Many Downtown L.A. condos becoming rentals

The L.A. Times is reporting on a shift in downtown housing that many local economists and consultants have been predicting for close to two years. Due to too many condos chasing buyers (and deeply flawed demand studies), many are converting to rentals, some until the market rebounds and others permanently. So is this necessarily a bad thing? It depends on who you ask. From the story:

In the midst of a downturn in the real estate market, some developers are finding that they no longer can sell condos in buildings that even a year ago would have been quickly snapped up. Flummoxed by a precipitous drop in qualified buyers, they are choosing to rent out their buildings instead.

It's happening in downtown Los Angeles, and to a lesser degree in Hollywood and the San Fernando Valley -- areas where high-density housing has sprung up in recent years.

And the shift raises questions about some of the fundamental assumptions surrounding urban development. Instead of buyers who can afford the hefty down payments and mortgages, some of these developments are now attracting renters who need only put down rents of $1,500 to $4,500 a month...

Jan Lin, a professor of sociology at Occidental College, said the change is "something that you should be a little cautious about if you are a planner or city official concerned about the social fabric."

Property owners are typically more invested in their neighborhoods and push for urban transformation that will better the neighborhood and increase their equity.

But the owners of rental buildings are usually absentee owners, not residents of the area in which they are invested, Lin said, and don't necessarily have the same dedication to bettering the neighborhood that condo owners often do...

But the revitalization of downtown was sparked much less by homeowners, said developer Tom Gilmore, whose conversion of old bank buildings along Main Street into rental lofts nearly a decade ago helped spark the revival.

It was renters -- a mix of artists, young couples looking for urban adventure and professionals who worked downtown -- who began to build the loft scene that eventually led to new restaurants, bars and galleries, as well as luxury condos.

Gilmore said downtown needs a mix of renters and owners.

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