New Orleans Finally, I’ve found a reason to keep up with the push-and-shove of some workers to stay at home rather than going back to the office: retrofitting office buildings to affordable residential housing units. In a discussion recently with the co-founder of the apartment application, Dwellsy, I raised the question about whether or not there was a chance that the pandemic and post-pandemic fight over office space might create an opportunity to convert millions of under used properties into desperately needed apartment housing units. He thought developers were still reticent about moving in that direction although it might have some promise.
Once the idea sunk in, although I’m trying to resist confirmation bias, I’m seeing increasing evidence that I’m not the only one to believe this might be an opportunity in our affordable housing crisis or at least an offset to our housing shortage. A piece in the Wall Street Journal didn’t exactly jump on the bandwagon, but did underline that this strategy might not be that novel:
Since the pandemic began, around 50 U.S. office blocks have been or are being redeveloped into multifamily apartment complexes, according to CBRE. In the U.K., which loosened planning laws several years ago to make redevelopment easier, an average of 12,000 new housing units a year have been created from old offices since 2015, official statistics show.
For their reporter with developers whispering in her ears, it’s still all about the money. The rule of thumb for them was whether the “property value of residential property needs to be about 50% above that of offices, adjusting for the loss of some leasable space linked to the conversion.”
Unfortunately, they are thinking suburban and high-end housing, which is a long way from the affordable fix that I’m seeking. The silver lining for me, not for landlords, is that as the vacancy rate for offices continues to become more permanent, the value of the properties will fall, and that means coming closer to my sweet spot for housing retrofits.
There is another solution and Chicago seems to be experimenting with it. According to marketplace.org, “The city aims to offer incentives from a $197 million redevelopment fund from its tax increment financing program to stimulate about 1,000 units of new housing on the LaSalle Street corridor, a third of it affordable.” Now, ACORN during a Chicago membership convention marched down LaSalle, so I can testify that’s some pretty toney real estate, but our experience representing cleaners in New Orleans gives me a clue to the huge differences between Class A, B, and C office buildings. These older buildings around the fringes of downtowns, just shorter and less modern, might be just the thing if the numbers added up, and cities did for affordable housing the grants and tax subsidies what they do for downtown hotels and buildings. There’s a couple of more birds we could hit with this stone by making downtown and commercial districts more viable with more people as well and making people better housed.
This isn’t crazy. Tell me why we can’t do more of this.