Several people have asked me why I haven’t said anything about condo conversions today. With all the controversy over condo conversions, they asked (some more politely than others), why haven’t I taken this opportunity to shed some light on the issue? The market’s recent downward spiral has taken the wind out of the converters’ sales (pun intended!), leaving not much for this condo-conversion opponent to talk about. But frankly, there’s nothing to say about the pro (I mean “pro” to be singular) and cons (shorthand for “oodles and oodles of bad aspects”) of condo conversions that hasn’t already been said, and I abhor redundancy. If I didn’t, however, I would say something like this.

(Remember: My writing today reflects my beliefs and has no necessary connection to the truth; any resemblance between what I believe and the truth is purely coincidental. Also keep in mind that I represent the parties suing the city of San Diego and umpteen developers over condo conversions. My beliefs do not apply to the few developers who are fixing up their complexes responsibly and dedicating an adequate number of units for sale to persons who truly qualify for “affordable” housing. I salute those two or three.)

In this last market boom cycle, San Diego’s condo conversions have been largely low-quality real estate that investors bought in order to turn a quick profit. For the most part, they bought run-down apartments, threw on a coat of paint and made other (superficial) “improvements” – condo-converter jargon for lipstick on a pig – and sold them at unconscionable prices to first-time buyers who were so desperate to own a piece of the American dream that they signed a pact with the devil; more precisely, they borrowed money on terms that soon enough they’ll be unable to meet without winning the lottery.

There are lots of people who should be ashamed of themselves for all the harm that they’ve caused during this last cycle – harm that has not yet fully manifested itself. First, there are all the real-estate brokers and advisors who urged mom and pop (the majority of converters were middle-class individuals with little or no experience in real estate) to take out all the equity in their homes or to cash in their retirement accounts to buy apartment complexes that could be fixed up quickly and cheaply and flipped for a substantial profit. Notably, many of these brokers and advisors didn’t buy complexes to convert themselves. Nor did they tell their unassuming clients about the unsustainable number of conversions taking place throughout San Diego – a number to which the commission-churning brokers and advisors were directly contributing – or about how the law of over-supply would cut into the marketability-and hence the profitability-of converted condos. The brokers and advisors just kept pushing their clients to jump on the “Who Wants to Be a Real-Estate Millionaire?” bandwagon.

Second, there are the hostile-to-the-public-interest bureaucrats at City Hall who work for the developers – OOPS! I mean the civil servants who protect the public by making sure that condo-conversion applications meet all legal requirements. If you sit down and talk to them, they will tell you until they’re blue in the face how much they hate condo conversions, not just because of all the paperwork they create for the bureaucrats but because – and this is classic! – too many condo conversions are a bad thing.

Indeed, these folks have known for a long time that condo conversions turn affordable rental housing into short-term affordable ownership housing (I say “short-term” because the owners won’t be able to pay for their exotic home loans once the interest rates start to soar), and yet there has been no new affordable-rental-housing construction in the city for years; in fact, the city council routinely declares an affordable-housing “state of emergency” because of the ever-dwindling supply of affordable rental housing. The bureaucrats have known that condo conversions force renters to move farther away from school and work, thereby increasing commute times and traffic, air pollution, and fuel consumption; if you don’t believe me, just read the last several drafts of the city’s proposed housing element. The bureaucrats have even known that many of the renters living in older apartments on the conversion block have been exposed to asbestos. So many asbestos violations have been issued to converters since 2004 that the county had to initiate a special public-education campaign to teach them that asbestos exposure could be deadly; the only conclusion here is that the city bureaucrats, busy facilitating the conversion of nearly 1,000 apartments per month for over 30 months, were just too busy to give a damn about that little killer known as asbestosis. And then, of course, there’s the impact of conversions on the scarcest of scarce resources in San Diego: parking. The city conducted a study concluding that there is more demand for parking with market-rate housing (i.e., converted condos) than there is with below-market rentals (i.e., affordable apartments). When I reminded the bureaucrats of that conclusion during a public hearing earlier this year, they responded by saying that the study should be ignored for the simple reason that staff disagreed with its conclusion. (Now, if you’re thinking that their reason is really lame, you’re right. The only thing lamer was the deer-in-the-headlights look on their face when they voiced that reason.) One would think that, if the folks at city hall really thought that too many condo conversions is a bad thing, they would not have waited more than two years to enact regulations (that barely begin) to address the problem.

Lastly, there are the converters themselves. If I had a dollar for every converter who has told me over the last year that his or her project was good for affordable housing, good for the neighborhood, or good for consumers, I could have retired already. To hear them tell it, condo conversions are a good thing because ownership improves the quality of neighborhoods and because conversions create “affordable” – they really mean “less expensive” – ownership opportunities. On the first point, I’m suspicious because apartment complexes sold to converters were obviously owned by someone before the converters. If the quality of neighborhoods is a function of ownership, why did the apartment complexes fall into disrepair in the first place? Perhaps it’s a function not of ownership in general but of home ownership. If that’s true, then it presupposes that the owners will have enough money to maintain their homes in the future. That’s doubtful, given the (exotic) nature of the loans that new owners used to buy their converted units and the major structural repairs that the owners will soon face. On the second point, converters are wrong because housing in general is more important than home ownership in particular. Surely there is some good in providing wanna-be homeowners with cheaper ownership opportunities (this is the one “pro” to which I alluded above). But in a city where there has been a long-running affordable-housing state of emergency, forcing low-income renters to compete for the fewer and fewer apartments in their price range so that people who already have a (rental) roof over their heads can own their own roof is outrageous and immoral.

In sum, condo conversions are twice problematic: they provide an inferior-quality housing product to owners with insufficient financial resources to make the expensive repairs that are sure to become necessary after escrow closes; and they have lots of adverse impacts on our community, not the least of which is making the affordable-housing shortage much, much worse.

The irony that I hope won’t be lost in all of this is that, had the city slowed down and studied the potential adverse impacts of condo conversions before rushing to approval, the rate of conversion would have been substantially reduced and steadied and the converters wouldn’t be looking at their own greed-induced insolvency. Unregulated markets are anything but fool-proof or villain-proof. Not surprisingly, San Diego’s unregulated condo-conversion market over the last few years has seen no shortage of fools and villains.

But since everybody pretty much knows all of that, I didn’t see any reason to take up space repeating what by now is common knowledge. What’ll be fun, of course, is reading all the responses from condo-conversion apologists and defenders and from those who aim to bring my beliefs in line with the truth.


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