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It’s not clear that condo units have higher long-term capex costs than single-family homes; arguably economies of scale make their capex lower as a percentage o

It’s not clear that condo units have higher long-term capex costs than single-family homes; arguably economies of scale make their capex lower as a percentage of home value. So the problem isn’t a problem of cost per se, it’s a collective action problem. The issue is that the buyers of condo units don’t really pay much attention to the condo association’s reserve balance. A current owner who contributes $1 to the reserve fund won’t see a corresponding $1 increase in the value of their unit. The increase, if any, will likely be a small fraction of that. So an owner who’s considering selling in the next few years - which is common, since the tenure of condo owners is lower than that of single-family homeowners - is rational to fight attempts to fund the reserve. They’re also rational to keep monthly condo fees as low as possible, since buyers do look at the fees. But that also makes preventative maintenance difficult.

ashtonkem 5y ago
Bigger condos often include shared facilities and industrial scale equipment that blurs that picture a lot. Not having a pool probably tips the scale in favor of individual houses in many cases. The lowest cost is probably shorter condo buildings without pools. These won’t include a lot of extra equipment that detached houses don’t use, can use closer to standard sized HVAC and water systems, and benefit from increased economies of scale over detached single family dwellings.
zippergz 5y ago
Right. As the owner of a single-family home, I control my destiny. Yes, I may pay more dollars to replace my roof than I would pay to replace the roof on a condo building. But I am in complete control of when it happens, who does it, and how it is done. In a condo building, I am at the mercy of my neighbors to agree to the repair and how it is done. And in any sufficiently large association, there will be at least a handful of people who will fight any expenditure at all (yes, this is rational for short-term owners, but in my experience it tended to be the long-time residents who were the loudest complainers...). Frankly, I don't have enough faith in humanity to put this kind of trust in a bunch of strangers.
salicideblock 5y ago
That problem is completely avoided in Belgian law, via the following rule: When you sell your fraction, you get the corresponding share of the reserves. When you buy a fraction, you must contribute the corresponding share of the reserves.
- toast0 5y ago
  If the buyer brings $X for the reserve, and the reserve gives $X to the seller, the reserve stays the same, and it's as if the buyer gave $X to the seller... Wouldn't that be tend to be reflected in the sales prices? A buyer may only be able to afford $Y, so the sales price would tend towards $Y - $X.
rsj_hn 5y ago
> It’s not clear that condo units have higher long-term capex costs than single-family homes; arguably economies of scale make their capex lower Economies of scale have to do with manufacturing identical units. Making 1000 is cheaper than making 10. But stacking units atop each other is not making identical units, so it is always cheaper to build 10 SFH than to build a single building with the same size 10 units stacked atop each other -- ignoring the extra price of land. When you go vertical, you need to set aside more space for services such as hvac and elevators. You need a stronger foundation. You need to deal with wind and earthquakes. You need to add emergency stairs in case the elvators go down. The walls have to be stronger, noise abatement needs to be added. You have systems in place to deal with vibrations. There is no attic in which to run HVAC. Air recirculation is a big concern in condos -- many don't even have windows that open, but they have enormous air filtration and pumping systems to get fresh air to all the units and maintain an air pressure difference. There are entire systems condos have to have that aren't even an issue in SFHs. And those systems require their own control systems, controlled by complex software and networks of sensors, with dedicated building staff to monitor and operate them. This is if nothing goes wrong. Thus the costs per livable square foot go up rapidly as you stack units atop each other, which is why you see condos only in places where land is very expensive. Everywhere else, it is cheaper to build a SFH. It is also why condos tend to be much smaller than SFH in terms of livable area per unit. In terms of maintenance, all those extra systems condos need are more failure points. Structurally, you have much higher stresses, which requires additional supports and more complexity. All of that increases the damage when there is a failure and increases maintenance costs as there are more systems to maintain. Even something as simple as washing windows becomes really expensive in a condo. Electrical and water repairs that are simple and fast in a SFH can become major engineering projects in a condo. More complex systems that are harder to service and more dependencies add up to higher maintenance costs to match the higher construction costs.

ashtonkem 5y ago

Bigger condos often include shared facilities and industrial scale equipment that blurs that picture a lot. Not having a pool probably tips the scale in favor of individual houses in many cases. The lowest cost is probably shorter condo buildings without pools. These won’t include a lot of extra equipment that detached houses don’t use, can use closer to standard sized HVAC and water systems, and benefit from increased economies of scale over detached single family dwellings.

zippergz 5y ago

Right. As the owner of a single-family home, I control my destiny. Yes, I may pay more dollars to replace my roof than I would pay to replace the roof on a condo building. But I am in complete control of when it happens, who does it, and how it is done. In a condo building, I am at the mercy of my neighbors to agree to the repair and how it is done. And in any sufficiently large association, there will be at least a handful of people who will fight any expenditure at all (yes, this is rational for short-term owners, but in my experience it tended to be the long-time residents who were the loudest complainers...). Frankly, I don't have enough faith in humanity to put this kind of trust in a bunch of strangers.

salicideblock 5y ago

That problem is completely avoided in Belgian law, via the following rule: When you sell your fraction, you get the corresponding share of the reserves. When you buy a fraction, you must contribute the corresponding share of the reserves.

toast0 5y ago
If the buyer brings $X for the reserve, and the reserve gives $X to the seller, the reserve stays the same, and it's as if the buyer gave $X to the seller... Wouldn't that be tend to be reflected in the sales prices? A buyer may only be able to afford $Y, so the sales price would tend towards $Y - $X.

rsj_hn 5y ago

> It’s not clear that condo units have higher long-term capex costs than single-family homes; arguably economies of scale make their capex lower Economies of scale have to do with manufacturing identical units. Making 1000 is cheaper than making 10. But stacking units atop each other is not making identical units, so it is always cheaper to build 10 SFH than to build a single building with the same size 10 units stacked atop each other -- ignoring the extra price of land. When you go vertical, you need to set aside more space for services such as hvac and elevators. You need a stronger foundation. You need to deal with wind and earthquakes. You need to add emergency stairs in case the elvators go down. The walls have to be stronger, noise abatement needs to be added. You have systems in place to deal with vibrations. There is no attic in which to run HVAC. Air recirculation is a big concern in condos -- many don't even have windows that open, but they have enormous air filtration and pumping systems to get fresh air to all the units and maintain an air pressure difference. There are entire systems condos have to have that aren't even an issue in SFHs. And those systems require their own control systems, controlled by complex software and networks of sensors, with dedicated building staff to monitor and operate them. This is if nothing goes wrong. Thus the costs per livable square foot go up rapidly as you stack units atop each other, which is why you see condos only in places where land is very expensive. Everywhere else, it is cheaper to build a SFH. It is also why condos tend to be much smaller than SFH in terms of livable area per unit. In terms of maintenance, all those extra systems condos need are more failure points. Structurally, you have much higher stresses, which requires additional supports and more complexity. All of that increases the damage when there is a failure and increases maintenance costs as there are more systems to maintain. Even something as simple as washing windows becomes really expensive in a condo. Electrical and water repairs that are simple and fast in a SFH can become major engineering projects in a condo. More complex systems that are harder to service and more dependencies add up to higher maintenance costs to match the higher construction costs.