Condos: affordability or quality construction? You can’t have both

By Deborah Goonan, Independent American Communities


The housing market is having somewhat of a correction in the last decade. Developers are building far fewer condominiums, especially those priced for first-time homebuyers.

Instead, in Washington State, as in Colorado and other states, there are plenty of apartment buildings cropping up, but hardly any condos.

Developers say the reason is because current state laws make it too easy for condo associations to sue over construction defects. That, in turn, raises insurance costs during construction, driving up the sale price of condos in order to preserve the builder’s profit margin.


Law meant to protect Wash. homeowners instead pushing up condo prices

In a housing market rife with new apartment complexes, there is an extremely short supply of condominiums being built and sold.

Puget Sound developers point to substantial risk in building condos, due to the Washington Condo Act, a risk that does not exist for apartment development.

Short Supply:

In 2015, the only condo project built in Seattle was Insignia, a large two-tower building with 469 units, according to the King County assessor’s data.

But there were no condos built in Seattle at all going back to 2011. In the past five years in King County, condos have made up fewer than 4 percent of multi-family construction. The rest are apartments.

In the search for ways to increase the supply of all housing in the area, some developers have suggested that the Revised Code of Washington needs to be changed, in the way that it describes a condo warranty.

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So what does Washington statute require of builders?

It states a condo must be:

(a) Free from defective materials;

(b) Constructed in accordance with sound engineering and construction standards;

(c) Constructed in a workmanlike manner; and

(d) Constructed in compliance with all laws then applicable to such improvements.


Does anyone with common sense see these as unreasonable conditions? What consumer would knowingly and willingly make the biggest investment of their lives on a condo that does not meet standards of safety and good workmanship?

Attorneys for developers call these standards “vague and uninsurable.”

Consumers say it protects them from buying shoddy construction, and that the current law helps condo owners who have already been saddled with hastily and cheaply built condos.

But you can bet that most of these reports are prompted by home builder lobbies, in an effort to gain sympathy and to pressure legislators to back off on regulation of construction standards.


Buyer Beware

At heart, this is the standard home buying consumer’s dilemma: what’s more important, a low purchase price or good quality, safe construction? In the long run, homeownership is not affordable if you have to shell out thousands of dollars to fix structural or mechanical problems, or, worse yet, to pay for medical bills related to defective products and poor workmanship that results in illness or personal injury.

What consumer ever wants to deal with the nightmare of Chinese drywall, defective plumbing, poorly applied stucco, resulting mold infestation, or even landslides?

When I see reports such as this one, I wonder why any housing and real estate policy makers would consider it reasonable and ethical to sacrifice health, safety, and long-term fiscal stability for the sake of keeping new construction prices artificially low.

If developers cannot afford to build it right, then they ought not to build it at all. If that means that first time home buyers have to delay purchase or buy an older home and fix it up instead of buying a brand new home or condo, so be it.


Tenants Beware, too

Here’s something that’s not often reported or discussed.

Developers are building apartments rather than condominiums, to avoid high insurance costs brought on by lawsuits over poor quality construction.

Does it follow then, that apartment buildings are being built to lower standards, because their construction is less regulated than condominiums?

Tenants need to think about that the next time they sign a lease. After moving in, will they have to deal with water leaks, mold problems, poor soundproofing between apartments, or absence of firewalls? Sometimes a tenant can walk away before renewing the lease, but only if there’s somewhere else affordable to rent. And if all those newer buildings are built to similar standards, perhaps living conditions will be no better.


Future condo conversions?

Finally, a word of caution for the future. In a decade or so, when the housing market is on its next volatile upswing, many of these apartment buildings may be converted to condominiums. If that’s the case, a buyer has no idea what potential troubles they are inheriting from the original landlords.

Some of the worst condo horror stories have happened in condo conversions of the 1990s and early to mid-2000s.

Don’t be fooled by the lure of an affordable sale price, and industry rhetoric about making it easier for developers and builders to avoid accountability by preventing consumers from filing lawsuits.


Further reading:

Harbor Walk Condo owner sued following bankruptcy

Who pays for mold damage in condos?

Aspen’s Centennial HOA – not so affordable housing

The High Cost of Failed Condominiums


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