NEWS: Renters must choose: Buy or goodbye
"I called my mom and dad ... and let them know I could be a homeowner out here in California," says DeForest, 48, an operations coordinator for a Bed Bath & Beyond store, who hopes to buy his bungalow unit and carry a mortgage for the first time. He expects to pay at least $300,000.
For Valerie Shield, an elementary school principal in a different pocket of San Diego, the planned conversion into condos of an apartment complex where 75 of her students live means something less rosy: Many of their families will have to find new places to live.
"These are people cleaning hotel rooms, busing tables," she says. "They can barely make the $900 to $1,000 rent. ... I'm worried about the children."
Condo conversions such as these in San Diego's stratospheric housing market are gaining momentum in metropolitan areas around the nation. In places such as Miami, Las Vegas, Charlotte and Washington, D.C., developers are buying and renovating apartment buildings, then selling the units as condominiums.
The condos, often priced far less than new condominiums or single-family homes, offer some longtime renters a fleeting chance at homeownership. Tenants who can't scrape together a down payment or obtain financing must move.
"Conversions create opportunities for entry-level purchases," says Gabe del Rio of Community HousingWorks in San Diego, which helps low- and moderate-income families. "Then we also see the other side. These are the very low-income individuals who have usually been in that complex for a very long time. ... They don't have many options."
The rental-to-condo rush is particularly hot in Las Vegas, the nation's fastest-growing metro area. Ten thousand to 13,000 apartments were converted to condominiums last year in Clark County, which includes Las Vegas.
The lower prices of converted condos are a big draw for would-be home buyers. Converted condos in Las Vegas cost $90,000 to $150,000. The median price of a new single-family home there is $305,500.
Converted condos are attractive to empty-nesters who want to downsize, but they are most popular with first-time home buyers, particularly firefighters, teachers and others who earn moderate incomes in expensive markets, says Walter Molony, spokesman for the Chicago-based National Association of Realtors.
Some cities where condo conversions are underway have the nation's lowest apartment vacancy rates, triggering concerns among local officials that renters are being left with few places to go.
In the Washington area, the vacancy rate for multifamily rental units was 3.6% as of July 1, according to the Realtors group. The rate was 2.9% in Miami and 2.7% in San Diego. The projected national average vacancy rate this year is 5.7%.
"We are definitely concerned about the displacement (of tenants) and the loss of rental housing, particularly affordable rental housing," says Melodie Baron, division chief for the Office of Housing in Alexandria, Va. Since November, applications have been filed to convert 2,365 rental units in that city.
Here's what some cities are doing to ease the crunch:
• Alexandria is offering interest-free loans of as much as $40,000 to tenants with moderate incomes who want to buy their unit when it goes condo.
• Clark County in Nevada is allowing homeowners on lots of 5,000 square feet or more to build another structure that they could rent to people who are not family members.
• The San Diego City Council has set aside $1.9 million for loans to displaced renters who earn the area's median income of $64,000 a year or less. Displaced tenants receive three months' rent, which they can use for a down payment on a home or another rental.
DeForest was worried when he learned five months ago that his bungalow community was going condo.
"It was a little scary because everything is just sky-high here ... and I don't make a whole lot of money," he says. But he also saw a chance to become a homeowner.
Fiel Barrow, 29, who attends San Diego State University, paid $217,000 in April for a converted one-bedroom condo. He says he was able to buy only because of the relatively low cost of the condo and loans he obtained through programs for first-time home buyers.
Mayor Mark Lewis of El Cajon, a San Diego suburb where apartments make up 52% of housing, welcomes conversions. Conversions enable residents to put down roots, and they also increase tax revenue for city services, he says.
Art Madrid, mayor of neighboring La Mesa, isn't so sure conversions help his town. La Mesa ties the number of conversions it will allow to the number of apartments built in the previous two years. No apartments have been constructed in the past decade.
"I think we have a legal and moral responsibility to make sure that the residents who've lived here for years and years aren't displaced just for the sake of money," Madrid says.