Studio City for 15 years. Because of the city’s rent-control laws, he pays $950 a month, less than half the market rate. He said he can’t afford to buy the renovated condominium, which the letter said would sell for about $500,000.
Protesters carried colorful umbrellas to symbolize what they called a storm of apartment evictions, and chanted slogans that were shouted over a bullhorn. None of it reached the conference, which was held two floors below street level. Still, panelists made many references to “the folks outside.”
Some panelists cited such protests as a prime reason why many converters have avoided Los Angeles in favor of San Diego, where twice as many apartments have gone condo in recent years. Other hot spots have been Phoenix, Las Vegas and Miami.
“In L.A., we wouldn’t touch a condo conversion because of the political climate,” said Lawrence Thompson, assistant general counsel of Lennar Homes and a panelist.
Chris Christensen, founder and president of Condoconversions.com, which is based in San Diego but has projects in Los Angeles, said he prefers to engage. He spoke at hearings in Los Angeles last spring, opposing the idea of a moratorium.
Christensen, who spoke at the conference, walked out to the sidewalk to meet the chanting protesters. Later, he took issue with their argument that conversions destroy affordable housing.
Many converted condos are bought by former renters -- who are then better off -- and holding the line on conversions will do nothing to create affordable housing, he said.
“The folks outside today want to do nothing,” he said. “It’s not really a solution.”