The End of Condominiums: Problems and New Supply Methods

ABSTRACT

Though the national condominium stock has reached almost five million units, these units are rapidly falling into disrepair. Up until now, policy measures for handling dilapidated condominiums focused on facilitating their rebuilding. However, as the rate of building volume to lot reached a premium, lots were subdivided into reserved floor area, meaning that the number of condominiums that can be rebuilt under cost is limited.

It is thought that there are a large number of condominiums incapable of being rebuilt that have the potential of turning into slums. In the case of these kinds of condominiums, abolishing sectional ownership rights, tearing down buildings, and selling off land are realistic methods of dealing with this issue. Though there is a possibility that unprofitable demolition costs may continue to crop up, it is vital to create a framework in which sectional ownership rights can be eliminated and to receive public support to cover teardown costs.

The root of these problems lies in the mechanisms for holding sectional ownership in apartment complexes. Amidst continually rising real-estate prices, the mechanisms that allowed the subdivision of sectional ownership rights enabled even those who could not acquire their own detached house to enjoy the merits of home ownership. Now, however, future profits from rising land prices are unlikely, and without rebuilding, the property value of condominiums is crumbling.

The merits of sectional ownership are collapsing. Indeed, sectional ownership rights now stand as a barrier to adequately handling the end of the era of condominiums. In the years to come, in place of subdivided condominiums, the diffusion of a new supply system that favors use over ownership will be necessary. While various options exist for providing condominiums, such as leased condominiums and securitized rental condominiums, in the future these kinds of mechanisms must be supported through policy measures.