Two-family house

Two-family house

Condos for sale

Condos for sale

Everyone knows what condo conversion is, right? It’s when an owner changes a multi-unit building from a one-owner property to condominiums deeded by multiple owners. Typically, this would be taking an apartment building and selling off each unit, separately, as condos.  In Somerville — the land of two-family or three-family houses — it means turning a property that had one, two or three rental units into a property that has two or three separate owners.

Somerville has had a condo ordinance for as long as I’ve been working here. (I started in 1992). There is a board that reviews condo conversion applications.

The old ordinance:

There was a huge loophole in the old rule. The old ordinance required that tenants be given a year’s notice, if the building was going to be converted to condos. Low-income, elderly, or disabled tenants were given two year’s notice.  However, if the property was vacant, that satisfied the ordinance.

So, guess what happened? Right. Tenants were asked to leave before the owners applied for condo conversion. Some of these tenants got a year’s notice; many did not.

What has the Somerville City Council done, and how does it affect homeowners?

The City Council closed that loophole that allowed owners to vacate the property, then convert to condos.

Now, unless a lawsuit derails the new ordinance, conversion begins one year after the owner applies to convert. The owner can give a year’s notice to the tenants and apply at that point; or the owner can apply, then leave the property vacant for a year. It’s their choice.

Additionally, the City Council is protecting tenants who are low-income, elderly, or disabled by extending the notice from two years to five years for them.

More tenant protections:

  1. Right to purchase: The tenants now have the right to purchase the property. How does that work? If the seller of the property gets an offer, the tenant, or the tenant’s designee, has the right to match the offer on the table and buy it. There is a timeline for the buyer to complete the purchase. It’s 120 days, or 180 days for low-income, elderly, or disabled people. A typical purchase takes about 45 days, so this is a bit longer.
  2. Relocation expenses: Owners will pay $6,000 relocation expense to tenants they ask to vacate for condo conversion. Owners will pay $10,000 for low-income, elderly, or disabled tenants’ relocation.

These provisions were supposed to go into effect July 31. Now, they are pending a court hearing on August 15.

Reality check:

Here is a quick taste of what property sale prices look like in Somerville.

Two-family and three-family houses:

Year                average sale price(rounded to $1K)                  price per square foot

2015              $932,000                                                                  $310

2016              $956,000                                                                  $333

2017              $1,129,000                                                              $392

2018              $1,205,000                                                              $409

2019 so far   $1,433,00                                                                 $403



2015              $592,000                                                                  $489

2016              $635,000                                                                  $527

2017              $699,000                                                                  $567

2018              $788,000                                                                  $626

2019 so far   $791,000                                                                  $652

See why there’s an incentive to convert to condos? See why Somerville did something about it?

Expected result of these legal changes:

Fewer tenants will be forced out of their rentals with less than a year’s notice. Fewer tenants will find themselves needing to scramble for first-month, last-month, security, and/or rental broker fees if the owner of their apartment decides to convert.

The timeline for condo conversion will be a full year. This will discourage investors who want to flip two-family and three-family houses into condos. This will slow down the market for investors who are flipping properties in Somerville. The result: fewer condo conversions of two-family and three-family houses. However, anyone who has been buying the past five years will agree that a reduction in demand would be a welcome change in the Somerville market.

  1. Discouraging investors will open the door for people who want to buy two-family and three-family houses to live in.
  2. The ordinance will slow down the drain of rental properties in town. Few condos are rented; most are owner-occupied. Two-family and three-family houses mostly have one, two, or three apartments for rent.
  3. The longer waiting period for condo conversion may slow down the increase of sale price for two-family and three-family houses. With the current rate of inflation on those properties, I see this as a correction, not a tragedy.