Buyers Vs. Renters
Condo conversions means more affordable homes for sale and fewer cheap apartments.
Thursday, February 1, 2007
Casanova Avenue is one of the most densely populated streets in Monterey. The only street in the Casanova-Oak Knoll Neighborhood zoned to allow multi-family housing, it has 740 apartments.
Only 35 percent of that neighborhood’s residents own their homes. That’s low when compared with national statistics, but it’s a percentage that closely mirrors the renter-homeowner ratio in the city as a whole. Casanova-Oak Knoll Neighborhood Association president Richard Ruccello says people want to buy in the area. “I get calls constantly,” he says. “People want to move into the neighborhood but they can’t afford it.”
It’s an increasingly common complaint throughout Monterey and the entire Peninsula. In 1950, 52 percent of Monterey residents owned their own homes. Today, 39 percent own and 61 percent rent.
“The high cost of housing has presented a high hurdle for people to clear to become homeowners,” says Rick Marvin, a senior planner in Monterey. “Beginning around ‘95, the city started looking at condo conversions as a way to address this issue.”
The idea is simple: allow developers to convert apartment buildings to condominiums. Once the building has been renovated, or completely gutted, as is often the case, the developer then sells the individual condos.
The City requires 20 percent of the units to be priced so that they’re affordable to low-income and middle-income residents. Additionally, market-rate condos sell for less than single-family homes, making them a more affordable option to a bigger pool people who live and work in Monterey.
In practice, condo conversion isn’t that simple. Condos are also more affordable to out-of-towners who want to buy an investment property, or a place to rent out as a vacation home. And it may deplete the city’s rental units, which provides the bulk of Monterey’s affordable housing stock.
On Tuesday, Feb. 6, the Monterey City Council will likely consider a 45-day moratorium on condo conversions. (At press time, the agenda had not been finalized.) If approved it will stop any new applications from proceeding through the development pipeline. During the 45 days, city planners would review the condo conversion laws—in Monterey, and in other cities—and then return to the council with policy suggestions.
“On the one hand, we’ve got a General Plan encouraging condo conversions as a way to provide affordable housing and homeownerships,” Marvin says. “On the other hand, we’ve got policies that say the city will maintain a broad choice of rental housing, recognizing that apartment rentals are more affordable than home ownership. It appears we’ve got competing objectives in our policies.”
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Almost 640 apartment units are currently in the process of being converted to for-sale condos. These units represent nearly 10 percent of the total apartments in Monterey. Two such conversions are underway on Casanova Avenue.
As a boy, Ruccello delivered newspapers to his neighbors in Casanova-Oak Knoll. Like many others in the area, Ruccello has lived here, in Monterey’s “sun-belt,” for more than 50 years. He wants to see homeownership increase. “Homeownership brings stability to the community,” he says.
Ruccello doesn’t believe out-of-town investors will gobble up the new condos on Casanova Avenue. “We’re not Carmel,” he says. “We’re not on the beach.”
He says the City should review its condo conversion policies, but he worries that any type of moratorium will price both developers and would-be homeowners out of the market.
“I call it the condo window,” he says. “It’s tied directly to the interest rates. That window is closing. If you delay too long you can make viable projects not happen.”
He’s got another phrase he likes to use: “The real estate merry-go-round,” he calls it. “The longer you wait to jump on, the faster it goes, and the harder it gets to jump on.”
THE MORATORIUM ON CONDO CONVERSIONS is tentatively slated for discussion at 7pm, Tuesday, Feb. 6, in the Monterey City Council chambers, Pacific and Madison streets, Monterey. Final agenda and staff report available online, monterey.org.