Understanding office-to-residential conversion

Understanding office-to-residential conversion

The publication on office-to-residential conversion comes from the Brookings Institution, a renowned think tank focused on research and policy analysis. The authors—Cara Eckholm, Tracy Hadden Loh, Jonathan Meyers, and Steven Paynter—examine the challenges and opportunities presented by converting underutilized office spaces into residential properties. Their work is particularly relevant in the context of post-pandemic urban dynamics and the ongoing housing crisis in the United States.

The COVID-19 pandemic has catalyzed a significant shift in work habits, leading to a decline in traditional five-day office work weeks. This change has prompted cities to reconsider their economic models, similar to past transitions seen during the Industrial Revolution. With many office buildings now underutilized, the potential for converting them into residential spaces has emerged as a viable solution to address the housing crisis. However, the process has been slow due to market uncertainties and zoning constraints.

Despite the pressing need for housing, actual conversion projects in major U.S. cities have been sluggish. Market uncertainties regarding the financial value of existing office buildings create hesitation among owners and investors. Additionally, outdated zoning laws that separate office and residential spaces complicate the conversion process. The publication discusses how local leaders are exploring practical tools to overcome these barriers and facilitate successful conversions.

The research includes six U.S. case studies that highlight various motivations for office-to-residential conversions. These include diversifying office corridors, preserving historic architecture, creating density in well-connected areas, and addressing regional needs for affordable housing. For example, Chicago's LaSalle Reimagined initiative aims to introduce 1,600 mixed-income units into its downtown area.

The publication emphasizes the need for local governments to optimize policies and practices around office-to-residential conversions. This requires a comprehensive understanding of local fiscal structures, market conditions, and regulatory environments. The authors highlight that successful conversions can contribute to both economic revitalization and equitable housing access, particularly for low-income households.

State and local governments have various tools at their disposal to encourage conversions. These include easing zoning processes, providing financial incentives such as tax credits, and investing in neighborhood amenities to enhance property values. The research indicates that the right combination of policies can effectively close the feasibility gap between conversion costs and market value, thereby spurring more conversion activity.

While most conversion efforts are driven by local and state initiatives, the federal government plays a supportive role through programs like historic tax credits. These initiatives have significantly leveraged private investment, facilitating conversions across urban and rural areas. The authors suggest that greater federal involvement could further accelerate the conversion process.

The publication concludes by stressing the importance of adaptability for cities facing changing conditions. It raises critical questions about how office-to-residential conversions can meet housing supply needs while promoting equitable access. The ongoing research aims to provide insights and recommendations for policymakers and industry participants as they navigate these complex challenges.