Dive Brief:
- The Biden administration on Friday threw its support behind efforts to turn empty commercial buildings into housing, announcing new federal resources to support commercial-to-residential conversion projects.
- New financing, technical assistance and guidance for states, localities, transit agencies and developers are among the new resources. The U.S. General Services Administration will also expand efforts to sell empty federal buildings that could be repurposed into housing.
- U.S. office vacancies reached a 30-year high of 18.2% in the second quarter of 2023, taking a toll on local economies, according to the White House. It said that converting these buildings into residencies could ease the affordable housing crisis and, if done with the climate in mind, drive down greenhouse gas emissions.
Dive Insight:
The high commercial real estate vacancy rate is a lingering symptom of the COVID-19 pandemic, which “forced Americans to change how they live and work, with ripple effects felt across the economy,” according to the U.S. Council of Economic Advisers. U.S. workers now go into the office 30% less than they did pre-pandemic, about 3.5 days a week.
This trend has taken a toll on the businesses the workers in those offices used to support, from restaurants and convenience stores to dry cleaners and hair salons. Many cities, such as Seattle and San Francisco, have devised strategies of their own to revive wilting downtowns. And the number of adaptive reuse projects in the U.S. multifamily pipeline has reached an all-time high, with office-to-multifamily conversion making up the majority of multifamily units under construction.
Turning offices into housing is more complex, however, than switching out desks for beds. Office building design doesn’t always lend itself to logical apartment layouts with adequate natural light. The plumbing and HVAC systems are often not set up to serve multiple residential units. Some commercial developers have also complained that conversion projects face governmental hurdles, including zoning and environmental regulations.
The new federal effort to support commercial-to-residential conversion includes a guidebook on available federal resources, including low-interest loans, loan guarantees, grants and tax incentives. The White House plans to hold training workshops this fall for local and state governments, along with private sector players, to learn how to use the federal programs the guidebook outlines. The White House is encouraging state, local, tribal and territorial governments to identify public tools and land disposition opportunities to support conversion projects.
Multiple federal agencies released subject-specific guidance on adaptive reuse as part of the announcement. The Energy Department launched a toolkit on creating zero-emissions housing from commercial buildings, while the Transportation Department released guidance on how states, localities and developers can finance conversation projects near transit with two existing federal programs: the Transportation Infrastructure Finance and Innovation Act and the Railroad Rehabilitation & Improvement Financing programs.
The Housing and Urban Development Department will increase outreach efforts to municipalities and developers looking to use HUD tools to finance conversions. The White House highlighted several HUD grant programs that can be used for conversions, including Community Development Block Grants, the Pathways to Removing Obstacles to Housing program and a research-related grant available to develop case studies that can help other localities better plan conversion projects.
The White House noted in its Friday announcement that the American Planning Association is expanding its work with the planning directors of the nation’s 30 largest cities to include new programs on commercial-to-residential conversions. Plus, the National Association of Counties is working with counties pursuing commercial-to-residential conversion projects to develop a policy paper for county officials interested in pursuing similar efforts.
