Study Finds San Diego Renters Helped By Condo Conversions

Written by Posted On Sunday, 20 March 2005 16:00

One day you're living in an apartment and the next day, you're a homeowner and you never even had to move. That's what is happening for many people in Southern California.

San Diego is among the least affordable cities in the nation to live in, but condo conversions may be helping those who can't afford to buy even a median-priced home, break into the housing market.

In the city of San Diego over the past 13 months, there have been more than three times as many applications to convert apartment units into condominiums, as there have been in the last five years.

"Fortunately, the conversion industry is providing, for the first time in a number of years, affordable housing, and three-quarters of all the people who buy conversion units are former renters. So it's not as if you're subtracting from the housing stock, all you're doing is changing folks from renters to owners," said Alan Nevin, Director of Economic Research for MarketPointe Realty Advisors.

Nevin also pointed out that, according to a recently released study sponsored by First American Title Company, the average person who bought a conversion unit had been renting in San Diego for 15 years, had a median age of 31, and was a first-time homebuyer.

Condo conversions are popping up all over San Diego. But while the increase has been significant, Nevin still says that, "All of them put together in the last ten years have been less than three percent of the rental housing stock."

The conversion process is popular for several reasons, including the fact that the process is fairly simple. In California, the building code is the same whether you're building apartments or condos.

"Normally what is done, is to modernize the building in terms of the appliances and the carpeting. The reality is, that converters don't want to do anything structural because it then puts them in line for construction defect litigation and as long as they just do cosmetics, then they're not subject to the litigation," Nevin explained.

However, since some projects being converted are 25 years or older, some cities are considering stricter building standards to ensure that units aren't sold in poor conditions.

While large projects in areas such as Mission Valley and the University Towne Centre area often make the news, plenty of other smaller complexes with fewer than 25 units are really the majority of conversions.

When a project is converted, Nevin said it helps the entire neighborhood. Typically, renters in San Diego County have a turnover rate of 60 to 70 percent a year.

"The neighborhood generally increases in stature because owners tend to be more stable than renters. It also creates more stability in the school system... If you have a school in a neighborhood that is substantially renters, the odds of having the same kids at the beginning, and the end of the year are pretty bad. In many cases you'll see class turn-over of 50 percent or more during the course of the year, and you can't educate kids that way," Nevin said.

But what happens to the tenants when a condo conversion takes place? Nevin said in the city of San Diego, tenants are entitled to six months' notice and those tenants who are not going to buy must be compensated.

"If you have tenants who are of moderate income, you have to give them a check for three months free rent when they leave," Nevin said.

As few as five percent of renters purchase their converted units, but Nevin explained that many eventually become homeowners.

"They don't buy their own unit, but we also know that they eventually go out and buy someone else's unit. Of all the move-outs in the county from apartments, 25 percent move out to buy a home," Nevin said.

In 2004 about 3,500 units were converted or, are in the process of being converted. So far San Diego has no moratorium in place for conversions, but the city may consider one in the future. Some experts say condo conversions are not only here to stay, but will soon become commonplace in San Diego.

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Phoebe Chongchua

Phoebe Chongchua is an award-winning journalist, an author, customer service trainer/speaker, and founder of Setting the Service Standard, a customer service training and consulting program offered by Live Fit Enterprises (LFE) based in San Diego, California. She is the publisher of Live Fit Magazine, an online publication that features information on real estate/finance, physical fitness, travel, and philanthropy. Her company, LFE, specializes in media services including marketing, PR, writing, commercials, corporate videos, customer service training, and keynotes & seminars. Visit her magazine website: www.LiveFitMagazine.com.

Phoebe's articles, feature stories, and columns appear in various publications including The Coast News, Del Mar Village Voice, Rancho Santa Fe Review, and Today's Local News in San Diego, as well as numerous Internet sites. She holds a California real estate license. Phoebe worked for KGTV/10News in San Diego as a Newscaster, Reporter and Community Affairs Specialist for more than a decade. Phoebe's writing is also featured in Donald Trump's book: The Best Real Estate Advice I Ever Received and The Complete Idiot’s Guide to Buying Foreclosures. She is the author of If the Trash Stinks, TAKE IT OUT! 14 Worriless Principles for Your Success.

Contact Phoebe at (858) 259-3646 or [email protected]. Visit PhoebeChongchua.com for more information.

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