In an era where the dream of homeownership feels increasingly out of reach for many Americans, condominiums—once a viable path to owning property in pricey urban areas—are facing their own crisis. According to a detailed analysis published in The Atlantic, the production of new condos has plummeted since the Great Recession, leaving aspiring homeowners with fewer options amid soaring housing costs. This decline, the article argues, is not just a market fluctuation but a policy-driven problem that threatens the nation's long-standing goal of widespread ownership.
Historically, the single-family detached home served as the entry point to homeownership for most Americans throughout the 20th century. But as prices in major cities have skyrocketed, many have turned to condos, which allow individuals to own their unit while sharing common areas like lobbies and grounds. These structures make efficient use of limited urban land, often costing far less than standalone houses. In coastal hotspots like San Francisco and New York, condos have been essential for middle-class families seeking stability without the burden of full-property maintenance or landlord dependencies.
The roots of condominiums in the U.S. trace back to Latin America, where they were already common before crossing borders. In 1958, Puerto Rican legislators became the first in the U.S. to codify condo ownership into law, inspired by regional models. The concept quickly gained traction on the mainland, particularly in Florida during the mid-20th century, where it attracted affluent retirees with promises of amenities and freedom from rental hassles. By the 1970s, single women drove much of the national demand, drawn to the safety, community, and job proximity that condos offered over sprawling suburbs.
The 1980s saw another surge as childless middle-class professionals flocked to cities, snapping up condos and building equity in rental-dominated urban landscapes. This momentum peaked in the early 2000s, when developers constructed hundreds of thousands of new units annually. Around 2005, nearly half of all new multifamily housing was built as condos for individual sale rather than rentals, helping to expand supply and moderate prices across the country.
That boom came to an abrupt end with the housing crash of 2008. While overall housing construction dipped sharply during the Great Recession, condo production suffered disproportionately and has failed to rebound. In many large cities, including those on the coasts, new condo builds have virtually halted, pushing families to either stay in rentals or relocate to more affordable suburbs. "Large cities have generally stopped building them, forcing more and more urban families to either remain renters or depart for the suburbs," the Atlantic piece states.
Several barriers have contributed to this stall. American zoning laws, which often outright ban multifamily housing in suburban areas, pose a fundamental challenge. By one estimate cited in the article, fewer than a quarter of residential zones in many cities permit anything beyond single-family homes, requiring lengthy rezoning battles for any apartment project. Condos face extra scrutiny: Developers must secure approval to subdivide buildings into separate legal parcels, a process rife with negotiations that can lead to demands for infrastructure upgrades or community contributions.
For instance, in West Los Angeles, one developer building four condos was required by the city to fund street widening, while a neighboring project of five rental units escaped the mandate. This added tens of thousands of dollars to the condo project's costs, according to the analysis, often tipping the scales toward converting plans to rentals instead. Federal tax policies exacerbate the issue; investors financing apartments for rental pay capital-gains taxes up to 20 percent upon sale, but those selling off condo units face income taxes as high as 37 percent.
Post-recession changes in lending and construction regulations dealt further blows. Stricter federal mortgage standards made it harder for condo buyers to secure loans, while buildings faced burdensome compliance requirements. Thousands of condos were effectively blacklisted and unsellable for years, even after regulators eased some rules in 2019. Additionally, a wave of litigation over construction defects—fueled by laws from the late 1990s onward—has prolonged disputes, inflated insurance costs, and held developers liable, deterring new projects.
In Colorado, for example, the number of active condo developers dropped by 84 percent in the 15 years following the recession, partly due to stringent defect laws enacted earlier. Once a hub for condo development, Denver now sees nearly all multifamily projects as rentals. There, the median home price stands at nearly seven times the median household income, making ownership elusive for many. In San Francisco, condo production lags far behind rental builds, despite the city's density demanding more homeowner pathways. New York has fared slightly better, with output at about 50 percent of its mid-2000s peak, though still trailing overall housing growth.
The article draws contrasts with Canada, where condo construction thrives despite similar historical zoning biases toward single-family homes. In Vancouver, most new multifamily units are condos, compared to Seattle's rental-heavy output just across the border. Researchers attribute this to Vancouver's tax incentives against rentals, lighter litigation burdens, and easier access to federal financing. British Columbia allows developers to use up to 25 percent of presale deposits for construction costs, slashing reliance on pricier loans. Washington State, by contrast, caps this at just 5 percent—generous by U.S. standards but still restrictive.
"Canada’s experience suggests that America’s condo crisis is a policy choice, not an inevitability," the Atlantic authors write. This abundance-oriented approach, echoed in booming condo markets in Hong Kong, Singapore, Taipei, Cairo, Kuala Lumpur, and São Paulo, prioritizes supply creation over rationing existing stock. In the U.S., demand chases scarcity, inflating prices and narrowing ownership opportunities.
Signs of potential reform are emerging. In California, the State Assembly recently passed A.B. 1406, sponsored in part by the housing advocacy group California YIMBY, to broaden presale financing options and reduce construction costs. Lawmakers there are also eyeing tweaks to construction-defect laws for better balance. Similar efforts have advanced in Colorado, Hawaii, and Washington, aiming to revive condo markets without compromising quality standards.
The piece includes a personal anecdote highlighting global differences. A few years ago, the mother-in-law of one author, Tara Nolan, purchased a condo in a still-under-construction building in Guatemala City. She put down 25 percent via escrow, aiding the project's financing alongside dozens of other buyers. The reputable developer's building is set to finish next year, part of a wave transforming the city for its rising middle class. "Young middle-class Americans should be so lucky," the article concludes, underscoring the irony.
As housing affordability debates intensify, the condo decline underscores broader tensions in U.S. policy. With homeownership rates stagnating—particularly among younger and urban demographics—experts warn of widening inequality if multifamily ownership paths aren't restored. Policymakers at federal, state, and local levels face mounting pressure to address these regulatory hurdles, potentially drawing lessons from international successes to keep the American dream within reach.
While some developers and local officials defend strict rules as necessary for community protection and fiscal responsibility, advocates like those at California YIMBY argue the status quo only entrenches renter majorities in cities. No major conflicts in data emerge from available analyses, but the path forward hinges on legislative momentum. For now, as prices climb, the condo—once a bridge to ownership—remains a fading fixture in the American landscape.