Condos

In the early 1950's, developers in Puerto Rico began to copy a form of property ownership common in Cuba. By 1961, condominium ownership had been tried out in several states, and Congress included a section in the National Housing Act of 1961 that addressed the criteria that would have to be met for condominium housing to be eligible for FHA backed financing. Today it is a very popular form of ownership and is generally preferred over cooperatives; in New York City, where rent controls make apartment ownership less attractive, not a few apartment buildings have been converted to condominiums.

In a condominium, the homeowner owns the airspace between the walls, ceiling, and floor. The shell of the building, along with the land on which it sits, is owned by the Homeowners' Association, and each unit owner might have an undivided interest in the common areas. The difference between a condo and a coop may seem artificial, but in the one, the homeowner actually has a deed to his property, whereas in the other, he only has shares in the stock of the company which owns the real estate and a lease for its use.

There are a number of concerns associated with valuing condominiums. In some instances, the developer sells the units but retains the land and leases the common areas to the Homeowners' Association. The financial stability of the developer is critical, because the building itself is part of the common area, and its maintenance would then be the responsibility of the developer. A preferable arrangement is one where the Homeowners' Association becomes the owner of the commons after a majority of the units are sold. In such cases, the homeowners then control the maintenance of the building and the grounds, and resale of individual units in that type of arrangement is usually much easier than where the commons are leased.

The common area amenities also contribute to the value of the individual units. Condos with lakeside commons are generally considered more attractive than those which simply have lawns and parking areas. The level of HOA fees is also a consideration : what does the homeowner get in return for the monthly fee paid to the Association?

As the cost of land rises, and as people age and grow less capable of maintaining a separate parcel of land, the various forms of common ownership become more attractive.