Before the current legislative session, Gov. Jay Inslee handed a task to several boards and commissions that report to him to bring recommendations to ease the current housing affordability crisis.
Looming large in the dialogue is what to do about the lack of interest developers seem to have in developing condominiums. The main reason condos have fallen out of favor is the risk of litigation from the homeowner’s association for any variety of liabilities.
A Wall Street Journal feature last year pointed out the significant extra costs a developer must bear to build condominiums over apartments, citing several sources that place the national average at more than $15,000 per unit for insurance coverage alone.
As a local developer put it, there are two kinds of condo developments: Those under lawsuit and those about to be under a lawsuit. Trial lawyers make convincing arguments to condominium association boards that virtually compel them to initiate a law suit before the statute of limitations expires, usually at about 48 months after occupancy. They’ve found a reliable client base and are serving it well.
The result is that developers took their ball and went to play in another game. Over the past five years apartments have tripled in production while condominiums have barely recovered. Some might explain this as a millennial phenomenon. They grew up watching their parents’ homes take a beating in the housing crash during the recession and had no appetite for the same experience goes the theory.
But millennial attitudes about ownership don’t explain the entire difference. It simply costs a lot more to build condominiums and unique legal exposures are the primary reason.
Lawmakers in Texas and Nevada have approved legislation in recent years intended to limit litigation, while a 2015 study in Seattle suggested the city and state explore similar changes to its condo laws.
Politically, such measures pit Inslee against the powerful trial lawyers lobby, a group that has supported his races.
What he and the Legislature are willing to do this year is a big question. Curtailing condo litigation is likely to be high on the list of recommendations and they’ll be confronted with that reality.
The core issues is how to convert land inventory that could be built into condos. Changes in the law that limit lawsuits would no doubt bring some of that land inventory into production and should be carefully considered.
Tom Hoban is CEO of The Coast Group of Companies. Contact him at 425-339-3638 or tomhoban@coastmgt.com or visit www.coastmgt.com. Twitter: @Tom_P_Hoban.
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