Wednesday, October 25, 2006

Conversions: The new hot button issue

I think it's interesting that suddenly condo conversions are suddenly becoming the new political issue. During the housing boom of the past few years, who hasn't seen one rental building then the next being converted to condos. With the rental market being so soft during that same time period, it's no surprise. It was just like when Starbucks began to pop up on every corner, just drive a little farther and you'll find another one, either Starbucks of condo conversion. Take your pick. In my opinion, it was great to see some of these older buildings being converted, instead of just being torn down and replaced by yet another new construction project. I even watched as two new rental high-rises were converted to condos, one of which was still being constructed. It all goes back to the highest and best use that I mentioned in yesterday's post. As demand for new housing pushed prices up, you would always hear in the background cries over the loss of affordable housing in the city. Those cries suddenly have a new advocate in Mayor Daley. According to Crain's, Daley has called for a task force to study the loss of affordable housing in Chicago, and potential ways to limit its loss. Daley told Crain's, "We have to have something to offset condo conversions, at least partially." It's no wonder conversions are the new target. There were a record 3,965 conversions in 2005 alone. What I find humorous about the whole thing is that now rentals are on an upswing along with their prices. Will a city like Chicago ever be truly affordable? And what constitutes affordable? As the city continues to grow, it's almost inevitable that a lower priced area will suddenly become trendy and the prices will increase. It's the nature of the beast. Does that mean we shouldn't strive to keep housing affordable, no certainly not, but we do live in a country were price regardless of the product is driven by demand. With the market rebalancing, it will be interesting to see how affordability will be effected over the next couple years.