The Growler is hearing from some residents of Parker-Gray that they are becoming increasingly concerned about the prospect of new and proposed development projects turning into rentals.
They may have good reason to be worried.
First the Monarch condominiums flopped, and the building went rental. The Madison, which was originally planned long ago as condos, moved through its approval processes earlier this year as an apartment complex instead. Now we hear that the Payne Street Condo project, approved by Planning Commission and City Council in February 2007, is also going the rental route -- with more and smaller units.
Of course, we're hearing from some of the developers that if the Northern Virginia condo market rises up from the ashes in the next two or three years, these projects may not end up as apartments.
But if the projected condo renaissance takes longer and these buildings open as rentals, how easy is it to convert back to condominums?
Interestingly, at least one financial industry observer — and condo dweller — in our neighborhood thinks the reversion may not be easy. A rental building that attempts to go condo has a staggering obstacle because the units are not already owner occupied. It may be difficult to obtain mortgages in a building that is mostly occupied by renters, and those mortgages even if available may carry a higher interest rate.
On top of this, there are new Fannie Mae and Freddie Mac regulations that limit the secondary mortgage market to buildings with 70% owner occupancy. A rental building today would thus need to vacate 70% of its rental units before the first purchaser would qualify for a mortgage in the complex. Can a building owner afford to push out renters and forego significant revenue to empty the building for a conversion? It's one thing to do so with an older building, but what about a new building that is still saddled with debt?
The pessimistic conclusion was that a building operating as a rental is more than likely to stay rental for many, many years and that the current panic-stricken developers who are rushing to convert their stalled condos into rental projects (a nationwide trend now) may not realize that they are moving down a one-way street with no real option to turn around later on.
But what does this mean for our neighborhood?
Renters, particularly in high rises, are unengaged with the community. Their issues are different than those of us in single-family homes: they tend to be less concerned about crime, because they can drive directly into their secured underground parking garages, and are high above the fray. They don't need to worry about City policies affecting their investments, because they have no real investment to protect and tend to stay for a much shorter period of time.
So what do you think?
The Growler noticed something else interesting while leafing through the real estate assessment records yesterday.
It appears from the Cranky One's unscientific sampling that from 2007 to 2008 the assessed value of many Parker-Gray single family homes rose modestly, while the Braddock Place Condominiums and Braddock Lofts declined 5 to 10%.
Since assessed values are based on sales data, does this indicate that our single family homes (many of which are historic structures) hold better value while the cluster of development nearer the Metro station is already losing some of its appeal?
The Growler also hears that several more Madison Street townhome owners are leaving the neighborhood, putting up their units for rent. Is it disillusionment about the City's misguided Braddock Road Plan, or just the fact that owners who bought ten or 20 years ago have achieved a considerable return on their investment and are financially able to move elsewhere while keeping their old homes as investment properties?