28 Housing Strategy | ENVISION FRANKLIN Where are the Condominiums? Condominiums have traditionally offered an important option for homeownership. However, for many years now condominium construction has been largely stagnant, especially on the more affordable end of the market – even as apartment construction of rental units has been steady. For-sale multifamily construction accounted for only 5.4% of all multifamily starts and only 2.7% of all single-family and multifamily home construction in the first three quarters of 2021.xviii Why the dearth of condominiums? Condominium development has still not recovered from the impact of the Great Recession. The housing crash in the aftermath of the Great Recession of 2007-2009 magnified the risks of building condominiums. Without sufficient cash flow from the sale of units, many residential developers did not have funds to complete infrastructure and or common areas. To this day, some condominium residents live in communities where the common areas are not maintained and infrastructure remains unfinished.xix Condominiums are more expensive and complicated to build than apartments. Insurance costs are higher because of the risk of lawsuits over construction defects. Materials must meet higher standards, and financing is harder to get – for developers, builders, and homebuyers alike. For example, restrictive rules for Federal Housing Administration loans can make it harder for homebuyers to borrow to purchase a condominium.xx Finally, larger condominium projects containing more units bear more risk, with increased potential for problems in design or construction.xxi For all these reasons, building apartments is more profitable and poses fewer risks. Overcoming the systemic barriers to condominium development will require dedicated coordination among federal agencies to ease financing restrictions, as well as commitments from states and localities to remedy defect laws.xxii
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