Why aren’t there more condos in Olympia?
The numbers tell the story.
Every month the Northwest Multiple Listing Service releases data on the number of homes sold in Thurston County, and typically hundreds of single-family homes have changed hands.
The condo numbers are shockingly different. Although 587 single-family homes sold in the county in July, only 16 condos were sold the same month, the data show. And that was up from 12 units in July 2018.
In downtown Olympia, the number of condos is even smaller.
That might come as a surprise based on all the recent, new and proposed construction that has been happening downtown. But almost all of that construction is apartments — for lease, not for sale — including Views on Fifth, which overlooks Capitol Lake, and Harbor Heights on Columbia Street.
City of Olympia data show that the current inventory of market-rate housing downtown, not including those who live on a boat, is about 1,200 units.
How many are condos? Eleven. (That doesn’t count the condo complexes along Budd Inlet’s east and west bays, near downtown.)
The number comes from Pat Rants, president and chief executive of The Rants Group, a commercial real estate company. He should know because he recently proposed a condo project on Columbia Street that he later canceled.
Rants was referring to eight units at Union Heights, at Union Avenue and Capitol Way, and three units atop Percival Plaza on Columbia Street. And that’s it, he said.
So why aren’t there more? Experts say litigation, cost, and questionable demand are factors that have contributed to a lack of development.
The threat of litigation
State Rep. Andrew Barkis, R-Olympia, who worked on a number of housing-related issues this past legislative session, acknowledged that 20 years ago there was a wave of shoddy condo construction that needed to be addressed, so legislative changes were introduced in the 1990s to protect condo owners.
But he thinks the state’s law has since gone too far and made it too easy for owners to sue.
Rants said he could recall a time when most condo developments were dealing with lawsuits. And the prevalence of those lawsuits had a ripple effect on contractors, engineers and architects, said Ron Thomas, owner of Olympia-based Thomas Architecture Studios.
Thomas said his liability insurance rates for his practice almost double when it is associated with a condo project.
“A very, very high percentage of all condo projects end up in lawsuits,” he said.
So how do these projects get built? Developers roll that risk into the cost of their development.
For Rants, who planned to build a 28-unit condo development that overlooked Percival Landing, he paid six-figures for an insurance policy that would protect him, the contractor and the subcontractors on the project. Not only is that kind of insurance expensive, it’s also hard to find, he said.
Combine the cost of the insurance with the cost to develop a waterfront parcel, including the need to build on pilings because much of downtown Olympia is on fill, and it produced a sales price that started at around $700,000. Rants pre-sold seven of the 28 units, but that wasn’t enough demand to move his project forward.
“I had a whole list of people who wanted to spend $350,000,” he said.
Changes to the law
Barkis co-sponsored legislation, HB 1306, to make changes to the state’s condo law that eventually morphed into SB 5334 and was signed into law this year.
It made two changes: It reduced the personal liability of condo association officers by granting them immunity. Previously, they could be forced to pay to repair defects if they didn’t sue the builders.
The legislation also changed what condo owners could sue for. Rather than the condo building having to comply with “all laws,” a lawsuit will need to prove the construction team violated building codes in the state.
Rants, however, doesn’t think the changes went far enough. For one, condo owners can sue up to six years after the project is complete. He would like to see that liability period reduced.
“I understand buyers want to be protected from real problems,” Rants said. “But that risk gets translated into so many other decisions that are made about the project along the way that it adds millions of dollars in cost.”
Barkis said condo liability reform will continue to be a legislative topic of discussion.
Is there demand for more condos?
Rants also questions whether there is enough demand for condos in the Olympia area. He thinks he could develop condos elsewhere in the county, and do it for less, but he also thinks that condo owners want to be within walking distance of coffee shops, shopping and grocery stores.
“We need a greater number of people who want to live downtown,” he said.
As for the number of people who told him they were willing to spend $350,000, he said he couldn’t develop his condos for that price. Rants’ condos were going to range between 1,300 and 2,400 square feet.
Ken Anderson, president and owner of Coldwell Banker Evergreen Olympic Realty in Olympia, thinks there is plenty of demand.
Every time someone sees that another new apartment building is being built in downtown Olympia, they call Anderson wanting to know more about the “condos,” he said. He then explains that the units are apartments and aren’t for sale, they are for lease.
“No doubt there is big demand for those who want to own and live downtown,” he said. “Pride of ownership creates a different community.”
Architect Thomas agrees.
He thinks if condos downtown could be developed at a certain price point, people would sell their homes and downsize into those units, and that would leave more disposable income to fuel downtown’s restaurants and shops.
And though there will be concerns about gentrification, Thomas thinks there will always be room for the “uniqueness and quirkiness of downtown Olympia.”
The Seattle Times contributed to this report.