Condo conversion craze makes finding apartments harder

MIAMI — Diana Perez got the letter a few months ago: the apartment complex where she and her family live was converting into condominiums. They had to leave if they couldn't pay a 20 percent down payment on their two-bedroom apartment, now selling for $185,000.

That's $37,000 up front on the apartment they now rent for $900 a month — too much for the 36-year-old who works in a nail salon and her car salesman husband, so they're looking for someplace else. But in the red hot Florida real estate market, they're having trouble finding anything comparable nearby.

"What I want to find is a place where I can stay and they're not going to kick me out" if the owners decide to convert into condos, she said.

As apartment building owners face rising property taxes and rents lower than home prices in certain areas, many are deciding to convert them into condos. That can generate large profits for owners, but the dwindling supply of apartments makes it harder for renters like Perez to find a place to live.

But developers say they help people who can't buy a single-family home by providing more affordable condos.

Problems finding apartments are more due to population growth and the difficulty for building owners to stay afloat with lower rents, said William Friedman, chief executive of Tarragon Corp., a New York-based urban homebuilder and condo converter.

Converted condos offer first-time buyers an affordable option to build up equity and live in more desirable locations with fewer responsibilities than owning a home, he said.

So far this year, the value of apartments sold to become condos is $22.6 billion, or about 152,655 units, according to Real Capital Analytics.

And the benefit for developers to convert is clear. So far this year, apartments converted into condos sold for an average of $154,000, compared to an average of $88,000 for units in buildings that were sold as rentals, according to the research firm.

Rents have been creeping back up as the market gets tighter after falling from 2001 to 2003, when more people were buying homes and avoiding renting. In the third quarter of this year, the national average rent for a 1,000-square-foot apartment was $1,258 a month, up from $1,195 in the fourth quarter of 2003, according to Global Real Analytics, another research firm.

And rents have increased faster than wages, making it increasingly difficult for poorer families to afford even modest apartments, according to a report from the National Low Income Housing Coalition.