The majority of Washington, D.C.’s residents are renters.
To be exact, WTOP reported at the end of 2022 that 54.7% of the District rents their home, illustrating that more than half of the city’s population does not benefit from home equity, nor generational wealth through homeownership–that is unless they double dip and also own a property.
Reasons that keep some renters from making the leap into homeownership range from high interest rates and saving for a down payment, to being responsible for everything from mowing a lawn, constant fixture and appliance repairs, to more costly challenges like replacing a drafty window or building a fence.
Despite current interest rates and a national low housing supply, real estate and financial experts say owning a home is the most viable long-term investment. Furthermore, District renters are offered several initiatives to inspire homeownership including the District Housing Community Development’s (DHCD) Inclusionary Zone program, Home Purchasers Assistance Program, amongst others in both D.C. and Prince George’s County offering down payment assistance, no-interest loans, and loan payment deferment.
When purchasing outright a single-family home or townhouse seems like too big of a bite to chew on, buying a condominium is a good option to consider as long as one does homework, according to DHCD.
Condominiums or condos–not to be confused with apartments–are private residences within a larger property or complex where ownership includes 100% of a private unit, and a percentage or share of all or most common spaces. Condos can be multi-family buildings, town houses, rowhomes or single-family homes.
DHCD offered a condo-buying workshop to offer tips and tools for District residents which include the following:
- In apartment buildings being sold, the District has created a regulation that requires landlords to give tenants the first opportunity to purchase the property before going to a public or private entity.
“That’s unheard of, right? No where else gives tenants that kind of power,” said Terrance Laney, DHCD Rental Conversion and Sale Division administrator. “When tenants get together, they can convert it to a condominium or coop. That way you can own your unit once it’s gone through that process.”
- Owning a condominium unit, also means owning the land that the building sits under, in addition to the airspace–just like a single-family home–but only a percentage, divided by the number of condo owners.
“[When you own a home] you own 100% of the building that the land sits on,” said Laney. “On top of that, you own all the air on top of your property. That’s a good deal. That’s why single-family homes cost more money than condominiums. When you purchase your condo, you are purchasing the unit of which you own 100% of, and then you own a piece of that land, common elements of the building, potentially a piece of the air … a share of the pool, parking lot, etc.”
- Housing supply across the country, including in the District, is low. Finding a single-family home, even a townhouse is challenging, especially if a buyer is looking in a highly sought after neighborhood. The availability of condominiums, however, is much more likely, especially in Washington, D.C., according to Laney.
- Initially, a condominium can seem more affordable than a single-family home. If there is a maintenance issue, a condo board can help troubleshoot the repair. Further, condo or home owner association fees assist with maintenance issues like termites, carpet replacement. Down the line, a condo purchase can still prove to be more affordable if a condo development is a newer product versus a conversion from an older building.
- Do the homework! With any purchase, whether entering a smart phone contract, a car lease or loan, single-family home or a condo, the fine print matters. With condos, there’s something called condo documents or condo docs that detail specifics like additional costs outside of homeowners association (HOA) fees for amenities or special features, remodeling, emergency repair often referred to as special assessments.
Another important aspect to look for is the financial health of the HOA. For properties with HOAs, the timeline to comb through condo docs before making a final decision to purchase is different in every jurisdiction. The District offers 15 days to read through condo docs, while Maryland offers 21 days.
“This is the most critical bit of consumer protection that you will have when you’re talking about condos in the District because you can cancel the deal before you get in it, because when you get in it, it’s your problem,” said Laney.
- Before purchasing a home, a home inspection is highly recommended. When purchasing a home under a government program like HPAP or FHA, inspections are required.
It is important to note that when buying a condo the unit will be inspected, however, the building will not be. This means the roof, foundation, elevators, electrical system, pool, etc., will not be reviewed for safety or longevity.
DHCD recommends prospective buyers request from the condo board a copy of the transition study or the most recent engineering or architectural report on the property.
- Newer, modern condos allow owners to get more bang for their buck. Residents seeking multi-family units in large buildings decked out with amenities see more value when they don’t have to spend additional money on a gym or pool memberships, event venue rental fees, and in some cases morning coffee and nightly beer–efforts many condos are offering now to entice buyers.
“If you want to live in Navy Yard, around 4th and M Street, SE, and you only have $400,000, the same single family home in comparison to a condo will cost two to three times the money,” said Laney. “You get amenities in a condo that you’re not going to get in a single-family home. You might have a pool, gym, gas grill, a rooftop deck, a nice employee that sits at the door that gets all your Amazon packages. Those are benefits you get with a condo that you don’t get with a single-family home.”
- Before deciding if you’re going to the family function or weekend party, we always ask the famous five questions: “Who all gonna’ be there?” Laney recommends doing the same when considering the purchase of a condo.
Ask ‘how many people who own the units actually live in them,’ and ‘what is the foreclosure rate.’ It’s critical to know who your neighbors are going to be or if you will be living next door to temporary tenants, like Airbnb customers–people who may not be invested in caring for the condition of the unit or the building’s amenities.
It’s also important to know if condo owners are leaving due to foreclosure, often due to not paying HOA fees, because if you ever want to sell your unit, the banks will review the foreclosure rate and may require you to seek cash-only buyers due to the risk, according to DHCD.
“A low ownership rate versus tenant rate in a condo building is a red flag for maintenance and quality life issues,” said Laney. “I tell people to fall in love with your condo because you’re marrying the building, you’re stuck with these people. When I own where I live, I take care of where I live. That’s just how human beings are.”