Comparison of Condo Conversions of Canada Versus Ocean Beach and San Diego

by on October 1, 2014 · 3 comments

in California, Civil Rights, Economy, History, Ocean Beach, Politics, San Diego

OB Dist 2 Quigley

The 4 units in the Quigley Building at 5151 Long Branch Ave. were approved for condos by the OB Planning Board .

Originally posted Oct. 1, 2014

Editor: Marc Snelling – a former member of the OB Planning Board, does a comparison between the history of condo conversions in OB and San Diego with Canadian cities.  He currently lives outside Ottawa.

By Marc Snelling

Ten years ago San Diego was among the national leaders in condo conversions.   Lack of City regulation combined with speculator greed resulted in a rate of condo conversions that threatened families and renters.

Condo conversion proponents invariably tout the supposed benefits of owner occupancy and the lower cost of a condominium versus a detached home for first-time buyers.    They are also just as sure not to mention the inconvenient fact that renters need to be evicted to make a condo out of an apartment.

The owner-occupancy argument is dubious as many condo owners do not live in the properties but turn around and rent them at a higher rate.    The end result is less affordable rental housing in a market already among the most unaffordable in the country.

Now with San Diego’s rental vacancies at their lowest rate in a decade, condo conversions continue to be a controversial subject.  Demand for rental property has pushed San Diego’s vacancy rate below 3% – a rate at which many North American cities place a moratorium on condo conversions.

For comparison, two of Canada’s hottest real estate markets Ottawa and Vancouver are among them.  Ottawa does not allow condo conversions when the city’s rental vacancy rate is below 3%.  Vancouver municipal laws prohibit condo conversions of buildings of more than four units when vacancy rates fall below 4%.  Montréal has long banned divided-ownership condo conversion, requiring a variance for any condo conversion project.

OB Saratoga 4725-27 front

These units on the 4700 block of Saratoga are up for condo conversions.

The condo conversion debate dovetails with the issue of gentrification.  Montréal in particular continues to see many battles over condo conversions and gentrification.  Some neighborhoods such as St Andre Street have seen properties available for rent drop from 93% to 35% in the last twenty years.

Long-term residents who have been displaced to achieve this number do not always go quietly.   Billboards for new condo developments have been spray painted with anti-capitalist slogans, and occasionally things have become more heated.  Windows of upscale restaurants were smashed in the upscale Hochelaga-Maisonneuve last year, and in 2004 a series of packages disguised as bombs were placed in an east end Montréal condo development under construction.

How you feel about gentrification depends on where you stand.  The word gentrification comes from gentry – the land owning manor and estate “high-born” class of England – a group to whom land ownership was a birth-right and whose income derives from land holdings.  Although the word gentrification is a French-derived word, the term the French use today is embouregoisiement.  Same thing but substitute Bourgeois for Gentry.

San Diego has not seen this level of opposition to condo conversions.  But even in real-estate happy San Diego the unchecked pace of pre-bubble condo conversions raised eyebrows.  As early as 2004 alternative San Diego publications like La Prensa were drawing attention to the problem.  Developers and investors continued to tout the supposed pot of gold available by converting old apartment buildings into condos.  The ‘wisdom of the market’ was the only regulation condo conversion proponents saw as necessary.

The San Diego City Council and Planning Commission rushed to push along the approval of the condo-conversion wave.   The few voices of reason were brushed aside in the rush to cash in.  By 2005 condo conversion projects were being consolidated together by the dozens to accelerate approval.

On July 24th, 2006 the City Council voted to approve 75 condo conversion projects (many in OB) in a single session by a vote of seven to one.  The lone vote of reason was then Councilwoman Donna Frye.  However, others spoke out.   Lori Saldaña, then 76th District Assembly woman, noted that “the City failed to do a study of the impacts” quoted in a Peninsula Beacon article.

At the same City Council session, attorney Cory Briggs made an appeal that these projects should be subject to environmental assessment and evaluated for their impact on issues such as affordable housing, parking and more.   Briggs’ appeal was denied on a motion from then Councilman Kevin Faulconer and seconded by then-Councilman Scott Peters.

A year later another effort to regulate condo conversion made it’s way to City Council with a proposal to limit the number of  units that could be converted in one year.   The measure failed by a vote of 6-2, with Donna Frye and  then CouncilwomanToni Atkins voting for regulation.  Then Faulconer refused any checks or balances saying he could not support any amendments to existing regulations (or lack thereof.)

Despite City inaction the so-called wisdom of the market would soon solve the problem on it’s own.

The unchecked pace of conversions and a weakening real-estate market saw the number of unsold condos sky-rocket.   By 2007 those who had bought condos within the last few years owned properties that were worth significantly less than what they had paid for them.

Downtown San Diego in particular accumulated a glut of unsold condos resulting in nearly $100,000 price cuts on the units only a year old.  Many units went back to rentals as the demand for condos evaporated.  But not before the renters in converted units had to worry about where they would live after they were pushed out for the condo owners that never materialized.

Condo conversions in OB were an especially dubious prospect.  Many of the ‘condos’ were many decades old apartment buildings of questionable quality.  Granite counter tops and stainless steel appliances were the only thing new about them.  This fact led some to question whether the foundations, plumbing and other infrastructure of these buildings would survive for the length of the mortgages on the condos themselves.

Even with all the owners who ended up underwater on their condo investment in the early-mid 2000s, there are those today who are hoping for a return to the easy money of the condo craze.   Yet downtown has not seen a new condo project started in over a decade.   The lack of will from City politicians to regulate the condo market contributed to 42 of the 57 downtown condo projects started between 2000 and 2007 ending up in court.

Will cond0 conversions in OB eventually result in a steep loss of rental stock like in Montréal’s St Andre Street neighborhood?  Or will condo conversions simply be re-rented as more expensive units or vacation rentals?  The answer remains to be seen as projects continue to be reviewed by the OB Planning Board.

{ 3 comments… read them below or add one }

Christo October 1, 2014 at 1:09 pm

“This fact led some to question whether the foundations, plumbing and other infrastructure of these buildings would survive for the length of the mortgages on the condos themselves.”

Given the age of any building in OB, it is unrealistic to think you are going to get 30 years without infrastructure work/improvement/replacement.

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OB Joe OB Joe October 1, 2014 at 4:56 pm

Marc, great summary and comparison, thank you. I had thought – based on some of what you recounted – that the issue of condo conversions was over. But apparently not.

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South OBcean November 5, 2015 at 4:20 pm

Have you considered that some of these buyers were former renters? Isn’t that the point? I think the risk to renters here applies whether it’s a conversion, a sale, a remodel, etc. Point being, the renter is at the mercy of the owner. I was booted from my last 2 places due to the home being sold. My friend has had to relocate twice in 2 years for the same reason. It motivated me to finally buy…. which displaced a renter! Honestly the renters circa 2005 where better off. I lost my azz buying a house during the crash. Rent prices are far more stable than sales prices because they are based on supply and demand. A housing unit changing hands does not change the housing supply.

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