Over the last year and a half, Chicago has seen scores of condo buildings deconverted into apartment complexes, as investors have seized on the growing appetite for rental units in the city.
While that trend has appeared to have slowed slightly, the City Council’s Housing and Real Estate committee unanimously approved a measure Wednesday that would make it more difficult for investors to deconvert properties.
The state now requires 75 percent of a building’s condo owners to approve a bulk sale of the units. The ordinance, proposed by Alderman Brendan Reilly, pushes the city requirement to 85 percent of owners.
“That’s a much higher threshold of approval. It’s hard to get 85 percent of people to agree on anything,” said Joe Smazal, an Interra Realty broker who said he thought the ordinance would reduce the number of deconversion closing in Chicago.
The amendment, Section 13-72-085, will go before the full City Council next week.
Brokers and investors have anticipated the move, pushing deals to completion in August and through this month, according to Jim Hanson, a principal at Avison Young. He wrote an analysis of Chicago deconversions last year.
“People are trying to hurry up and get them done with current rules in place,” said Hanson.
Steven Livaditis, an Essex Realty broker, said the new measure, if passed, “will definitely impact deconversions.” Livaditis has advised on at least 15 Chicago deconversion deals. “I don’t think it’s likely that deconversions will go through” as easily, he said.
Illinois’ 75 percent requirement is actually low, compared to other states. It favors investors and infuriates condo owners who are forced to sell their units. But the rate is not unprecedented, and is matched by Wisconsin, among others. Approval rates in Florida, Arizona and Texas stand at 80 percent of condo owners.
“The current trend to deconvert condominiums into rental apartments has many owners worried, particularly long-term owners who fear that an investor-promoted purchase could leave them without a home,” said Alderman Michele Smith, in an email to constituents about the vote.
The deconversion trend began with small deconversions in the suburbs before migrating downtown. That brought in large investors, who began buying up condos in a weak market, and then deconverting them, according to Gail Lissner, managing director of Interra Realty in Chicago.