Could office-to-housing conversions play a material role in solving the housing crisis? Brookings Metro fellow Tracy Hadden Loh discusses the challenges.
Downtowns are struggling with twin problems: too much empty office space and not enough housing.Well, it turns out that in practice, “adaptive reuse” is complicated. And expensive. Still, many major cities are giving it a try — but not necessarily at a scale that will make a serious dent in either problem.
Still, many major cities are undergoing office-to-housing conversions — or are, at least, proposing them — and they include Atlanta, Chicago, Houston, San Francisco, Seattle and Washington, D.C. In New York City, a developer is transforming a lower Manhattan building that once housed both the New York Daily News and JPMorgan Chase & Co. JPM, +0.34% into 1,300 apartments. This helps problem No. 2, but perhaps not in a significant way.Problem No.
Tracy Hadden Loh: When really devastating disruptions happen, it causes these fluctuations in the office market. But in the past, the office worker has recovered. Another really different example of there being a glut in the office market is that in the 1980s, the real estate industry functioned a little bit differently than it does today because of some differences in the U.S. tax code.
NerdWallet: Does it seem like office building owners are trying to wait out office vacancies at this point, or are they looking around and saying “What else can we do?” Tracy Hadden Loh: It’s absolutely housing — just to be clear. But it’s also restaurants, clubs, venues, entertainment venues, sports facilities, schools, hospitals.Tracy Hadden Loh: I mean, I wouldn’t even describe those as amenities. What do people do all day? It’s a lot more than just work and sleep, right? Work and sleep means offices and housing. But what about everything else? The trend, globally, is that productivity is going up.
NerdWallet: Let’s talk about affordability. Usually when you build more housing, rents will go down, right?NerdWallet: But creating new housing in downtown areas and bringing in all these other new things, new businesses, etc., it seems like it could draw young professionals with disposable incomes away from other areas of cities and potentially alleviate some of the rent pressure in the areas they left.
Tracy Hadden Loh: The housing crisis at its core is caused by not having enough housing where all the jobs are and there’s no way to subsidize our way out of that or get somebody else to pay for the solution. We just need more housing near where jobs are and that’s it. So office-to-housing conversion can provide us some small percentage of that, like maybe 10%. But we need to also build the other 90%.
In cities that are supporting office-to-housing conversions, are those cities going to be easing, permitting or regulatory provisions that would allow for the creation of weirder apartments — I mean those that aren’t 100% fitting code like having windows in bedrooms? I just hear people saying, “Why can’t they just turn all of these empty offices into housing?” And all I can think is of the plumbing alone. Housing and commercial spaces are just very different.
NerdWallet: So empty offices are sitting on pretty expensive land. Would it just be easier, with the challenges to convert to housing, to knock down a building and restart with the intent for it to be residential? Or is that impractical? NerdWallet: And they’re usually near those desirable areas that are also near some kind of public transportation.NerdWallet: What would actually need to happen to alleviate unaffordability in urban centers that lock out middle-income and lower-income populations?
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