Mayors in cities across the United States are seeking to relax regulations that impede the conversion of office spaces into residential properties. Some cities are even offering attractive tax incentives to developers who take on the task of constructing new housing units.
During a news conference in December 2022, Washington, DC Mayor Muriel Bowser expressed her support for housing budget proposals, stating that there is a tremendous opportunity to repurpose downtown areas. However, Erica Williams, the executive director at the DC Fiscal Policy Institute, criticized Bowser’s plan to increase tax breaks for downtown developers in 2023, calling it a mere budget gimmick. While Williams supports the idea of converting buildings into residential or mixed-use properties, she believes there is no need for additional subsidies.
Mayor Eric Adams of New York City has assembled a task force of planners to analyze the impact of zoning changes and potential incentives for developers who include affordable housing units in conversion projects.
Other cities, like Philadelphia, have already embraced these policies to breathe new life into their downtown areas. Homeowners and investors in Philadelphia have received over $1 billion in tax breaks for their renovation endeavors.
A select group of developers has taken on the challenge of converting office buildings into housing units. Since 2000, a total of 498 buildings have been converted in the United States, resulting in the creation of 49,390 new housing units, as reported by real estate services firm CBRE.
Prominent investors such as Societe Generale and KKR have collaborated with developers like Philadelphia-based Post Brothers to provide funding for large-scale office conversions in expensive central business districts. However, securing financing for these projects has become more challenging and costly.
Experts anticipate that local governments will modify zoning laws and building codes to facilitate future conversions. Dan Garodnick, the director of New York City’s Department of City Planning, acknowledges that existing regulations can be restrictive and acknowledges the need for reforms.
To learn more about how cities are encouraging developers to convert offices into apartments, watch the video above.
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