On the latest episode of the South Florida Roundup, WLRN鈥檚 Tim Padgett spoke with Sandra Einhorn, the executive director of the Coordinating Council of Broward, and Tom Hudson, WLRN鈥檚 Senior Economics Editor, about the condominium crisis in South Florida.
Amid stricter restrictions for Florida condominiums taking effect Dec. 31, the values and sales of South Florida condos are dropping.
This summer, condo sales fell as much as 7% in Miami-Dade, Broward and Palm Beach counties. Meanwhile, the number of condos for sale jumped 60% in Miami-Dade, which will likely have an impact on its values. In Broward, median prices have dropped.
Some blame new state condo laws, which changed in response to the Surfside condo building collapse of 2021, as the culprit for the dropping numbers.
READ MORE: Old condos crowd the market for sellers in South Florida as post-Surfside reforms loom
Below are some highlights of the conversation:
Padgett: Sandra, I want to start with you here because you鈥檙e in Broward, and one of the most recent examples of the new condo gloom we鈥檙e seeing here is in Pembroke Pines 鈥� specifically a complex called Heron Pond Condominiums. Thirteen of the property鈥檚 19 buildings have been declared structurally unsound. This is hardly the first case; it won鈥檛 be the last. But it seems to capture the South Florida condo zeitgeist 鈥� that sense that decades of complacency if not negligence has come home to roost. Is that a fair take?
Einhorn: Absolutely. What do you do when economic impact and safety come to a head? And we're seeing that now with the impacts and the implementation of the condo laws.
Padgett: We should point out that, because the Heron Pond buildings are only two stories, the complex is not subject to the new state condominium law you just mentioned, which issues several new safety regulations. But still, Sandra, does it illustrate that lax attitude toward condo complex maintenance that we鈥檙e suddenly having to confront 鈥� and which may be driving a lot of people out of the condo market now?
Einhorn: Of course. Naturally. I mean, these new condo laws and specifically with that development in Pembroke Pines, I think it shows just how widespread this issue is. This isn鈥檛 for high rises. We're talking about most of our housing product [which] was built in the 鈥�50s and 鈥�60s and '70s. I think that we're going to find the most vulnerable to be the ones that are most impacted, meaning folks that, as they were getting older and they wanted to downsize, [they] decided to move into condos and perhaps they've paid off their condos. So, maybe their overall housing costs have gone down, but their income has also gone down as they've gone into retirement and they're relying on some of their social security and things like that. It now becomes a situation where those that were prudent and thinking, 'okay, I know that in the future, I'm not going to have as much disposable income. Let me decrease my cost of living now,' put in a position where they're stuck between a rock and a hard place. What are they going to do and where are they to go?
Padgett: Tom Hudson, walk us through how bad the situation looks right now for the condo market here, especially the emerging sales data that I know you've been doing a lot of reporting on.
Hudson: The condominium market is shaky right now. The hard and fast reality is that the older the condo, the more vulnerable it is to this reckoning, the less financial or fiduciary responsibility that associations have had throughout the course of the past decades, the more vulnerable it is to falling values. Two months ago, a Republican Florida House member told me she was telling people not to buy a condominium in Florida. Now imagine, any Florida politician, regardless of property, telling somebody to hold off on buying a condominium in Florida. That is a remarkable statement and admission about how shaky and uncertain the market is.
Padgett: Tom, about that big deadline that鈥檚 looming, Dec. 31, when a lot of these regulations for structural soundness and financial reserves [will be assessed]. What do you think is the biggest issue that鈥檚 really spooking condo owners and associations when they are looking at that deadline and on to 2025?
Hudson: It's the certainty that there's an assessment coming and the uncertainty of 鈥渉ow much is it?鈥� And, it is affecting owners, regardless if they have a mortgage or not. How much is it going to draw away from the equity that they may have built up into a condominium? And, for potential condominium buyers, how much is that special assessment going to require a haircut on the offer that they're going to make to try to purchase a condominium? This is a bit of a slow motion reckoning that is now picking up steam as we move to the end of December. The long tail effects of this in this condominium market in 2025 and 2026 obviously are going to remain to be seen, but it is going to likely be in this market for some time.
Einhorn: It's unprecedented volatility. I think that we could make assumptions, but even above and beyond the assumptions, it's not a question of 鈥渋f,鈥� it's a question of 鈥渉ow many.鈥� How many people are going to have to walk away from their condos simply because they're not going to be able to afford the assessment? The retail value has dropped so significantly that there might not be an option to sell those units. What becomes of the people that have to walk away and for those unoccupied units?
Padgett: Tom, looking ahead at the new state legislative session next year, people like Miami Dade Mayor Daniella Levine Cava are urging legislators to prioritize this issue and maybe, tweak or reform the reforms that they passed last year. Do you think it will happen?
Hudson: I do think it's gonna get a lot of attention and there will probably be some legislation in here. Maybe not easing the reforms, but perhaps kind of acknowledging the fact that there's a lot of reforms put in place after a number of years of ignoring the reforms that were necessary. The legislature will have seen three months of experience with the reforms in place. I think there will be places that they're going to look to tweak. But also the insurance industry is going to be watching to make sure that the overall accountability remains very strong.
The transcription has been edited for brevity. You can listen to the full conversation above or wherever you get your podcasts by searching: The South Florida Roundup.
