Setting a record, nearly 9,000 condominiums were sold in San Diego County last year with about 5,000 of them being apartment conversions. Our county accounted for almost half of the conversion homes sold in Southern California.

The conversion sales revealed in MarketPointe Realty Advisors’ newly completed fourth quarter 2005 condominium audit are more than just numbers. They are a bonanza for almost 5,000 households that now own a home in this county.

The sale of 5,000 conversion homes at affordable prices is a minor miracle, considering the average new detached home is priced at more than $900,000 and the average new condominium well above $500,000.

By contrast, the typical conversion home sold for slightly more than $300,000, a veritable bargain in Lotus Land.

An in-depth survey of condominium buyers by MarketPointe reveals that 75 percent are former renters. The average time lived in San Diego County was 15 years and most had never owned a home before. Most were young singles or newlyweds. About 15 percent had children living at home.

Because of absurd housing prices, we do not attract the typical family market. They go to Phoenix, Dallas and Orlando. In San Diego County, two-thirds of all households have no children living at home. Therefore, our demand for housing is being generated by persons who can comfortably live in attached housing, either new or conversions. In the future, as much as 70 percent to 75 percent of our housing supply will be attached product. That’s just the way it is.

An unfortunate but strong anti-conversion attitude is settling in among San Diego County cities. Some are enlightened and encouraging this affordable housing — among them Escondido, National City, Chula Vista and El Cajon.

The city of San Diego can’t make up its mind whether conversions are good or bad. Its leaders publicly declare home ownership a worthy goal, as they know first hand. Except for the two members of the City Council who do not own a home, they all have built up substantial equity in their property. They recognize that their primary net worth and what they will leave to their heirs is largely a result of long-term appreciation of their homes.

Council members also are bright enough to recognize that when an apartment converts to condominium status, it means the project undergoes a dramatic improvement in its appearance and becomes a major benefit to the neighborhood. They also know that owners are therefore stakeholders who stabilize a neighborhood, eventually creating an environment where crime wanes, school grades increase and camaraderie builds.

From the standpoint of the near-destitute city of San Diego, it is important to note that property tax revenue typically quadruples when a project moves from apartment status to condominium status. That’s because the typical seller of the apartment project has owned it for 8 to 10 years and has a very low tax base.

Now the city of San Diego is mulling a change to the condominium ordinance that would dramatically curb the ability to convert a project and/or add to the cost of conversion. City officials are considering increasing the required parking ratio, increasing construction standards and adding inclusionary housing provisions.

Here’s one reason why I am against the proposed ordinance change: If the city increases the parking ratio, converters would, by necessity, combine a sufficient number of units until they reached the point where the project qualifies for conversion. That means that where a converter was once able to offer the majority of its units as entry-level one-bedroom models, it would change the mix to include many more two-bedroom units, which would have to sell for far more money.

The other aspect of increasing the parking ratio is that most of the projects with less parking than the present code requires are specifically those projects that desperately need conversion because they are aging and often functionally obsolete. The typical converter invests $40,000 to $60,000 per unit to bring the development back to life.

If projects remain as rentals, they will continue to age poorly, as rental owners could never afford to invest the large chunk of money to bring the units up to today’s standards. So they just get older and increasingly dowdy. And the neighborhood deteriorates.

Now let’s look at this year’s conversion and condo market. In 2006, there will be a major decline in the number of condominium units sold in San Diego County. The decline is due to several factors.

First, most of the big better quality projects already have been converted. We didn’t have that many to start with.

Second, the large professional converters are leaving town because there isn’t much left to convert.

Third, the remaining converters, certain that the local cities inevitably will make it financially impractical to convert, are looking elsewhere where government is more laissez-faire.

Finally, the remaining convertible inventory consists mostly of small projects and sufficient volume cannot be generated in these projects to produce the type of volume that we experienced in 2005. The vast majority of projects going through the processing mill are less than 20 units.

From a macroeconomic perspective, the condominium conversion provides the first rung of the home ownership ladder. If San Diegans are not able to purchase their first home, the enormous economic housing machine that fuels much of this economy’s strength and tax dollars falters. We know that every time a new home sells, four resales occur in the same relative time frame. As families strive to improve their living environment, they move up the housing chain, but if they can’t get on the first rung, the economy suffers gravely. We can’t afford to let that happen.

Alan N. Nevin is director of economic research with MarketPointe Realty Advisors (marketpointe.com), a consultancy providing real estate and demographic statistics, feasibility studies and litigation support to the California land use industry and legal professions. Nevin can be reached by e-mail at anevin@sandiegometro.com.