Across the country, office-to-housing conversions are being pursued as a potential lifeline for struggling downtown business districts that emptied out during the coronavirus pandemic and may never fully recover. The conversion push is marked by an emphasis on affordability. Multiple cities are offering serious tax breaks for developers to incentivize office-to-housing conversions — provided that a certain percentage of apartments are offered at affordable below-market prices.
In January, Pittsburgh announced it was accepting proposals to produce more affordable housing through the “conversion of fallow and underutilized office space.” Boston released a plan in October aimed at revitalizing downtown that included a push for more housing, some of which would come from office conversions. And Seattle launched a competition in April for downtown building owners and design firms to come up with conversion ideas.
In the nation’s capital, Mayor Muriel Bowser has made office-to-housing conversions a cornerstone of her plan to repopulate and revitalize the district’s downtown. Her “comeback plan” for the capital city, announced earlier this year, seeks to add 15,000 new residents to the downtown area, adding to the approximately 25,000 who already live here.
Bowser’s administration says about 1 million square feet of downtown real estate is already transitioning from commercial to residential. But the city needs another 6 million square feet converted to meet her goal of 15,000 new downtown residents.
“We’re not going to have as many workers downtown as we had before the pandemic,” Bowser said earlier this year. “Our job is to make sure that we are getting more people downtown.”
But the conversion push has some skeptics. Housing advocates worry that the affordable housing requirements could get watered down. And even advocates of the conversion model say giving tax breaks to wealthy developers isn’t the best tool to achieve the goal.
“Developers who feel it’s going to benefit their bottom line will do it without an incentive,” said Erica Williams, director of the D.C. Fiscal Policy Institute. “This is a very costly proposal for an unproven program.”
And, as increasing numbers of employers turn to hybrid work models, there’s the question of whether people will want to move to downtown areas if they’re not required to be there every day.
“You have to make downtown a neighborhood — somewhere that’s living and playful and active,” Pittsburgh Mayor Ed Gainey told an panel at the United States Conference of Mayors meetings in Washington last January. “How do you make it a neighborhood that has a vibe where young people want to be?”
Chuck D’Aprix, principal at Downtown Economics, a development consulting firm, said attracting new residents to a former downtown business district holds specific chicken-and-egg issues. The businesses that residents need are different from those of daytime office workers.
They include mid-size affordable grocery stores and day-care centers, pet supply shops, hardware stores and auto repair garages. And those places need to stay open past office hours.
“A lot of those services simply aren’t available right now in small city downtowns or mid-sized city downtowns, you know, they close up at night,” D’Aprix said.
But with vacancy rates at downtown office buildings continuing to rise, from 12.2% in the fourth quarter of 2019 to 17.8% in the first quarter of 2023, according to the real estate firm CBRE, there’s an urgency to do something. Some of the hardest hit places include San Francisco with a preliminary vacancy rate of 29.4%, Houston 23.6%, Philadelphia at 21.7% and Washington at 20.3%.
I saw Houston’s place on this list and so wanted to blog it. I haven’t worked downtown since 2017 so I don’t have a great feel for what it’s like during the day these days. We could certainly use more affordable housing here, and it would be great to have some of that in the Inner Loop. The complementary businesses issue is something that will need to be dealt with, but Houston wouldn’t be starting from scratch. Also, if you consider that Houston has multiple “downtowns”, with Greenway and the Galleria and Greenspoint all having similar characteristics, there are more opportunities for this kind of reinvention. Mostly, what I’d like to see is a recognition from the various Mayoral candidates that we need to be open to all kinds of ideas about affordable housing. I don’t need a fully formed plan, just the acknowledgment that a plan is needed.