Since condos became popular in the 1970s, more than 11 million condominiums have been built, spurred by the idea that buyers can purchase a condominium for less than the cost of a single-family house while enjoying low-maintenance living. The apparent affordability is made possible by buyers sharing ownership of the land and common areas, from roofs to furnaces, while owning a unit typically smaller than a single-family home. The low-maintenance lifestyle is courtesy of a condominium owners association (COA) run by an elected board of owners that manages all common areas in the community and pays for needed maintenance, repairs, and services by assessing a monthly fee and, when needed, special assessments from owners.
This sounds like a good deal for all involved. But a growing number of maintenance crises in condominiums across the country are making us aware that the model has significant inherent weaknesses that must be resolved to forestall a wave of displacement, vacant buildings, and significant loss of owner-occupied affordable housing.
Condominium owners’ equity and the affordable multifamily homeownership stock it provides are at imminent risk.
- Condominium monthly fees are increasing at eye-popping levels as building systems age and repair needs increase, long-deferred maintenance and repair comes due, and insurance rates rise. Many associations have not been building sufficient reserve funds, leaving COAs vulnerable to financial shocks.
- COAs have the authority to foreclose on units and sell them at public auction if owners are unable to pay the assessed fees. Owners are losing their homes—sometimes for very small debts—even after diligently paying their mortgage and property taxes.
- When multiple owners are unable to pay, especially when large and critical repairs lead to mortgage-sized assessments, condominium developments fall into financial distress, which leads lenders to stop offering mortgages to prospective condo buyers, creating a vicious cycle that hastens the deterioration of the buildings.
In the years since the June 24, 2021, collapse of Champlain Towers South in Surfside, Florida, several states have passed new laws to require that condos be more physically and fiscally safe and healthy. Some of this legislation helps to make the condo model more resilient, but other laws present a cautionary tale as they destabilize condo markets and make condo ownership riskier.
Who Owns Condos?
In most large U.S. metro areas, condominiums are less expensive to buy than single family homes. For example, in Atlanta, in 2022 the median price of a condo was $286,000 while the median price for a single-family home was $396,000. So it’s not a surprise that condos provide homeownership to three critical demographic groups who tend to have lower median incomes and/or assets for a downpayment than other homeowners—owners of color, owners under age 35, and seniors over 65.
In the decade from 2011 to 2021, ownership of condos in communities of color rose faster than ownership of single-family homes. In that decade, Black, Asian, and multiracial households increased from 14.4 percent of condo owners to 19.1 percent. By 2021, a higher percentage of Black, Asian, and Latine homeowners owned a condominium nationally than white homeowners.
Condos are also a popular option for first time homeowners under age 35 and seniors over age 65. In 2021, first time homeowners with a government-backed mortgage bought 60 percent of condos, and just 40 percent of single-family homes. Senior retirees rely on condominium ownership to locate in desirable areas with high amenities.
However, buying a condo requires automatic mandatory membership in the condominium association, and membership comes with a contractual obligation to pay not only a monthly fee, but lien-based assessments to cover the care and repair of common elements, regardless of the price tag or the owner’s capacity to pay.
Affordability in Danger
Over the past five years, in Southern Florida, monthly condo fees have increased 60 percent and many COAs have levied five- and six-figure special assessments to cover tens of millions of dollars in deferred repairs. A 2024 Redfin study of monthly condo fees in 43 metro areas found that even where condos are priced affordably, fees have increased sufficiently to put affordable ownership at risk. For example, in Fort Worth, Texas, fees have increased almost 15 percent in the last year to $424 monthly for a median-priced condo of $217,000. In Detroit, COA fees for buildings along the east riverfront and in the central business district can exceed an owner’s monthly mortgage payment. The greater costs of repairing and replacing building systems in aging buildings are the primary cause of increasing fees, but poor fiscal management, substandard construction, increasing insurance costs, and, ironically, some of the new government regulation spurred by the Surfside collapse and other disasters are driving up costs as well. For example, in Florida, condo property insurance rates have increased by 102 percent due to increased storm activity.
As of 2021, 37 percent of condo owners were housing cost burdened, as opposed to only 25 percent of owners of detached houses. When an owner cannot pay levied fees, the COA has the power to place a lien on the owner’s home, foreclose on the lien, and put the condo unit up for auction to obtain payment of the delinquent fees. The reason most states give COAs foreclosure authority is to protect residents from having to pay for the mistakes of delinquent neighbors. If half of 100 condo owners facing a $10 million repair to a facade cannot pay, then the financial obligation of the remaining owners would double. In several states the COA’s powers exceed those of lenders, and the association has a super-lien giving them priority over all creditors including the first mortgage lender.
In some states, the COA can choose to rent the unit to collect fees. For example, the Illinois Condominium Property Act gives a board the power to evict the owner and rent the unit to collect a past due assessment balance. In addition, in states like Georgia, the COA can garnish an owner’s wages to pay the full amount of the special assessment.
When a COA is unable to afford major repairs because it cannot raise assessment fees high enough to bankroll projects but keep them within the means of owners, and it has difficulty accessing credit, both the physical property and basic service provision suffer. Condo buildings with multiple vacancies and insufficient revenue to pay for needed capital expenses can quickly become “troubled buildings.” Without adequate funding, and with lenders unwilling to offer mortgages to prospective buyers because of the building’s condition or financial distress, the condominium complex begins to slowly deteriorate. Beyond not being able to accomplish capital improvements and major repairs, there is now not even enough money to pay for essential services such as utilities, trash collection, or basic upkeep.
Chicago has condemned condominium buildings that could not make city-mandated life-safety repairs to prevent these buildings from becoming a danger to residents and neighbors. The fate of the condominium development is often tied to the strength of the housing market. In stronger market communities, developers will buy up a condominium building’s units to convert to rental, or owners can vote to terminate the condominium and allow the property to be sold free and clear of ownership interests, which makes it more attractive to a developer who wants to redevelop the entire property. In weaker markets, the city may be left with a problem property that endangers the remaining owners and the surrounding neighborhood.
Recent Legislation
Condominium associations are governed by state law, yet few states mandate best practices, such as requiring transparent disclosure to prospective buyers, conducting reserve studies to anticipate future costs, and reserving funds that act as savings accounts to pay for repairs and rising costs. In fact, only 12 states require that a COA maintain a reserve fund at all. As a result, the majority of COAs do not save enough for planned and unexpected repair projects or other rising costs, and instead, when critical issues arise, impose large special assessments that owners could not anticipate or budget for.
New Jersey passed legislation in January 2024 that requires regular structural inspections calibrated by building age, reserve studies every five years, and phased increases to the reserve fund over 10 years to ensure it is eventually adequate to meet the development’s needs. Where inspectors find structural defects, the COA board can levy assessments or secure loans even without owner approval to avoid delays. The New Jersey law prioritizes repairs to the structural load bearing systems in the building.
In 2023, Tennessee passed a law that requires associations to conduct reserve studies, but does not mandate that they make necessary repairs or keep a reserve fund adequately funded. Maryland similarly requires periodic reserve studies and requires that resale certificates state whether there is a reserve fund and how it will be used.
Meanwhile, Florida, a state with high numbers of condos, has taken the most dramatic legal steps to ensure all condominium properties are safe and have sufficient money in reserve to pay for needed maintenance and repair. In reaction to the 2021 condo collapse in Surfside, which killed 98 people, Florida passed a requirement in May 2022 that communities repair aging structures and bring them up to code. State lawmakers banned associations from waiving reserve contributions and delaying any identified structural repairs. Condo associations with buildings three stories or higher were required to perform a reserve study by January 2025. Condo buildings over three stories and more than 30 years old were required to have an inspection by an architect or engineer by December 2024. COAs then were required to fund their reserves immediately in order to be able to complete all identified structural repairs by the end of 2025. While the intentions were good, the result has been to put the sizable Florida condo market in a tailspin, with record high numbers of units listed for sale, and at plunging prices. It has raised fees so high that some Florida retirees have had to walk away from their houses or return to work to pay the assessment.
Steps to Take Toward Condo Stability
States and cities can take 11 actions to support and stabilize the condominium model to create more sustainable condo ownership.
- Require education and training of board—Providing owners who serve on COA boards with foundational knowledge about financial planning, reserve fund studies, and the need to anticipate major expenses before they arise will allow them to do their job more effectively.
- Require transparent disclosure to prospective buyers, including anticipated repairs and current reserve fund amounts—Information about the association reserve fund and anticipated repairs should be made available to prospective buyers early in the purchase process so they understand the potential risks.
- Mandate reserve studies and reserve funds, with phased repair schedules—Require COAs to perform periodic reserve studies and maintain an adequate reserve fund in order to prevent boards from kicking repairs down the road to keep fees artificially low. There is a lesson to be learned from Florida here: Requiring COAs to immediately fund all repairs identified in the reserve study risks raising the cost of condo housing out of reach of many prospective buyers and displacing current residents, so it is important to rank repair priorities and allow for phased contributions to the reserve fund as New Jersey has done.
- Enhance government oversight of administrative, management, and financial practices—Add new oversight of COA management and financial practices to help to ensure the board is managing funds responsibly and planning for future expenses.
- Perform regular facade inspections—Mandate inspections to ensure that facades of buildings over six stories are structurally sound.
- Create a protocol for COAs and condo owners in distress—Fannie Mae, Freddie Mac, and other mortgage leaders should create a detailed protocol to help the COA bring the property back in good standing so it can meet its responsibilities.
- Provide low-interest loans to owners at risk of losing their homes—State and local governments can provide low-interest financing to help long-time condo owners pay for special assessments and stabilize their buildings. Miami Dade County provides 0 percent interest loans up to $50,000 with a repayment term of 40 years to condo owners who meet eligibility requirements. The county has a $9 million cap for the project, however, so it can only help a fraction of condo owners who may need financial assistance. A small annual tax or transfer tax on condos could help to create a sustainable fund.
- Restrict COAs’ right to foreclose for relatively low levels of unpaid assessments,
limit attorney’s fees and fines, and require COAs to obtain a reasonable value for
foreclosed units at auction—Placing minimum thresholds on delinquent fees before a COA can begin foreclosure proceedings, as Georgia has done, can prevent an owner from losing their home for a relatively modest debt. - Provide property tax abatements for major rehabilitation of properties—Cities and counties can offer tax abatement programs, agreeing not to tax owners on the increased value created or restored by the rehabilitation for some period of years.
- Help condo associations establish a temporary financial hardship accommodation
for payment of common expense assessments—Boards can provide longer payment periods and temporary deferments. - Provide free foreclosure prevention counseling to owners—Providing owners with expert advice and an understanding of their financial situation can help them avoid the loss of their home.
Saving Condos Is an Efficient Way to Maintain Affordable Housing Supply
Condominiums provide important affordable housing, but condo ownership is not sustainable without government regulation and support.
Moderate income owners, many on fixed incomes, do not have the cash to double their monthly fees or pay a six-figure share of major capital expenses. Yet the condominium model gives them sole responsibility for paying their share of costs regardless of the price tag. Deteriorating conditions and insufficient financial resources for owners to address them are putting our condominium housing stock at risk. Preserving our existing condo housing is far cheaper than building new affordable homeownership opportunities, so we are better off extending the life of our older condo buildings. Most importantly, preserving our condominium buildings prevents displacement and loss of wealth for homeowners who have steadfastly made all mortgage payments and tax payments required. Creatively helping owners to fill the resource gap is essential to creating a healthier condo market and keeping condos viable as a form of affordable owner-occupied housing.
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3 thoughts on “Condos—a Key Source of Affordable Housing for Homeowners—Are in Jeopardy”
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It seems the same applies to cooperative housing. Can you comment on the risk to cooperative housing? Many thanks.
Thank you, Karen. An insightful summary of some of the many problems that accompany this particular form of tenure — and some useful suggestions for improving condominium stability.
Thank you for raising the alert. Other affordability and condition issues abound. If you count the downside price and condition risks, you may not think that condos are ‘affordable’: Note that for the totality of problems, current rental buildings should mostly NOT be allowed to convert to condos as was the trend in the 1980s where thousands of rental units were lost to condo conversion.
For the prices of condo-vs-house in San Jose, I found that the average HOA fees, capitalized over time, equated to almost half the difference in the price. And, price levels of condos are more subject to crashing farther than do single family homes, especially condo prices in ‘converted’ buildings. In the 1990s housing crash in California, I saw condos lose more than half their value when houses lost 1/3.; the recent crash saw similar patterns in values collapse.
Condition issues abound: in the 1990s, California fought to get liability laws for careless builders who would build complexes, then dissolve the company , and leave owner-occupants with near-impossible remedies. Memories are short: housing ‘advocates’ now push for deletion of those liability requirements. Professional management companies do exist: some publish financial ratings of area HOAs.
. What is the answer? the proposals above plus yet more transparency plus strict liability plus…?