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July 29, 2008

AFFORDABLE HOUSING ... BMR UNITS ... WHAT IS THE ANSWER?

I have been writing about the problems owners of BMR (Below Market Rate) units experience when the majority of owners want to upgrade or when rehabilitation of the condo building is needed and it takes a large special assessment. I worked with a BMR owner for about a year trying to find solutions - communicating with the Association representatives and City representatives, to no avail. The solutions offered (get a room-mate, sell the place, etc.) were simply not acceptable. Most BMR contracts have prohibitions on room-mates and even if the City will lift them - how many do you need to fund a $10,000 special assessment? And if even if they sell, they are responsible personally for the special assessment, and limited in collecting on the gain if there is one, and have to go somewhere else. Where will that be?

I recently received an email from another frustrated BMR unit owner. This person got into a situation where the monthly assessment doubled in a few years, and two large assessments (over $10,000 each) were imposed in a five year period. I referred that owner to my earlier blogs on the subject, and asked for suggestions on solutions. Legislation has been proposed in California that would allow BMR unit owners to vote independently of other owners on whether they wanted to approve special assessments proposed by the Board, and which actually allows the BMR faction in a common interest development to veto special assessments they cannot afford.

One of the bills (which are AB952 & AB567) is discussed in an earlier blog if you want to read about it.

This is the feedback I received from this reader:

"First of all, BMR units do not belong in high end residences and if they choose do have BMR units they need to offer concessions to the BMRs for costs and improvement assessments since generally BMRs have less expensive amenities (meaning decorations, fixtures, appliances, and sometimes even parking arrangements). Most importantly, all CID residences should assess the HOA dues based on mainly on square footage; at least that way the smaller units aren't subsidizing the larger ones which seems to be the case where I live. I also believe if the developers and DRE were honest about the start up costs (meaning they did not tend to "low ball" budgets in order to sell units), people could make a decision based on more accurate information. If you really want to live in a certain residence or area you will end up having to pay the cost of living for that area. I've been beating my fists against the wall for four years and have decided to walk away. I cannot handle the financial strain or the emotional impact which is just as stressful.

What really distresses me is that the local agencies that work very hard to put people into "affordable" housing, and then turn their backs on those same people when they start to "go under", blaming state laws for their inability to assist homeowners. There are solutions, but they require a government and society that supports social justice and ours isn't quite there yet."

It is true of course that local officials work hard to create "affordable" housing (BMRs)intermixed with other housing by setting requirements and quotas for developers. But I have yet to see a case where those people are farsighted enough to actually propose and carry out a feasible long term solution to keep costs in proportion to the intent of the original plan for the BMR owners which is to "afford" to live there. And the "solutions" that have been proposed such as the legislation giving BMR owners veto power over the imposition of assessments that require an owner vote, which essentially would lower the standards in any development with BMRs to the lowest common denominator, is definitely not the answer. In an earlier blog I made the suggestion that BMRs pay a smaller increase or special assessment than other units and that if this is written into the developer documents, people will know from the start how things will work and costs will be allocated. Of course, the comments back include the issue that this would affect the marketability as between developments with BMRs, and those without BMRs.

The truth is, as I have written, that its a Catch 22 to combine BMR units with regular units where one would expect to profit from the investment. It does not seem to work well for either group, because those not BMR tend to want to spend money to maintain, improve, and upgrade and BMR unit owners just want to be able to survive.


Any other suggestions? Send them on to me through my website at http://www.californiacondoguru.com.

Posted by Beth Grimm at July 29, 2008 9:13 PM