Converting offices to homes helps ease housing crunch
By John Seiler | September 6, 2024
“There is no logic that can be superimposed on the city; people make it, and it is to them, not buildings, that we must fit our plans.”
—Jane Jacobs, author
As cities in California and other states grapple with a housing crisis, an old solution is returning: converting old office, hotel or industrial buildings to condos or apartments. It’s the market for property responding to the changing needs of consumers. In this case, as people have left offices to work from home, commercial buildings have emptied. But they’re still serviceable as living structures at a time of increasing housing demand.
A new study by the Urban Institute asked in its title, “Which Cities Would Benefit Most from Converting Offices into Housing?” For 83 cities, Jorge González-Hermoso created “a conversion disposition index made up of two composite sub-indexes: office distress and housing supply need.” Here are the top five on his list, the first two in California: San Francisco, Redwood City, and then Phoenix, Seattle and Atlanta.
The author points out cities have been giving incentives to promote the conversions. And, despite such problems as inoperable windows, “the pipeline of office-to-residential conversions remains strong.”
Indeed, a May report by RentCafe found converting outdated buildings to apartments rose 17.6% nationally in 2013: “A whopping 151,000 rental apartments are currently in various stages of conversion, with 58,000 of those on track to be repurposed from former office spaces.” Hotels actually led the type of building converted at 36%, followed by office buildings 28%, factories 15%, warehouses 9% and others 12%.
For perspective, I talked to Samuel Staley, former director of land use policy at the Los Angeles-based Reason Foundation and currently a professor of urban policy at Florida State University. He’s also chair of the board of directors at Unhoused Humanity, which works to address the housing needs of Tallahassee’s homeless population, and the author of several books on urban policy.
“Traditionally, before conventional zoning, these kinds of land-use conversations were common,” he told me. “No expectation existed that land uses would be permanent. Rather, markets would be expected to convert existing land uses to new uses.” He said it’s not surprising many cities are seeing building conversions from industrial and commercial uses to residential.
A key part of the problem has been excessive zoning regulations by governments. “Conventional zoning – where land use maps lock land uses in place in ever greater detail – makes conversion a political decision rather than a consumer driven one. Thus, the political process delays conversation. The problem of slowed land-use conversation in urban areas is particularly acute in California. The economic research is pretty clear that government regulation of land use is a significant contributor to higher housing costs.”
He pointed to a 2007 study he co-authored, “Statewide Growth Management and Housing Affordability in Florida.” One thing it looked at is “Smart Growth,” which the U.S. Environmental Protection Agency promotes as “an overall approach of development and conservation strategies that can help protect our health and natural environment and make our communities more attractive, economically stronger, socially diverse and resilient to climate change.”
But Staley et al. found “a growing body of research strongly suggests that some of the goals of Smart Growth’s advocates may be inconsistent with the realities of housing development. To the extent that more compact, higher density urban development is encouraged through growth-management laws such as Florida’s, higher housing prices could result: “In fact, despite statewide planning goals and programs de-signed to promote affordable housing, housing costs have been increasing in Florida faster than the national average.”
Staley also said homeless crisis also will be eased if these conversions make housing more affordable, especially for families. But he cautioned many homeless are in that condition not from a lack of housing, but because they “experienced significant personal trauma of some sort, mental illness, drug addition, etc., and they need specific interventions focused on their needs.”
What can be done to free cities to allow more market-centric adaptations of buildings to housing needs? González-Hermoso suggested reforming land-use ordinances and updating building codes “to accommodate the unique requirements of residential conversions while maintaining the safety of new housing infrastructure.
He also called for streamlining the permitting process, as with California’s Assembly Bill 1490, which mandates reviews of adaptive reuse projects must take only 60 or fewer days if there are 150 or fewer units. He also said cities should offer tax credits or abatements. On the latter, a better approach would be overall tax reductions.
“Any policies that allow or speed up conversations from vacant or underutilized office uses to residential uses would help address the housing crisis,” Staley concurred. He cited Houston, long known for its paucity of zoning laws: “The city’s lack of zoning has contributed to its ability to build units on pace with market demand and convert land uses as the market sees fit. The pandemic and tariffs have significantly altered supply chains for key resources, but the planning process has been sufficiently unwieldy, lengthy and uncertain that supply has not kept up with demand.”
Basically, government should repeal as many housing restrictions as possible. The government also is advancing new programs to address the issue. Last October, the Biden administration announced, “Several existing federal programs already support commercial-to-residential conversions” that aim “to further facilitate commercial-to-residential conversions through new actions … through its Housing Supply and Action Plan.”
It also promoted the use of long-running Community Development Block Grants to promote conversations. They provide “$3 billion annually to support community housing and revitalization projects for low- and moderate-income families.” Unfortunately, using money largely taxed from the middle-class for another subsidy for the poor itself is a market distortion.
In sum, while few cities will adopt Houston-style laissez faire, even a few changes can help. But converting policy is needed more than converting buildings.
John Seiler is on the editorial board of the Southern California News Group.
