Recently, a trend is emerging in the Los Angeles condo market, particularly in older buildings. Prices have declined from their peak, buyer demand has thinned, and yet rental demand remains strong. The result is a growing number of “accidental landlords”; condo owners who intended to sell, but instead are leasing their units because today’s resale math simply doesn’t meet expectations.
Prices Are Off Peak, But Renting Is Often the Better Financial Play
Condo values surged during the ultra-low interest rate period of 2020–2022. Since rates have risen, affordability has tightened considerably. As a result, many condo properties are trading below peak levels.
At the same time, rents across most Los Angeles neighborhoods remain elevated. When comparing a typical condo’s total cost of ownership to the cost of renting a similar property, renting is often materially less expensive than buying with a typical down payment. Higher mortgage rates combined with rising HOA dues, insurance premiums, and special assessments have pushed monthly ownership costs well above comparable rental payments. That dynamic has fundamentally shifted behavior for buyers or those who otherwise would.
The Deferred Maintenance Problem
For many older buildings, deferred maintenance has come due all at once. Compliance with California Senate Bill 326 (SB 326), which requires inspection and repair of exterior elevated elements such as balconies, has led to significant repair projects. Simultaneously, insurers are demanding roof replacements, electrical updates, and higher deductibles. Many have left the state or condo market altogether, reducing competition and elevating premiums on both HOA master and individual policies.
The outcome:
- Increased HOA dues
- Special assessments
- Insurance repricing
- Greater reserve scrutiny
When buyers analyze the full “all-in” cost of ownership, many conclude that renting a similar property is substantially cheaper and comes without the risks of assessments, capital expenditures, or HOA governance issues. That reality has materially reduced demand for older condo product. At the same time, values of older houses have not been affected in a similar way. This appears to be the case because living in an apartment building, while it may closely replicate condo living, is not a comparable substitute to living in a house. Additionally, maintenance for homes, while sometimes more costly than that of a fractional owner in a condo association, feels more controllable.
Lending has Become a Challenge
Financing is another pressure point. Lenders are scrutinizing HOA’s far more carefully than in prior cycles, and much more closely than they underwrite loans on houses. They evaluate:
- Insurance coverage levels
- Reserve funding
- Pending litigation
- Special assessments
- SB 326 compliance
In some cases, associations carry insurance policies that meet legal requirements, but fall short of lender underwriting standards. Loans that would have closed smoothly a few years ago are now being delayed or denied. Escrows are falling out over issues unrelated to the unit itself, but tied to the building’s financial and structural health. For sellers, this creates both uncertainty and fatigue.
Enter the Accidental Landlord
Many condo owners purchased or refinanced at historically low interest rates. They are not distressed. They are not overleveraged. And while resale values may be below peak, they often still have equity and manageable monthly payments.
When a listing doesn’t attract sufficient buyer interest or when an escrow collapses due to lending or insurance hurdles, the owner faces a choice: Cut the price materially to chase the shrinking buyer pool or lease the property and wait. More and more are choosing the second option.
I represent landlords and prepare leases, and I have already seen multiple examples this year where sales failed to gain traction or encountered lending/insurance complications, leading the owner to pivot toward renting the unit instead. In each case, there was no distress. It was a strategic decision to preserve equity and wait for more favorable market conditions.
Why This Trend May Continue
The underlying forces driving this shift remain in place:
- Renting is materially less expensive than buying in many LA condo submarkets.
- Older buildings face rising compliance and insurance costs.
- Lender scrutiny has increased.
- Most owners have low fixed-rate debt or a low purchase basis and can afford to hold.
Until buyer demand meaningfully increases; through lower rates, improved lending clarity, or renewed confidence in condo associations, many would-be sellers will continue sitting on the sidelines as landlords.
Alternatively, we may see change only if seller exhaustion increases; as owners tire of managing tenants, absorbing assessments, navigating HOA complexities, or the condo rental market materially weakens. Some lending options do exist for condos that don’t fit into the box perfectly for the big banks. For serious sellers, it is important to present those options to buyers early in the process.
For now, the condo market is not defined by distress. It is defined by hesitation. Inventory that might have come to market for sale is instead quietly entering the rental pool. This dynamic suppresses resale supply but increases rental availability, further reinforcing the rent vs. buy imbalance. As long as the financial logic favors renting vs. buying and, in many cases, holding vs. selling, the rise of the accidental landlord is likely to remain one of the defining themes of this cycle.
