Renters feel the squeeze as more apartments convert to condos

Published 9:45 am Sunday, June 17, 2007

Anna and Lawrence Knight thought they had found home at the Park Place Apartments.

The small complex was situated in a quiet, evergreen-filled Edmonds neighborhood. It offered good schools and a grocery store within walking distance. The neighbors were friendly, and the rent at $820 a month seemed reasonable.

Then, a few months ago, things began to happen.

The building was sold, and the management changed. Surveyors sized the property. Neighbors began to whisper and worry about the building turning into condominiums, something they had seen happen to nearly every other apartment building in the neighborhood.

Then came the notice to vacate: Their 48-unit apartment complex was going condo.

It’s a familiar story in Snohomish County, where conversions have exploded during the past few years.

In 2002, a single, 24-unit apartment building was converted in the county. Last year alone, more than 1,500 apartments were converted, according to Dupre + Scott Apartment Advisors, a Seattle research firm that tracks trends in real estate. Those numbers don’t reflect smaller buildings with less than 20 units. There are about 33,000 apartments in the county, according to the firm.

It’s a regional trend affecting King and Pierce counties as well, with a total of 7,000 conversions last year in the three-county area.

“A really big year (for that area) used to be 1,000 units,” Scott said.

The conversions are a mixed blessing for people living in Snohomish County.

More condos mean more options for people who want to buy but can’t afford a single-family home, especially since converted condos are often priced less than new ones.

Conversions also shrink the number of apartments available, making it harder to find a place. And they can drive up rents by increasing demand.

The conversions take a toll, too, on the people who live in buildings slated for conversion.

The Knights, for example, said they had to suffer through months of remodeling.

As their building emptied around them, construction workers began pulling out dated appliances, stripping molding and flooring, replacing windows and working on the roof. The constant noise made life unpleasant for Anna Knight, a stay-at-home mom.

The remodeling debris made it dangerous, the couple said.

“It is horrible,” Anna Knight said. “They tore everything down and threw it all in the walkways. There was debris everywhere: garbage, nails, broken glass. They have no concern or respect for the people still here.”

Lawrence Knight, a union carpenter, said he can’t understand why he is protected from these conditions on his work sites, but it was OK for his family to have to live through them. He said he could do little more than complain to the manager.

The Knights also had to bear the costs of finding a new home and paying to move.

Condos as starter homes

The conversions are happening partly because many people can’t afford to buy anything else.

The median price of a single-family home in the county reached $375,808 in May, according to the Northwest Multiple Listing Service. In comparison, the median-priced condo in May was $259,950.

“There are a large number of would-be homebuyers that recognize they can’t afford a single-family home,” said Glenn Crellin, director for the Washington Center for Real Estate Research at Washington State University. “They know they want to accumulate equity and get out of the rental market and the only way to do that realistically is to buy a condominium as a starter home.”

While housing markets in other areas of the country might be cooling, demand for homes remains strong in the central Puget Sound area, Crellin said. Lots of jobs, a growing population and not enough new homes are fueling the demand.

Those are some of the same factors driving down vacancy rates and pushing up rents. But the No. 1 reason is condo conversions, said Mike Scott of Dupre + Scott. That’s true even though about one in five conversions becomes a rental, he said.

As conversions have picked up speed, vacancy rates have plummeted, according to Scott. In March, 4 percent of county apartments were available. Before the rush of conversions in 2003 it was 9 percent. Today’s vacancy rate is not the lowest the analysts have seen in the last 20 years, but it’s close.

Today, the average rent in the county is $854, nearly $100 more than two years ago. The analysts expect rent to increase another 20 percent by the end of 2009.

The top areas by ZIP code for conversions since 2000, according to Dupre + Scott, were:

* Lynnwood (98037) 741 apartments.

* Mill Creek (98012) 528 apartments.

* Everett (98204) 511 apartments.

Companies work quickly

During the past three years, large companies specializing in conversion have mostly taken over what used to be done by local “mom and pop” companies, Scott said. Larger companies, bankrolled by national and international sources, can handle bigger projects and get them done faster.

The most active converters in the county are Mosaic Homes, with offices in Seattle, which converted 1,100 apartments in the last six years, and California-based Legacy Partners, which converted more than 800 apartments.

The Seattle Displacement Coalition began keeping track of condo conversions in 2005 after renters inundated the office with calls, said spokesman John Fox.

“This is wreaking havoc on working-class and low-income people,” Fox said.

Renters complained about inadequate notice and buildings being remodeled around them. They asked for help finding housing and moving, he said.

A bill introduced in the Legislature in January would have helped by lengthening the required notice to 120 days, delaying construction until everyone moved, and requiring relocation assistance.

The bill never made it through the Legislature, although it’s likely to resurface, said Sen. Ken Jacobsen, D-Seattle.

Edmonds is the only city in Snohomish County to pass an ordinance requiring owners to help displaced tenants. It requires converters to provide $500 to lower-income tenants.

Fox said legislators have promised his organization they’ll begin work on another bill for next session.

Whatever happens, it will be too late for the Knights.

The family could have bought their converted apartment for $243,000. But they chose to buy a home in the Arlington area about 50 miles north of Edmonds.

It will be a long commute, but the Knights said they can’t afford anything closer.

Reporter Debra Smith: 425-339-3197 or dsmith@heraldnet.com.