The current housing boom has been uniquely void of condominium development, a category that has historically been a meaningful component of the supply chain in other recovery cycles. This is a feature that has affordability advocates and policy makers concerned.
There are signs that things could be changing with big investors from around the country backing condo developers in Seattle and Bellevue for the first time since the 2008-09 crash. A deeper look, though, reveals that it’s not really great news for those seeking affordable housing on their journey through the housing ladder.
That’s because most developers are targeting high rise condos in the $500,000 price range to well-paid millennials with urban lifestyle needs. At that price point, it seems there’s enough room for developers to cover the added costs they must reserve for litigation and insurance coverage to defend themselves against the near certainty that they will be sued for construction defects by the condominium owner’s association once it takes over control of the building. Land and rising construction costs are another contributor.
Designed with good intentions, Washington’s Condominium Act almost encourages condominium associations to start a lawsuit within the first few years after change of control whether they can identify real construction defects or not. Legions of lawyers and experts have emerged over the years to occupy this space, too, so the environment for most developers looks pretty intimidating. Instead, they’ve opted to build apartments.
Curiously, affordability advocates are siding with developers and trying to coax them back into the game. How to modify and balance the condominium laws or develop new strategies that encourage condo development in the $250,000 to $400,000 range is still the challenge.
Unfortunately, there’s little energy at the state level to make modifications to the condo act, so unless there’s a major influx of land supply zoned for this use, suburban communities like Snohomish County will see little in the way of condo supply under the $500,000 price point in the near future.
Tom Hoban is CEO of The Coast Group of Companies. Contact him at 425-339-3638, or email@example.com or visit www.coastmgt.com. Twitter: @Tom_P_Hoban.