Wednesday, January 2, 2019

Why so many apartment buildings and no condos downtown?

The Washington Condominium Act is the culprit. It provides certain consumer protections for buyers but inadvertently deters building condos priced for entry-level buyers contributing to our housing affordability crises. The following 2/20/18 article by Jeff Reynolds in "Urban Condo Space" gives an excellent explanation of the Washington Condominium Act and why it's responsible for all the rental buildings in downtown Redmond and elsewhere. Washington state Rep. Tana Senn (D-Mercer Island) said she will reintroduce legislation in 2019 to reduce the risk of developing condominiums. - B. Yoder

"Changes To Washington Condominium Act Must Wait, Legislation Fails" by Jeff Reynolds, 2/20/18 

As reported by the Puget Sound Business Journal last week, the proposed revision to the Washington Condominium Act failed to make it to the House floor by the Wednesday deadline. Let me do my best to explain why this impacts the Seattle [and Redmond] Condo Market:  
Why Was the Washington Condominium Act Created?  [It was created in 1989]
The objective was to protect condo purchasers from developers trying to cut costs by using poor building materials & construction practices. It was also created to raise consumer protection standards. Inadvertently it added a tremendous amount of litigation.
Why Is It A Problem?
  • It limits the amount of non-refundable deposits a buyer has to risk (The amount a buyer must deposit to hold their unit reservation)
  • It creates enormously high per unit insurance premiums that developers have to plan for
  • It allows attorneys to prey on unsuspecting board members and makes them feel personally liable for action
  • It limits new buildings, effectively reducing inventory – which in turn is widening the affordability gap
How Do You Fix It?
  • Focus on affordability (*make this your primary reason for change)
  • Put a cap on attorney’s fees
  • Creating binding arbitration
  • Enforce a right to repair only
  • Change HOA liability to give confidence back to the board
Why Is A Revision To The Washington Condominium Act Being Proposed
To introduce legislation to reduce the risk of developing condominiums. The Puget Sound region is facing an overall shortage of housing and the lack of condos is a glaring issue. If we found a way to modify the condominium act, we could re-introduce smaller, mid-rise condo projects that would benefit those looking for more affordable housing options.
My Opinion
A revision to the WCA is absolutely necessary. Th Washington Condominium Act has inadvertently crippled condo construction and affordability is getting worse with each passing month. I think we have an opportunity to address both quality control and more development. The real question is when. Are we running out of time?
I was pleased to see that the PSBJ included our data again in their article:Developers shielded themselves from the risk by building mostly apartments. The result has been a severe shortage of condo construction. Research by Windermere Real Estate broker Jeff Reynolds last year found there were only five condos for sale for less than $500,000 in downtown Seattle.

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