As the housing market in many parts of the country has floundered, many developers have taken creative approaches to stanch the outward flow of cash. In many markets, this means opting to convert portions of developments originally intended as condo units into rental properties.
When a condo with no units sold converts to rental, it's not such a big deal, but when there are fully-vested owners who have purchased their units living side-by-side with rental tenants— or when unit owners rent out their apartments as income properties—the situation can become more complicated. Rental tenants simply do not have the same level of investment in the property as owners do, and this can be a source of friction between building residents, as well as board members and managers.
This results in an increasing number of renters in many Chicagoland markets—and it’s not without turmoil. Thankfully, there are legal mechanisms in place to protect current condo owners, developers and landlords to make sure the transition is done as smoothly as possible.
In Chicago, there is no data tracking how many condos have been turned into rentals, but based on anecdotal evidence, the majority of unsold units from downtown condos within the last three years are being rented if they are not foreclosed, says Brian White, executive director of the Lakeside Community Development Corporation in Chicago.
“Chicago has an untold number of units in a shadow inventory, which includes units intended for sale but held off the market as rentals, yet-to-be-finished units, or foreclosed and vacant,” White says.