Sub-Prime Backlash?

Will New Lender Rules Cut Availability of Condo Loans?

Last month we asked the question: “Will the sub-prime crisis impact community associations?” (www.condoissues.com, March 20, 2008) We predicted that mounting foreclosures of condominiums and town homes would greatly impact community association budgets as owners abandoned properties leaving unpaid assessments. Lenders holding first mortgages on these properties would have no obligation to homeowners associations to cover these deficiencies, leaving large gaps in association funding.

Now, a new issue is looming. Rules for government-backed mortgages and some private mortgage insurers are being re-written to toughen lending standards for condominiums. ..

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The Board's Dilemma

I had a call the other day from a woman (let’s call her Mrs. X) who was very troubled over recent increases in her homeowners’ association assessment. “I probably can’t live here much longer if this keeps up!” she said. Turns out the board of directors had raised the assessments by 20% on top of similar increases a year ago. They also levied a special assessment to fix some unexpected problems with the buildings. “You know what they did when I complained?” She said, “They handed me your book and said to read it!” She was referring to the treatise we wrote a couple of years ago entitled “The Uncertain Future of Community Associations” (See link on the left) a discussion of the perils of under funding association reserves. According to my caller, the board was using the book as at least part of the justification for the assessment increases...

Read the Full Publication: "The Board's Dilemma" --Click the Title link or Download link on the left...

If Density is the Key to Economic Growth; Are Condos the Key to Density?

We recently wrote that older suburbs may become the new urban cities if public policy in those areas would favor density (See below, "Will the old suburbs become the new urban core?).  Now, Richard Florida, writing in The Wall Street Journal, April 12, 2008 gives us the economic justification for such policies, he states: "...our public policy must work toward, not against, density. Nearly every expert on the subject agrees that innovation and productivity are driven by density. For the better part of a century, we've subsidized suburbanization."  He goes on to show that big cities and economic "mega-regions" are the primary creators of wealth.  Suburban areas with low density populations consume, but rarely produce sufficiently to meet their own consumption. 

If so, condominiums and multi-family rental housing are the key to higher density and conversion of old inefficient suburbs to productive, high energy economic zones. We're talking urban condominiums, however, not suburban projects that spread over acres of open space without proximity to transportation and jobs. Urban, high-rise condominiums fit the model of the new urban areas we discussed earlier, and if, as Florida holds, higher density produces more innovation, then greater use of high-rise housing in an urban environment should be a national priority.