Converted Commercial Buildings May Not Be A Short-Term Answer To Addressing Affordable Housing Crisis | New
Last month, New York State passed the Housing Our Neighbors with Dignity Act (HONDA), laying the groundwork for converting hotels and other commercial buildings into affordable housing. Nonetheless, a recent NBC News article gives a long list of reasons why, among commercial buildings, offices, in particular, are unlikely to be converted into affordable housing.
The bottom line: it is still far too profitable to transfer this property to affordable housing. That is, there is simply too much money to be made in the long run, even if rental space remains vacant in the short term. Why risk setting a precedent that unused space should be ceded to the thousands of people who live on the streets? Why set a precedent that the dignity of every person is more important than Cushman Wakefield’s quarterly income?
Nevertheless, politicians have at least started to take a stand. HONDA in New York specifically targets hotels, which would make it easier to convert to accommodation. Indeed, during the pandemic, New York City authorities were embroiled in battles over the fate of hotels converted into housing for the city’s large homeless population, which they did, much to the chagrin of some outspoken residents of Manhattan’s Upper West Side. Lucerne becomes the emblem of the temporary conversion of hotels into housing. However, it was temporary, and at a time when the hotel vacancy rate was incredibly high. Today, according to the city’s mayor, Bill De Blasio, “hotel visits are on the rise”, due to the increase in tourism. HONDA is it too late?
In addition, converting offices into housing poses unique challenges (and opportunities). On the one hand, there is a large stock of underutilized or unoccupied office space, while hotel vacancy rates have recently declined. Office vacancy rates are unlikely to ever return to pre-pandemic levels. While the return to the office has resumed in earnest, in the long run it is simply unlikely that young workers will agree to forgo the perks of working from home, as argued by Nelson D. Schwartz and Coral Murphy Marcos in a recent New York Times article. This is because Millennials, especially younger ones, are significantly less likely to return to the office, even if that means giving up a job that may require showing up in person. With the workforce only getting younger, offices are unlikely to ever fill up to pre-pandemic levels.
For this reason, since the start of the pandemic there have been many calls, including Bloomberg City Laboratory‘s Patrick Sisson, to rethink the future of high-density commercial areas like Midtown Manhattan, which to date are relatively empty compared to their hustle and bustle of early 2020. While the deep floors of many office buildings feature architectural challenges for a successful conversion into housing, the real reasons for hesitation are not spatial. NBC reports on the matter suggest that high-end, Class A office space is unlikely to be converted.
Indeed, according to a study conducted by Gensler in the Canadian city of Alberta, the older and more dilapidated the office space, the better the chances that it will be converted into housing. This is both because of the financial disincentive to convert newer, more valuable Class A space, but also because older office buildings tend to have smaller floor areas.
Fortunately, New York and San Francisco, two cities struggling with serious roaming issues, have no shortage of aging office space. It remains to be seen whether there will be any incentive to hire architects for this type of adaptive reuse project without straining the hands of developers. Anyway, with the recent updates to the energy code, architects will rehabilitate these old office spaces for one use or another in the years to come: affordable housing or no affordable housing, the question is who will benefit?