The number of apartments declared eligible by the District of Columbia for conversion to condominiums has risen dramatically in the last year, threatening to squeeze out of the city many middle-income people who cannot afford to buy apartments they now rent.
In 1978, the city government approved 10,481 rental apartments as eligible for conversion -- nearly 15 times the 1977 figure -- according to city housing records.
Such approval is only an initial step leading to conversions, but it signals the potential for a dramatic change in the city's housing market that has alarmed both tenant organizations and city officials.
Conversion approval was granted for 114 buildings, most of them in neighborhoods near downtown Washington.
"Right now, we're looking at the apartment buildig like the dinosaur of prehistoric times," said John T. O'Neill, executive vice president of Washington Apartment and Office Building Association, a lnadlords' group. "It's becoming extince," he said.
Ivanhoe Donaldson, Mayor Marion Barry's general assistant, said he considers the level of condominium conversions and the decrease in the city's supply of rental housing to be a critical problem that is putting the middle class under tremendous pressure.
Landlords say that conversions are a financial lifesaver for old apartment buildings as the landlords try to survive under D.C. rent control laws and escalating operating costs.
Developers stand to make tens of millions of dollars on the conversions in the next several years; they make a minimum of several thousand dollars in profits for each unit that is converted.
The condominium movement, which has counterparts in some suburban neighborhoods as well, likely could transform downtown Washington neighborhoods. "All of Washington could soon look like the upper East Side of New York City," one housing expert said.
The conversion movement parallels another housing phenomenon going on in the District, the rehabilitation of older housing by upper-income people. The neighborhood-by-neighborhood spread of such rehabilitation work, and the consequent increase of housing prices, has forced out of the city many poor people who have lived here for years.
If all the apartments approved for conversion last year alone complete the conversion process, the number of condominium units in the city could more than double.
City records show that the actual conversions of almost 2,000 apartments began last year -- five times the 415 conversions registered in 1977.
The condominium movement, coupled with additional conversions to cooperatives and apartment hotels, means that "we're literally being wiped out, one way or another," said Ann Loikow, a tenant who is also chairman of the Foggy Bottom Advisory Neighborhood Commission.
"All you need to do is to go to a [tenants] meeting and talk to them," she said. "There's panic."
Many apartment renters say they cannot come up with the large down payment required to purchase their apartments after conversion. And many other renters who say they are committed to living in the city say it is unfair to face the choice of buying now or moving out of the city.
Condominiums can vary wwidely in price, from $30,000 for small units in fringe areas to more than $200,000 for luxury units in expensive areas.
For example, such neighborhoods as Foggy Bottom or the West End, Georgetown, the Connecticut Avenue-Cathedral Avenue area and Dupont Circle are particularly popular now, according to G. V.(Mike) Brenneman, the head of Brenneman Associates, a firm specializing in condominiums and cooperatives. He called Dupont Circle "Hotsville U.S.A." right now.
Many developers contend that the displacement issue is false because, they say, most of the tenants displaced have relatively high incomes.
"These are tenants who can afford to move somewhere else," said Brenneman, adding that there is a difference between displacement of middle-income tenants because of conversions and the much-publicized displacement of poor people.
O'Neill, of the Apartment and Office Building Association, estimated that the city is losing about 2,500 rental apartments a year. In addition, he said the only rental housing built in Washingtin in several years has been that subsidized by the federal government.
"The only people wanting to but it (apartment property) are people intending to change its use." O'Neill said.
City records show that three buildings on California Street NW, just off Connecticut Avenue across from the Washington Hilton, have been registered for condominium conversion and five have received certificates to convert -- representing more than half the residential buildings in a twoblock area.
Sharaine Lear, a high school teacher who lives in a California Street condominium, says, "On the whole, I'm happy we were able to buy but it's really a shame how the neighborhood has been transformed over the last 3 1/2 years. There used to be such nice families with children -- Jamaicans, blacks, Latinos, South Americans. It's pretty antiseptic now."
Malcolm E. Peabody, a realtor, owns a California Street building, called California House, that includes both condominiums and rental apartments. Peabody has a certificate to convert the entire building, but he said he hasn't yet decided whether he will do so. He also owns another building on the street that he is converting.
Peabody said economics is making him consider the changes.
"A number of us would prefer to be in the rental business," he said, "but the rental business is going out of style because of rent control. We have the harshest rent control law in the country in D.C."
Peabody said he bought California House in 1974 for $1.2 million, and since then it has been making "almost no money," he said. He is spending more than $1 million to renovate the condominium side of the structure, and the result is what he considers a "successful" project whose units sold at prices ranging from $65,000 to $125,000.
Rozanne Weissman, a free-lance writer, said she is striving to raise a downpayment for a house before her New Hampshire Avenue building is threatened with conversion.
"First, the poor, the black and the elderly were pushed out of D.C. Now, many middle-class people are being pushed out," said Weissman, a self-described "city person" who said she would rather move to New York than to the suburbs of Washington. "This will be a city solely of the very poor and the relatively wealthy... There is no conceivable way I can pay 20 percent down plus $800 to $900 a month for a lousy apartment. There is nowhere else to go if you live alone and you haven't owned a house before."
Many landlords apply for the certificates of eligibility from the city's housing department without immediate plans to convert their buildings. They do so to protect themselves and to enhance their building's value in case the city imposes a moratorium on conversions, as it did five years ago.
The supply of rental housing in Washington is being reduced not only because of condominium conversions, but also because of conversions of rental apartments to cooperatives, a form of homeownership in which residents own shares in a corportation that owns their building.
City housing figures show that the owners of 19 buildings, containing 2,952 units, were approved for cooperative conversion last year. Many of those owners also received permission to convert the same buildings to condominiums.
In addition, Rental Accormmodations Office staff members and Advisory Neighborhood Commission representatives say the conversion of apartment buildings to hotels or so-called "apartment-hotels" that provide shelter for transients also are on the rise.Some ANCs are trying to persuade the city zoning commission to restrict such conversions.
In 1974 District officials, alarmed at the number of people displaced by condominium developments, imposed a moratorium on condominium conversions that lasted two years.
In its place, the City Council passed legislation that limited the conversions to "high-rent" buildings or to buildings where a majority of the tenants agreed to the conversion. Under existing legislation, high-rent buildings are those, for example, where efficiency apartments rent for more than $221 a month, and where apartments with three or more bedrooms rent for more than $408 a month.
In part because these rents are not all that high today, many more buildings have become eligible for conversion in the last couple of years.
Benny L. Kass, a lawyer specializing in real estate who also is helping tenant groups trying to buy their buildings, said he thinks the conversions present a "fantastic hardship" for renters.
"The bottom line is that rent control, either rightly or wrongly, has created a low-rent structure for luxury housing," Kass said. "In New York, people would have been paying $700, $800 a month for some of these apartments. Here, they're paying $300, $400."
When such buildings are converted, Kass said, tenants find that the closest thing to comparable luxury housing that they can afford is "way out in the suburbs, like in Manassas or Gaithersburg," he said. And living in the outer suburbs is not their preference, many tenants say.
Tenants have some orotections under city law. For example, they must be given 120 days' notice of an owner's intention to convert. In addition, if a landlord plans to sell his building, he must first give tenants 30 days in which to organize a tenants association and 90 days to negotiate and come up with a contract to purchase the building themselves. Some tenants also qualify for moving expenses if their building is converted.
Attorney Kass said, however, that some of these laws provide meaningless rights. For example, he said, it is almost impossible for tenants associations to raise enough money to purchase their buildings within 90 days.
New D.C. housing director Robert L. Moore said his department is working on a program that will provide technical assistance and financing to tenants who want to purchase their buildings.
The profits developers are making vary. One developer said, for example, that he expects a profit, before taxes, of at least 15 percent of the ratail sales of the building. That means that if the condominiums sell for a total of $5 million, he expects a profit of at least $750,000. "Otherwise, he said, "I wouldn't touch it. I'd walk out."
Another developer, saying that conversions are a risky business like playing poker, also said he would not begin a project unless he felt he was going to make a profit of at least 15 percent. Often, he said, "you end up with less than you originally planned."
A third developer, however, said that most often profits are 8 or 9 percent. "I would say that 15 percent is on the high side, 10 percent is really neat if you can get it, but most of us get around 6 to 8 percent," he said.
Developers of condominiums usually offer tenants already in a building discounts on purchase prices -- sometimes 5 to 10 percent off the regular price offered to the public -- if they purchase their units as condominiums. Some developers also help relocate their tenants who do not wnat to buy, or provide moving expenses.
The new homeowners, developers say, often are people who cannot yet afford a single-family house in the District, or else order people whose children no longer live at home. They often are people who earn enough money to need the tax benefits that homeownership provides.
By a large margin, condominiums in the District are the result of conversions of older buildings rather than new construction, unlike nearly all the suburban jurisdictions. There were 656 condominiums registered as new construction in Washington last year, city records show.
A report by the Metropolitan Washington Council of Governments last July said there were 58,685 condominiums -- both new and conversions -- in the Washington area.
Iin the District, there were 4,899 converted units and 1,888 new units, the report said. The jurisdictions with the largest number of condominiums were Fairfax County, with 10,407 new units and 3,216 converted units, Montgomery County, with 5,627 new units and 5,327 converted units, and Prince George's County, with 4,686 new units and 4,853 converted units.