Ttoo many empty offices. There are not enough houses. The solution seems simple – solve two of America’s biggest crises by converting commercial office space to residential units.
This is not a new idea, but the size and scale of these problems with major negative economic and social impacts require immediate attention. It is time for local and state governments, along with the business community (banks, developers and investors) to invest in residential transformation to benefit all sectors of society. More legislation is needed to streamline and speed up the approval process to reduce unreasonable burdens that stifle conversions for market-rate and affordable housing.
According to separate estimates by the Urban Institute and the National Low-Income Housing Coalition, there is a shortfall of more than 7 million affordable housing units.
Office vacancy rates in the United States exceeded 20% for the first time in decades, with downtown Los Angeles and San Francisco exceeding 25%. Office migration began when employees were forced to work from home during Covid-19, and the shift to remote and hybrid work has continued to this day.
When offices are vacant, downtown businesses like restaurants, grocery stores, dry cleaners, and shopping centers that need constant foot traffic to survive are forced to close.
This leads to the dreaded “urban disaster loop,” in which office workers and homeowners leave the country, resulting in less tax revenue and a decline in city services such as police, fire, sanitation, and road maintenance, which in turn leads to worse crime, safety, and health. . businesses are moving away.
The solution may be simple, but it is not easy. The biggest obstacles to converting from office to living space are price tags and regulations. I believe both problems can be overcome by focusing on the three “C’s” – Codes, Costs and Creativity.
Perhaps the biggest boost to providing new housing in California comes from Assembly Bill 2011, the Affordable Housing and Highway Works Act, which took effect in July. Along with Senate Bill 6, the National Low-Income Housing Coalition notes that it “would allow housing in areas currently zoned for parking, retail or office buildings. The bill exempts housing projects in these commercial areas from local approval processes and California Environmental Quality Act review — which are often used to delay housing construction — as long as the project meets affordability, labor and other standards outlined in the bill.
“Projects eligible for legal approval can be 100% affordable housing or mixed-income housing. Mixed-income housing developments are limited to commercial corridors (typically strip malls and parking lots) that are large enough to accommodate increased density and transit, while 100% affordable housing can be developed in larger commercial zones.
“All development should occur in infill areas, which will reduce sprawl, limit greenhouse gas emissions, and ensure residents are connected to existing transit and infrastructure.”
Los Angeles alone has about 2,300 commercial properties that could provide between 72,000 and 113,000 units, according to a Rand Corp. study last year.
Many buildings are perfect candidates for conversion, but not every property makes financial sense. Many older commercial structures must be retrofitted with extensive plumbing and electrical needs for residential use.
Government tax cuts and incentives make a big difference. As noted in the Rand report, “Hotel/motel properties appear to be the most feasible property type for conversion (provided the rooms are directly converted to residential units). The availability of office space varies, with larger (one- and two-bedroom) apartment types generally seem financially unfeasible, but studio apartments hold more promise.”
Sometimes a crisis creates opportunities and fuels innovation. In many cities, architects, engineers, urban planners and developers must continue to find creative solutions to reimagine vacant buildings. Here are three examples:
The famous Bradbery Building in downtown Los Angeles, built as an office building in 1893 and seen in the movie “Blade Runner,” recently converted its upper floors to residential buildings.
The Crosby, a 12-story Art Deco building in Koreatown, once housed IBM’s Los Angeles offices. It now offers 298 studio and one-bedroom apartments with modern amenities and vintage charm.
David Damus is the CEO of System Property Development Co. in Los Angeles.