According to Politico, the U.S. is short between 2 and 6 million homes. At the same time, as more and more companies shift to remote work, hundreds of millions of square feet of office buildings are going unused. The perfect solution would be to convert those empty office buildings into apartments and other housing, right? While not entirely impossible, converting commercial spaces to functional residential buildings is both an engineering and financial challenge. Plus, office building conversion is much better suited to luxury housing. So, it probably isn’t the solution to the affordable housing problem many have been searching for. But, could it at least help with the housing crisis? Let’s find out. 


What is Causing the Housing Crisis?


The U.S. is currently in the midst of a housing shortage that is making homes more scarce and less affordable- especially in major cities. Phoenix, Dallas, New York City, San Francisco, Atlanta and Miami are among the top 10 cities with the biggest housing shortages. This is not only driving up the prices, it’s driving would-be buyers out of cities and only leaving space for the uber-rich. 


The Covid-19 pandemic didn’t do anything to help the housing shortage. In the shutdown years, supply chain issues made acquiring materials for housing slow, difficult, and expensive. This in turn drove up the price of new homes and other developments- and of course, rent.  However, the real root of the housing problem happened in good ol’ 2008. After the housing bubble burst, the U.S. experienced “the worst housing market crash since the Great Depression.” Many homebuilders went out of business and housing projects shuttered. In the years after the Great Recession, even as Americans began buying homes, new home building projects flatlined. 


This is essentially why we find ourselves in the position we are in today. As millennials came of age to buy (and rent) homes, there just weren’t enough new ones built to accommodate everyone. A lack of supply compared to demand has made housing prices increase by a lot- a whopping 20% last year alone


Hangover From the Pandemic is Affecting Construction Projects


To make matters worse, now many construction companies are finding it difficult to find workers. In fact, according to the Associated General Contractors of America and Autodesk, 78% of construction companies are having difficulty hiring workers for roles like bricklayers, drywall installers, pipelayers, carpenters, sheet metal workers, and plumbers. Like other industries, shutdowns, supply chain issues, and early retirement from the pandemic years were all contributing factors to this trend. Despite covid-era savings and stimulus money dwindling, the construction industry did not recover the way other industries did when things began to open back up. Much of this is probably due to a cultural shift to remote work. Many workers left construction jobs during Covid-19 and didn’t look back.


Remote Work Has Emptied Office Buildings


But, while remote work might be making it more difficult to to make new homes, it is opening up office spaces. In fact, the pandemic wreaked havoc on in person work and office spaces. According to Bloomberg and Forbes, more than 17% of office space in the U.S. is currently vacant. This leaves around 330 million square feet of office space unused. And, it’s unlikely landlords will be able to fill them in the future- or even keep them around for much longer. 


Landlords are now having to pay back loans with money that they just don’t have. The Mortgage Bankers Association and Forbes estimated that $92 billion and another $58 billion of borrowed money will become due in 2023 and 2024 respectively. This staggering number is causing many property owners to simply give up their buildings. This leaves all that office space in limbo. Plus, it doesn’t seem like workers will return to the office any time soon. In fact, office occupancy in the top 10 most populous U.S. cities was just 49.9% of pre-pandemic levels the first week of May.” And experts predict that office occupancy rates will only go down going into 2024. 



So, Why Aren’t These Vacant Office Spaces Made Into Housing? Better Yet, Affordable Housing?


Sadly, there are many challenges to converting office spaces into livable buildings. A recent Gensler study estimates that only 30% of buildings are viable to be used as apartments. Zoning restrictions, engineering problems, as well as the price of such a big renovation project are some of the main reasons preventing landlords and developers from converting office spaces. 


Another big problem is that many office buildings were built in the late 20th century without regard to much natural light throughout the interior of the buildings. This is not only not desirable for would-be tenants, most building codes require a certain amount of natural light for residential spaces. In a similar vein, most offices only have one or two bathrooms per floor. To convert an office to a residential space would require a massive plumbing operation involving adding additional water and sewer lines to accommodate each unit. 


A Building Has to Have a Lot Going For It To Be Viable For Conversion


According to Fast Company, in order to be truly viable for conversion, buildings have to have a number of factors going for them. They cannot be too big, small, or close to other buildings. Buildings should be mid-sized, built before WWII, and have two outward facing sides. Ideally, they should be near enough to a city’s financial district, but not in the middle. Still, strict zoning laws and high costs can curtail even the perfect building.


Perhaps one of the biggest roadblocks to conversion is the price tag. All of this converting and retrofitting costs money. Some estimates sit at around 200- 300$ per square foot. Because of this, in order to make some kind of return on their investment, landlords would either have to have a very cheap building in the first place or raise the rent. So, most viable buildings end up as luxury apartments and condos. This may help a lucky few in congested city environments, but it does absolutely nothing for the affordability of housing. Really, in order to make a dent in affordable housing, the government would have to step in. This could either be in the form of tax incentives or entire government sponsored housing projects. 


Despite All of This, There Are Some Converted Office Projects in the Works


In California, a state with immense housing shortages, half-empty or empty offices could soon be converted into housing. This is thanks to a push by local and state efforts to loosen zoning laws in hopes of providing more housing for California residents. 


One such law, Assembly Bill 2011 is set to go into effect on July 1st. The law willfast-track approval to build 100% affordable housing on most properties zoned for retail, office or parking.” as well as expedite approval for mixed market/affordable housing projects near four- to eight-lane commercial corridors. While bill 2011 aims to open up commercial lots to residential projects, it also opens the door to other bills like Assembly Bill 1532 and Assembly Bill 529. Both focus on helping developers repurpose offices to residential buildings with less hassle.


Already, companies like Affirmed Housing are taking advantage of the new laws. The company plans to make 200 units of affordable housing on a Sacramento commercial lot. As for converting commercial buildings, Jamison Properties plans to adapt seven office buildings into residential units in LA’s Koreatown. Hopefully, more developers and cities will follow suit to put empty office spaces to good use. 


While Some Could Make it Work, Converted Office Space Likely isn’t the Golden Ticket to More Affordable Housing


Unfortunately, due to cost, engineering issues, and zoning problems, adaptive reuse of office buildings to residential units won’t likely solve the housing crisis. If anything, they’ll probably just make a few luxury condo or apartment complexes here and there. However, there is some hope that with new zoning laws like in California as well as potential tax incentives, that developers and landlords might invest in converting their office buildings into more affordable housing units. However, without significant effort, they won’t make a dent in affordable housing any time soon. 





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