In the late 1970s, it was condominium buying fever. Then the market crashed, and now it's condominium reassessment fever.
In the wake of a sharp drop in condominium values, especially on the Westside and in the San Fernando Valley, condo owners are queuing up to get their property taxes reduced.
In response to their requests, the Los Angeles County assessor's office is checking the resale values of 26,200 condominium units, including nearly 19,000 in the Westside and 4,200 in the valley.
After processing the first several hundred requests, officials predicted that reductions would be given on one-half or more of the units reviewed.
Thus far in the Westside, reductions have ranged from 10% to 30% of the assessed property values, according to Dan Gould, senior appraiser in the assessor's Culver City office.
On a $150,000 condominium, a 10% decrease in assessed value would reduce the owner's annual tax bill by $150.
It's no substitute for lost equity, but the prospect of lowered property taxes seems likely to take some of the sting out of lost property value.
Proposition 13, approved by California voters in 1978, fixed property taxes at 1% of 1975 market value, with annual increases limited to 2%. New or resold properties are taxed at 1% of their sale price.
Letters to Condo Associations
"The Proposition 13 rates are ceilings, not floors," said County Assessor Alexander H. Pope. "Nothing says the assessed value has to increase 2% each year or that the assessment cannot go down when there has been a decline in value."
Pope, who in June sent letters to all condominium associations in the county suggesting that they apply for reappraisal if property values have declined, said he hoped that "expectations are not raised too high by this process."
"There seems to be a tendency on behalf of some to think of themselves as having lost money on their condominiums," Pope added, "when in fact all that really has happened in many cases is that they have not kept up with inflation."
He said that the pending reappraisals will have only a "minimal" effect on county revenues. Property owners who responded to Pope's letter represent 18% of the 145,000 condominiums in the county.
The assessor said the most likely candidates for reductions are condominiums purchased between 1980 and 1982, "when the market peaked and after which values went down pretty rapidly."
Pope said that the decline in values "usually gets the attention of owners when someone who paid $150,000 during the peak period notices that an identical condominium sold recently for $140,000."
Of all areas of the county, the Westside was hardest hit by "condo-mania," a rash of condominium development, according to Mark Ryavec, Pope's special assistant.
Pope said that the high cost of Westside land has priced many people out of the market for single-family homes, and thus has encouraged condominium development as a more affordable alternative.
"The farther west of the San Diego Freeway you get, the smaller the number of people who can afford those (single-family) homes," he said. "You could build three or four condo units on the same amount of land," he said, making condominium housing more widely affordable.
Developers, lured by the fast escalation of real estate prices in the late 1970s, built an oversupply of condominiums in the Westside, according to local real estate brokers. Many high-rise projects, most notably on the Wilshire Boulevard "Gold Coast" between Westwood and Beverly Hills, were geared to the luxury market and were priced as high as $11 million.
"The absolute peak was the summer of 1980," according to Gould. Buyers who purchased condos at that time, when prices were at an all-time high, "almost certainly" will be entitled to a reduction in their assessments, Gould said.
The Westside condominium market collapsed in 1981 with soaring interest rates that brought real estate sales almost to a halt.
Since that time, sale prices have dropped about 15% on units selling for $200,000 or less, 30% on more expensive units and as much as 50% in the luxury category, according to local brokers.
Hardest hit by the downturn, said a spokesman for the California Building Industry Assn., were apartment complexes converted to condominiums. Many converted units lacked the amenities of newly constructed condominiums and "couldn't compete when the market became tight," he said.
Pope said that the response to his letter inviting reassessment requests confirms that most of the decline in values took place in the Westside and in the valley.
The 18,906 Westside condos under review are in 266 buildings in areas including Santa Monica, Culver City, Hollywood, West Hollywood, Marina del Rey and the Wilshire Boulevard "Gold Coast," officials said.
Some Westside reassessments were sent out before the Dec. 10 tax bill deadline, and more will be sent out by the April 10 deadline, Gould said. He said that depending on the staffing available, he hopes all the reassessments will be completed by June.
Officials said that when they get a request from one condominium owner for a reassessment, they check the entire complex. They almost never visit the complexes, but make their decisions based on computerized records of recent sale prices.
Those dissatisfied with the assessor's decision have the option of turning to the Assessment Appeals Board, which is appointed by county supervisors and is independent of the assessor's office.
A spokeswoman at the board's office said there has as yet been no surge of appeals from condominium owners and that the number of appeals filed annually has remained at 10,000 for several years.