Apartment complexes in Asia do this, though I wonder just how adequate the funds are. Clearly not enough to rebuild the whole darn thing.
I’ve wondered about that, though it sounds like the units weren’t cheap, being right on the beach, and whoever lived there had some money. I was reading something about a resident who had just spent $100K renovating their own unit and was simply disinclined to spend more. But condos sucker people in because the initial costs are relatively low; it’s costs like these that start adding up.
Or the public sector, even. I expect the private sector will deal with the situation by, for instance, making buildings uninsurable and therefore unlivable, and the federal government will have to step in with bail-outs. But as recognizing the problems in the near future become more and more unavoidable, it’s a hard pill to swallow to expect the federal government to bail people out of failed Miami real estate speculation, especially when they should have known better.
The whole situation is baffling in how people are (not) dealing with the issues, and I just keep wondering how it’s going to shake out. The county has a “Office of Resilience” and a “chief heat officer,” but it feels more like a “Office of Whistling Past the Graveyard” and “chief too-little-too-late officer.”
So far, they’ve been dealing with the situation by approving loans. What I learned by reviewing the financials of a few local condos is that many associations in my area are up to their eyeballs in debt. Part of making condos seem attractive on the surface is low monthly fees. When associations are only paying interest on loans, they can keep those artificially low figures in place.
When substantial repairs are needed, and the banks won’t allow them to dip deeper into the well, the owners have to pay more. If deferred maintenance is part of the problem, owners wind up with sticker shock. Condos tend to attract older people on fixed incomes and landlords who own multiple units. Unless there is some public assistance in cases like this, they’ll wind up in the same cycle as folks who lost their homes to property taxes - liens, court, and sheriff’s sale. The only ones that come out ahead in all this are the lenders.
It was a condo building. The board was comprised of residents. I lived in a condo and was on the board—it’s often a mess, and the people on the board often have no understanding of finance and related matters.
If only the upside were that the nation would see this fiasco as analogous to another crisis, that if left untended, will lead to a political/societal/global collapse.
I’ve actually served on the board of a condo HOA (in SF, so CA law applies). It was a 44 unit building about 100 years old, converted into condos in the 90s. The board was entirely made up of owners (all of whom at this point were residents, but that was not a requirement). The board was also elected by all of the owners, and you had regular meetings where issues like this were discussed.
We had a similar if less dire deferred maintenance situation, where all units along one side of the building were starting to get major water intrusion during any rain. The cost was several million dollars, which would have been split among the units pursuant to a formula in the bylaws but IIRC approximately 1/44th each. The building probably wasn’t going to fall down, but one of the walls could have started to shed bits down onto the street and the living situation for impacted owners was pretty bad.
Guess whether people in non-impacted units were excited about possibly having to take out a second mortgage or dip into their retirement to pay the costs? They were not. (Full disclosure: my unit was one that was impacted by the problem.)
We had several special meetings of the entire building where many of the owners railed against paying the cost of the necessary special assessment. Several others wondered why we weren’t just making the impacted units pay (answer: the problem was with maintenance of the exterior, which is not individually owned, as specified in the bylaws - but no one really cared what the answer was, they just didn’t want to pay).
I think the resolution ultimately passed by one or two votes. But if it had not passed, not only would the whole board have resigned, but also several of us would have probably had to sue the building to live up to its maintenance obligations. And this for a situation where you could see the rain coming in the walls and pooling on the floors. When you are telling people that a concrete pillar is degraded, it’s probably easier to convince yourself as an owner/voter that you can delay addressing the problem.
The main things I learned were (1) don’t live anywhere with an HOA and (2) don’t ever serve on an HOA again.
ETA: sorry for the novel-length comment!
I’m no expert in Florida strata-title law but if it’s anything like the jurisdiction where I was trained all the property owners should still own the space where their condos were and, as a group, still own the rest of the site as tenants-in-common. So they, or their heirs, will all have to be bought out when the site is redeveloped. The lawyers are going to make out well here.
Or, you know, die
I would like to read the actual engineering reports to see just how strident the warnings were … how were people able to sell units in the lead up to this disaster? When I purchased, I read the strata/body corporate minutes, looked at the size of the maintenance fund, etc.
Reminds me of how we’re all dealing with climate change.
similar issues in Ireland - concrete contaminated with Mica causing houses to collapse. Fortunately mostly 1/2 storey buildings so nobody is being killed but there are large numbers of houses that are crumbling & worthless and it looks like the govt is going to have to step in and pay for the repairs due to our lax building inspection regime.
Mica??? That’s a super soft mineral.
Also just in general I thought this guy did a pretty good job of really digging into the structural problems including the report findings too.
Residents were on the hook for $80k per bedroom they owned. So, if they owned a 3br unit, they were required to contribute $240k towards the building repair costs. For condos that were $4-500k (and likely purchased for significantly less if a long term owner), an assessment that is 50% of your homes current value is a lot! I’m sure a number of residents were forced to sell their units because they simply could not afford to pay the assessment.
My condo bldg at the beach in LA had an assessment of $75k for each unit about 10yrs ago to make some roof and seismic improvements. While I didn’t own my unit here at the time, as I learned, the residents put up a HUGE fight and didn’t want to pay. That assessment cost was roughly 10% of the value of their units at the time.
Fix something???. That will cost us profit!!!.
Took me a second to figure out what a 1/2 story building was. Got it now, 1 or 2, not 0.5. I can be slow on the uptake.
There is probably a bad leprechaun joke in there somewhere.
I had the same take fo a moment too. I thought it might be some historic style of housing. Then I realized that makes no sense if it is a modern collapse. It is amazing what twists one’s brain can do while it rectifies itself.
And I imagine when it all goes to total shit, it’ll be the lenders who are the ones who get the protection against their losses. Even - especially - when they were in situations where they shouldn’t have been lending in the first place. I suppose that’s what’s keeping the real estate bubble going there - as long as the lenders feel assured they’ll get a bail-out, it continues as if everything is normal.
I mean, it’s literally the same issue for real estate markets like Miami. But not to worry, Ben Shapiro reassures us that if you find your house is under water due to climate change, you can just sell it!