Condo conversions a complex issue

Dan Kulin

Tuesday, Nov. 1, 2005 | 8:27 a.m.

Concerns about Las Vegas' shrinking apartment market may prompt the Las Vegas City Council to impose a six-month moratorium on condominium conversion applications.

Councilman Steve Wolfson said he is worried that the continued conversions from apartments to condos is "displacing renters and shrinking the rental market."

The issue, to be discussed Wednesday, is part of the problem of maintaining affordable -- or even attainable -- housing for those who cannot afford to buy a home, new residents who need rental housing while searching for a home to buy or people who would rather rent, Wolfson said.

Councilwoman Lois Tarkanian said she supports the moratorium, which she hopes will give city officials time to assess conversions' effects.

"We don't understand everything that's happening, so a moratorium will give us time to ferret out how much this is helping or hurting people," she said.

One concern is that as more apartments are converted to condos, the lower supply could raise rents. And condo prices, in turn, often are too high for renters.

Jeff Swinger, an apartment broker and senior vice president at CB Richard Ellis, said a moratorium "is a great idea (because) we're losing too many rental units in this town."

The problem for developers is that rising home prices make condos more profitable than apartment buildings, which prompts apartment owners to seek permission to convert their property into condos, Swinger said.

The reduced number of apartments can make it difficult for some people to find a place to live, he added.

Rent in apartments built during the last two years averages about $790 per month, while the monthly cost of a condo converted from an apartment during that same period is $1,056. The converted-condo cost assumes that the buyer paid 5 percent down on a 30-year mortgage, plus had $100 per month in association fee.

According to figures provided by Swinger, 17,677 apartments valleywide have been converted to condos or received approval to do so in the last three years.

During the same three-year period, about 11,000 new apartments were approved or opened, and at least 6,000 were torn down, he said. Before the pace of apartments-to-condos conversions began picking up several years ago, the valley saw roughly 7,500 apartments added annually, Swinger said.

One factor that clouds the issue is that many of the new condos -- some real estate experts estimate as many as half -- are being rented as apartments.

City documents say a moratorium would give its staff time to draft new rules so future conversions would need a special-use permit in addition to the reviews already required.

Such a change would let the council deny conversions based on factors such as whether apartments or more condos would be preferable for an area, not just code issues such as parking and open-space requirements.

Wolfson said that while requiring a special-use permit might be part of the solution, he believes officials should look at a range of possibilities, such as requiring that a portion of the apartments converted to condos be sold for a lower price as affordable housing.

Twenty applications for converting apartments to condos have been approved by the city during the last two years, documents show. That has resulted in 4,105 apartments being turned into condos, with another 2,924 authorized for future conversions.

Dennis Smith, Home Builders Research Inc. president, estimated that in the valley about 10,000 more apartments will be converted to condos during the next few years.

A six-month moratorium probably would not dramatically affect the market, Smith said. The long-term effect of preventing some conversions would be to further increase home prices and keep some apartments available, he added.