Changing Rates of Return on Rental Property and Condominium Conversions

In the 1970s about 350,000 housing units in multi-family structures in the US were converted to a condominium or co-operative form of ownership. This paper shows how changes in both rents and housing prices influence the expected rate of return on rental property and therefore the probability of conversion. A minimum logit chi-square model was applied to data from 34 metropolitan areas to estimate the effects of these changes. The evidence suggests that changes in housing prices had a greater effect on conversions than changes in the expected net return on rental property.