What to do with vacant condos?

I am wrapping up a nice little visit to Portland, where I’ve enjoyed one last burst of wintry weather and given a few talks on faith-based cooperative economics. One of these was a potluck hosted by Ecumenical Ministries of Oregon, which is doing a lot of really interesting work here as part of their Interfaith Food and Farms Partnership (and even more of the same around Corvallis, about an hour south). This includes the Farm to Congregations project, which has set up farm stands at Sunday services at eight churches. We had a great discussion, and I look forward to seeing where they go next.

Portland had a really tremendous boom of condo construction, which seems to be causing trouble now. I saw one project out in East Portland that had a sign out front, advertising for 3BR 2 BA condos, great views etc, only 10 left. The catch is that it looked like there were a total of 12 units in the joint. This seems to be the start of something that has already hit hard in Sacramento, where prices have plummeted and some developments have many units still for sale (or for rent). In some cases, the developers saw it coming and didn’t even finish all of the units. 

The silver lining in this ominous cloud is an opportunity for some fairly nice affordable mixed-income housing that builds home ownership in a sustainable way. There are already plenty of individual condos up for auction. However, we might soon see a peculiar kind of foreclosure sale, in which the developers themselves are trying to unload units in bulk. Some of these may be ready for occupancy, but others may just be shells in need of substantial work, including drywall, fixtures, and maybe even wiring. 

It would certainly be possible for an individual to buy a shell of a home and then hire their own contractor to finish it. However, it would not be cost effective to do this. I think the ideal situation would be to form a cooperative to make a lowball bid on all the units in a failed development. Then, the co-op could hire a single contractor to finish the work. They might not get the granite countertops and Italian faucets that their neighbors enjoy, but I suspect that it would be possible to do the units up nice and cheap by purchasing materials and labor in bulk.

This could also be done by non-profits or faith communities as part of an affordable housing program, which would provide a way for participants to build equity without getting sucked into their own individual mortgage (assuming that they can get one, since many people have damaged credit and banks are not lending freely). The nonprofit approach might help the residents form a co-op to own the units in common; it might also do something like Qurtuba Housing Co-op, which is one of several that help Canadian Muslims buy their own homes without paying interest. The way Qurtuba works is that the co-op essentially buys a property on the member’s behalf. The member then purchases shares in the co-op on a regular schedule until they have enough equity to correspond to the value of the home. Finally, the co-op gives the title to the member in exchange for the shares, and the capital is freed up to purchase a home for the next member.

I’ve already talked this concept over with a few people in real estate, and the response is that it could work really well. So feel free to be the first on your block to salvage a failed condo project.

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