Local zoning codes hinder office-to-residential conversions, says report

In the New York Times, Emily Badger and Larry Buchanan examine fiscal challenges of converting office buildings into housing, as considered in places like SJ. Due to high conversion costs, the produced rentals are generally unaffordable for the avg resident. Badger and Buchanan suggest tax abatements, subsidy programs, and relaxed zoning regulations could make conversions more financially attainable—for local developers and residents alike.

The apartments that result from all of this don’t exactly resemble what you’d get if someone constructed a new residential building on an empty lot. And the resulting rents aren’t cheap, ranging today from $3,500 to $7,000 a month. Conversions in Manhattan tend to create market-rate “luxury” rentals, or condos selling for $3 million to $4 million.

That’s in part because in New York and many other markets, it’s hard to cover the costs of conversion while producing housing affordable to middle-class or lower-income residents. “Without public policy, without the city offering incentives, it just economically is not viable,” said Nathan Berman, the head of Metro Loft (the city’s own conversion task force concluded the same).

That could change with tax abatements and subsidy programs, or if outdated office buildings lose so much value that the cost of acquiring them plummets.

“Nobody just yet is giving these buildings away,” Mr. Berman said.

Developers and architects who’ve been doing this niche work for years say that few conversions are physically impossible if you’re creative enough. But the economics and the regulations aren’t as malleable. That’s where cities have some power to make these puzzles simpler.

In addition to creating economic incentives, they could relax the zoning distinctions between office and residential uses, or rethink the rules that say how much green space an apartment needs or where its windows must be. In New York, Mayor Eric Adams has proposed extending to many more buildings the relaxed rules that helped make 180 Water possible.

This article originally appeared in the New York Times. Read the whole thing here.

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