Evan McKenzie, Professor and Head of Political Science Department at University of Illinois at Chicago and instructor at UIC School of Law, joined Yahoo Finance Live to break down how more oversight could help save condo infrastructures.

Video Transcript

SEANA SMITH: The tragedy of the condo collapse down in Surfside, Florida of course, is sparking some concerns about the safety of these aging condos, and also what needs to be done to better regulate these structures. So we want to bring in someone who knows a thing or two about this. And that's Evan McKenzie. He's a professor and head of political science department at the University of Illinois at Chicago. And professor, I guess just first if we take a step back, how dangerous are these aging condos to people that live in them? Because I was reading a statistic earlier today. 74 million Americans either lived in condos, housing co-ops, or HOAs right now.

EVAN MCKENZIE: That is true. Yes. And it's an estimated $7 trillion worth of property values in that whole housing sector that's all under the control of basically unregulated, untrained amateur directors. Nobody really knows the extent of the potential risk because states don't really keep track of even how many condos they have. And they know almost nothing about the financial state of the associations and the physical condition of many of the buildings. So it's really unknown.

But most industry experts think that there's a serious lack of resources for conducting major repairs that are necessary in these old condos.

JARED BLIKRE: So professor, I understand the first step is to get a handle on the problem. Assuming that's done, and I know that's a big assumption there, what do we do about this going forward?

EVAN MCKENZIE: Well, I think going forward, there's certain really commonsense steps that should be taken. One is that developers when they build a new project, should put much more ample reserve funds in place before they sell the first unit. And secondly, the unit owners should be required once they take over the project to have reserve studies conducted by professional construction experts. And in big buildings, separate structural examinations by structural engineers every few years, say reserve studies every three years, structural exams every five, something along those lines.

And they should be required to follow the recommendations. They should be required to set aside reserve funds that would be necessary to perform necessary repairs. And this needs more oversight, and in my view, more publicity. I think that the reserve studies they do should be made public. And we should know a lot more about the financial condition of these associations.

SEANA SMITH: When we talk about the condos that are at risk, are they just the condos that are along the coast similar to what we saw down in Surfside, Florida? Or is this the case for all condos and all co-op buildings no matter where they are located?

EVAN MCKENZIE: That's really a good question because we're so focused on this particular incident. And certainly there's coastal property on Atlantic, Pacific, and Gulf Coasts that need special attention in that regard. But we also have many, many units of common interest housing built in areas where landslides are a real risk because of the heavy rainfalls that we have been experiencing due to climate change. And also many others that are in the path of wildfires, or that are in drought regions where lack of water can produce wildfire and other problems as well.

And all these things require certain types of mitigation. It's different in each region. And this is the sort of thing that needs to be prepared for.

JARED BLIKRE: Well, and to continue this discussion here, what kinds of neighborhoods are we looking at that might be impacted most severely? I would think maybe some of lower income, some of the less desirable housing units might be a little bit older, a little bit less oversight. Is that part of the calculation here in trying to get a handle of what's going on?

EVAN MCKENZIE: Yes. Here's an example of a type of property that we need to be especially concerned about. An awful lot of condominiums were built-- were condominium conversions. They were originally apartment buildings. And some of those apartment buildings that were converted in the 1980s, '90s, or 2000s were already 50, 75, or 100 years old when they were converted. And that's a special risk because you're talking then about a new looking condominium building that is actually very old structurally.

So and many moderately priced condos are like that. And so those really need special attention. And then there's just the factor of aging. The older these buildings are, the more you have-- it's sort of like I use the term ticking time bomb. That may be too dramatic. But the idea is it's a large amount of housing built during housing boom periods that is all aging at the same time. And these buildings begin to experience problems at the same time in the same general locations.

And so that's a special problem that has to be looked at. You have to think of how old the building is in reality and how old the Condo Association is. And we need to know more about the state of their finances.

SEANA SMITH: Professor I don't know if you'll be able to weigh in on this or we had the data about this. But how does the US compare to other countries when it comes to the oversight of some of these aging condos? And specifically in areas, because the US isn't the only country who it's very popular to live in these condo type buildings and these co-op type buildings. I was reading it's also very popular in Israel and Australia as well.

EVAN MCKENZIE: Yes, that's right. Israel, Australia, many European countries. And in fact, China has probably as many as 250 million people living in private communities. And their system of land ownership is different than ours. But they're leasehold type structures. But they are still very much bought and sold like condo units. So it's all over the world. And there is more government oversight almost everywhere than there is here.

SEANA SMITH: Wow. I was going to say, I don't really feel too encouraged after this conversation. But certainly, it's a very, very important conversation to have. Professor Evan McKenzie, head of the political science department at University of Illinois at Chicago, thank you so much for taking the time to join us. And we hope you have a great weekend.