Officials push to turn office buildings into housing amid home shortage, remote-work boom

Story at a glance

  • The U.S. is facing a years-long affordable housing shortage and record-high office vacancies.

  • Elected officials are pushing to speed up the conversion of commercial buildings into housing to address both issues.

  • Regulatory and architectural challenges can make those conversions complicated, and costly.

From city halls to the White House, officials across the U.S. are pushing to turn commercial real estate into housing in an effort to solve two national problems: the rising need for homes and the increasing amount of vacant office space.

The idea garnered renewed interest during the COVID-19 pandemic, when millions of Americans were suddenly forced to work from home, leaving office buildings vacant.

Commercial building occupancy still hasn’t recovered from those days, with office vacancy rates reaching almost 20 percent — a record high — in April, according to Moody’s Analytics.

At the same time, the U.S. has experienced a years-long shortage in affordable housing and new housing construction has slowed down again this year.

Developers have turned to unused office space as a potential source of much-needed housing supply. But transforming an office building into apartments isn’t easy, and doing so comes with regulatory and architectural challenges that can cause the process to be costly.

“There are a few circumstances where things might align [where] incentives and the architectural conditions and the neighborhood conditions all come together … but those are far and few between,” said Mahesh Daas, president of Boston Architectural College.

Elected officials have sought to speed up office building conversions by offering help, funds or greater flexibility in the codes and regulations that govern the structures.

The Biden administration announced a plan in late 2023 to help speed up conversions of high-vacancy commercial buildings to residential spaces “through new financing, technical assistance, and sale of federal properties.”

At the state level, lawmakers are proposing  tax incentives to help make office to residential building conversions more affordable.

City officials, like New York City Mayor Eric Adams (D), are also proposing changes to zoning laws to allow for residential construction everywhere to help ramp up office to apartment conversions.

The “context” of an office building plays a big role in whether it can be turned into housing, according to Jesus Vassallo, an associate professor of architecture at Rice University.

That’s because most office buildings are located in areas that are less desirable to live in due to their limited access to schools, parks and other things people typically want close to their homes.

It also means considering city zoning laws, which can be tricky to navigate.

In New York City, most commercial areas where office buildings are located allow for some residential buildings as well. But some parts of the city are ruled by Euclidean zoning, or zoning laws that only allow one building type — commercial, industrial, residential or retail — to exist in the area.

“It poses an obstacle to the more modern return in urban planning to mixed-use neighborhoods,” said Casey Berkovitz, a spokesperson for New York City’s Department of City Planning.

In some cases, there are site specific zoning changes that can make a building eligible for conversion that wouldn’t be otherwise, Berkovitz said.

But those cases are limited, he added.

And once the question of what is allowed under city zoning laws is answered, architecture firms also face the challenge of making an office building habitable while abiding by residential building codes.

City building codes include natural light and ventilation requirements for residences, which is why many apartment complexes are H-shaped or have an inner courtyard.

Making sure that potential new apartment buildings have enough natural light and ventilation can be a major task.

New York City building code, for instance, dictates that all bedrooms must have access to natural light through a window, according to Berkovitz.

This is much easier to ensure when constructing new rooms in prewar buildings, because of their narrow frames and shallow floor depth, according to Florian Idenburg, a professor of practice at the Cornell University College of Architecture, Art and Planning.

Office buildings built between the 1970s and 2000s, meanwhile, tend to be tall and rectangular or square and have deep floors with long distances between windows thanks, in part, to the widespread adoption of air conditioners and fluorescent lightbulbs.

New York City building code also requires that apartments have operable windows to allow for air ventilation, a feature towering office buildings are typically short on.

Some designers have tried to remedy both natural light and ventilation issues by increasing buildings’ perimeters and removing their cores, replacing them with open spaces like atriums.

But removing a building’s core also removes a lot of its structural stability, according to Idenburg.

“It’s a puzzle where the older the tower the easier it is,” Idenburg told The Hill.

Little natural light and poor ventilation can wreak havoc in apartments that were once commercial spaces.

Some residents in an Albany, N.Y., apartment complex called The Kenmore that used to be a hotel, for example, do not have openable, indoor windows, a tenant told The Hill.

The building’s owners tried to improve air circulation by creating a breezeway, but some residents still endure strong smells in the building, said the tenant, who requested to remain anonymous.

The Hill reached out to the building’s management for information about The Kenmore’s natural lighting and ventilation but did not receive a response.

Limited kitchen facilities, bathrooms and sometimes lower ceilings also present challenges for architects when trying to convert office to residential space, according to the Washington, D.C., Office of Planning. D.C. is also offering tax incentives for commercial to residential conversions.

Typically, the plumbing systems of an office building are ripped out and replaced so that future apartment units can each be equipped with adequate toilet, sink and shower access, according to Idenburg.

Office building interiors are often completely redone during the conversion process to meet energy codes, sustainability codes or to remove toxic material like asbestos, a D.C.-area real estate worker told The Hill.

All of this work adds up, with the delays in the conversion process sometimes adding on unnecessary fees, according to the worker, who also requested to remain anonymous.

The price of converting an office to an apartment runs at about $100 to $200 per square foot, according to a 2022 analysis from Moody’s Analytics, which noted that the cost is most likely higher now.

Daas told The Hill he thinks the cost of retrofitting and converting office buildings to apartments could be as expensive as $500 per square foot.

The higher the cost of converting the building, the higher the potential asking price for the apartments, Daas notes, potentially pricing out those who need affordable housing the most.

“This stuff is very expensive,” said Berkovitz. “The costs in some cases can actually approach those of new construction.”

Copyright 2024 Nexstar Media, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

For the latest news, weather, sports, and streaming video, head to The Hill.