For many, condominiums (condos) are the answer to many questions that accompany California’s housing woes.

First, condos present densities that are higher and more satisfying to those obsessed with planning and smart growth.  Local elected officials, purportedly, like condos.  But, many builders worry that if it was true affection these elected officials had for this housing type they’d figure out how to hold development costs down.  More on those costs later.

Secondly, condos provide homeownership, which is preferred over renting.  That is, what’s most associated with the American Dream is property ownership.  Condos, while not exactly like single-family living, provide that equity opportunity we as a nation are so smitten with.

Thirdly, condos encourage downtown living and, thereby, avoid the more suburban development that means tearing up open space and farmland (whether the farmland is productive or not), and promoting far-away automobile travel.  By that thinking, condos are more environmentally friendly and “sustainable” than other forms of homeownership and should, therefore, be more desirable.

Lastly, theoretically, condos are more affordable – at least they have that potential.  Think about it:  condos are almost always multifamily and occupy less space per unit than traditional single-family homes.  That means builders can fit more people in condos and their residents can better enjoy the economics of real estate.  More (economy) is less (cost), right?

So, why are new condos just 7% of multifamily housing construction, according to a recent survey?  At the turn of the century, they were 22% of the market.  One reason for the slide in condo production is relatively good news:  today’s rental market is strong.  This is usually rewarding for real estate – it generally means there are more people in the market, shopping for a place to live.

Also affecting construction of condos is they aren’t being built in the areas where entry-level buyers want to or can afford to reside.  Today’s small supply of condos being constructed tend to be luxury units, often in pricey cities and well out of reach for many first-time buyers, according to the national homebuilding association.  Hence, a dampening of demand is a cause of fewer units being built.

In addition, despite landmark legislation last decade, condo builders are still skittish about construction-defect lawsuits.  Condos have been a magnet for construction-defect claims because of the concentration of residents in a few buildings, making them more attractive to plaintiff’s attorneys shopping for clients.  SB 800, which passed in 2002, gives homebuilders the right to repair a problem before it becomes a complaint in court.  Thought by builders to be a breakthrough, lawyers have reportedly found ways of getting around the law.

Also, not surprisingly, the recent real estate downturn dampened demand for housing – generally, and for riskier condos as well.  Many people lost their homes to foreclosure during this period and even more saw home prices plunge, making them less willing to take a chance on buying.  “People looked at what happened to their friends and their parents, and used that as a gauge of whether to enter the market,” says a well-known housing economist. “You may not have owned a home, but you saw your parents or your buddy get killed in the housing market.”

At about the same time, lenders tightened their credit standards, so it became much harder to qualify for a mortgage.  Most of those standards are still in place today so many have simply chosen to rent instead of buy.

Finally, condos aren’t that affordable anymore.  Fees and other locally imposed base costs have grown significantly and elected officials are nowadays simply asking too much of builders.  Moreover, a plethora of environmental lawsuits are affecting the market for condos, driving up costs.  To neighborhood groups with NIMBY (“not in my backyard”) tendencies, any multifamily housing – rental or ownership – is objectionable.  So they sue.  Simply put:  an amassing of extraneous costs have put condos out of reach for many first-time homebuyers.

Local elected officials ought to stop discouraging condominium construction and start looking at ways to incentivize it.  The condo market can rebound but only if locals really want the product.  Right now it doesn’t seem that way.