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NEW YORK CITY- Some condo developers have abandoned selling units because they’ve only been able to sell 10 percent of the property to which they resort to renting the remaining 90 percent. This trend hearkens to weakened demand for condo units, especially in markets where there is a large affordability gap between high-end apartments and affordable housing, Marc Heller partner at law firm Akerman, tells GlobeSt.com.
“A lot of condo developments that kicked off several years ago, many of them literally or effectively come to resemble rentals than condos,” Heller said. “Some condos developers have abandoned selling units cause they’re only able to sell 10 percent and rent the rest of the 90 percent.”
Heller refers to these condominium developments as ‘busted condos.’ Some of the properties, Heller and his clients take over management to implement the apartment model when existing investors want out or to pivot. And in some cases, some owners may not even be able to sell the remaining slated condo units because some prospective condo-unit buyers prefer not to buy into a building where there are renters instead of owners, he said.
With the condo market experiencing challenges and lackluster demand, affordable housing is looking more promising. According to a recent GlobeSt.com article, due to the lack of market-rate housing to accommodate the middle-class incomes in the 70,000 to 75,000 range, this section is being squeezed by the affordability crisis, according to Heller.
As the gap between higher-end apartments and value-add apartments grows, Akerman clients see a real opportunity to take apartments and turn them into affordable homes for low-income to middle-income rents, driven in part by the new construction of luxury apartments that have saturated the market, Heller said.