Residents of the area surrounding Pratt and Sheridan will be pleased to note that the formerly seedy, dangerous building at 1200 W. Pratt Blvd., on the northwest corner, is being gutted and redeveloped into condominiums that range in price from $129,900 for a studio unit to $299,000 for a duplexed two-bedroom with two baths.
Since I live next door to this place, I'm really happy to see the reconstruction of this interesting building, because it was a major source of problems in the area, and was dangerously overcroweded and decrepit. Because I am in the market for a reasonable, attractive condo, I have been eagerly awaiting the completion of the project, so when a couple of models were opened to the public last week, I trotted right over and toured the models. Only two were completed for display, both of which were two-bedroom, two-bathroom units that would fit easily into the living and dining room of my rental, and perhaps claim part of the kitchen.
First, let me say that these are attractively finished units with nice appointments, including stainless appliances, granite counters, and lovely, large marble baths, one of which is fitted with a spa tub. But these were the smallest two bedroom apartments I have ever seen. They were pretty units, and the architect managed to make an attractive, well-appointed apartment out of a very small, strangely -configured space, but the second bedroom was scarcely larger than the walk-in closet in my living room, and there were only two extremely small closets, and extra space in the furnace closet, for in-unit storage. A storage locker comes with the unit, and you will need it for anything that isn't stored on a hanger. The unit is supposed to have 800 sq. ft., but it somehow felt and looked much smaller.
The best feature of this building is its premium location, a block from Pratt Beach, and on one of the cleanest, most crime-free streets in the city, let alone Rogers Park. Pratt is a wonderful street. The proximity to restaurants, retail, entertainment, and public transportation also more than offset the lack of parking, which it would be impossible to provide in any case. Still, even with the glossy finishes and appointments, and the excellent location, these units seem steeply overpriced to me. The two bed two bath unit I looked at, attractive as it is, would still feel like a steep comedown from the lovely, large rental I now occupy nearby, with its incredible millwork, perfectly proportioned rooms, and massive closets, and I have to conclude that there is still a massive "affordability gap" in the housing prices, betweeen reasonable rents for beautiful places versus outrageous prices for a tiny place lacking in distinction or storage space.
Therefore, I expect that there will be considerable give-back in the prices of these units as even more conversions and newly-constructed units come to the market and add to the substantial glut. Maybe, just maybe, the sellers will price the units to be affordable to the single person making $40,000-$60,000 a year, without having to resort to the "creative" mortages that are the cause of the problem to begin with.
It strikes me that we are seeing more overpriced conversions and new construction than ever at the very moment the tanking housing market seems poised to take the next leg down of a precipitous drop, due to vast numbers of unsold homes all markets coast-to-coast. There's nothing to indicate that the market will pick up anytime soon, nor is there any reason why it should, given the massive drop in existing home sales, and the drop in prices of new homes. While new home sales experienced their biggest surge in 14 years, the prices paid for them dropped more than they have for the same time period, and you have to figure that there is a causal relationship between the drop in prices and surge in sales, which in any case was limited to the West Coast- sales of new homes here in the Midwest dropped 4% for the same period.
Yet the conversions and new projects continue apace in Rogers Park and Edgewater, as well as Lakeview and Lincoln Park, even as 17 remaining units in 1415 W. Lunt were auctioned off and hundreds of rehabbed and existing units languish on the market. Now, there were many projects that were already in the permitting pipeline for a couple of years that are now just being completed, and there are also numerous cancellations and deferrels of new projects, especially large buildings in Uptown and Edgewater that were slated to be completed by now, but haven't even been started and likely won't be for some time. So we have to wonder why so many owners are rushing to convert amidst some of the worst selling conditions in recent history.
Could it be that it has become just too unrewarding to be a landlord? A friend of mine owns numerous properties, both commercial and residential, in Uptown and on the west and south sides, and may be compelled to sell or redevelop by the escalating taxes, which are rendering his commercial property unprofitable and vastly increasing the load on the residential properties, a couple of which are running negative cash flows already. He assures me that this situation is very common among investment property owners. The taxes are particularly crushing on the commercial property, but the lower taxes on the residential properties are more than offset by losses from non-paying tenants who must be evicted, and legal expenses pursuant to tenant issues. Additionally, there are expensive repairs and improvements that must be done pretty much constantly for the apartments to be attractive to good tenants, and harrassment by city officials over minute code violations (nobody's perfect) is pretty much ongoing. All in all, the whole business of operating rental property has become all pain and no gain for this guy, and he is not alone.
Many people have remarked on the fact that Rogers Park alone has lost over 3,400 rental units to condominium conversion, and at least one of the aldermanic candidates in the last election openly advocated forcing landlords to allocate at least 30% of all units in large buildings to low-income housing. Another candidate proposed a one-year moratorium on all condominium conversions. These proposals are blatant violations of basic property rights, and like all such violations, they would only cause more problems than they solve, by forcing the slumification of good buildings and by triggering more conversions when it became legally possible to do them. Landlords will only be marking time to the end of the moratorium so they can unload the building completely along with stratospheric taxes,prohibitively expensive mandatory repairs, and unruly tenants that it costs a minimum of $5000 and four months of legal wrangling to evict. Only professional slumlords will find it rewarding to operate rental property.
So, instead of promulgating more socialized housing for ever-higher income brackets, as increasingly stratospheric taxes make housing, and life in general, less affordable for everyone who isn't in Paris Hilton's income bracket, why not work to reduce the tax load, present and future? What is the use of TIF-spurred "economic development", if the net result will be to erode the tax base while creating impossible business conditions for all businesses that don't receive some sort of Corporate Welfare in the form of tax abatements and TIF district "gimmes"?