Events

Prof. Leah Brooks
Associate Professor in the Trachtenberg School of Public Policy and Public Affairs
George Washington University

Although condominiums account for more than one in three new housing units in major urban areas, and although they are the primary option for increasing the supply of owner-occupied housing in cities, we know very little about how the internal economics of condominiums shapes urban outcomes. We posit that condos present a trade-off between the benefits of economies of scale in the provision of maintenance and consumption of land, and the costs of collective action in maintenance contributions and decisions. We further hypothesize that these collective action problems should be particularly severe for low-income owners, whose greater liquidity constraints may limit maintenance contributions. Consistent with this, our review of housing policies around the world indicates that governments view collective action costs in condominiums as an important issue and that many introduce institutional solutions to mitigate collective action problems for low-income owners. We use property-level data from two of the largest US counties to show that condos have less maintenance and appreciate less rapidly than single-family homes. Overall, our results suggest that the collective action problem in maintenance fundamentally distinguishes condominium units from structures with a single owner, and that this difference is particularly notable for low-income owners. Thus, these results suggest that without government intervention, condominiums are not an attractive form of ownership for low-income people.