Many urban and rural areas nationwide are plagued by empty commercial buildings, with office vacancies reaching a 30-year high, according to the Council of Economic Advisers. That’s putting a strain on commercial real estate markets and local economies. A new White House plan seeks to adapt these vacant commercial buildings for residential reuse, which could help answer the desperate call from the real estate industry for more homes.
“America is facing a more than $4 trillion underinvestment in housing that has left us short some 5.5 million homes,” says Tracy Kasper, president of the National Association of REALTORS®, which applauded the White House plan. “With many office buildings sitting empty, converting underused commercial space into multifamily housing is an innovative, tangible and sensible solution that will also address housing affordability, which is currently at a historic low.”
The Biden administration seeks commercial property conversions that can create “much-needed housing that is affordable, energy efficient, near transit and good jobs and reduces greenhouse gas emissions—nearly 30% of which comes from the building sector,” according to a White House fact sheet.
A lack of inventory across the country has been driving up rental and other housing costs. The White House says its latest effort complements its 2022 Housing Supply Action Plan, which set a goal last year of closing the housing supply gap within five years by creating and preserving hundreds of thousands of affordable housing units, new financing standards and more.
Large-Scale Efforts to Support Conversions
The White House detailed several initiatives from government agencies and programs to help foster a greater number of commercial-to-residential conversions. For example:
- The Department of Transportation is releasing new guidance on lending programs to support the development of more affordable housing projects near public transit.
- The Department of Housing and Urban Development is updating its guidelines for using the Community Development Block Grant program to increase the acquisition, rehab and conversion of commercial properties into residential or mixed-use development.
- Other initiatives include promoting the sale of surplus federal properties that buyers could potentially redevelop for residential use.
- The plan also includes coordination among more than 20 federal programs that can be used to support commercial conversions, including with low-interest loans, loan guarantees, grants and tax incentives.
NAR has long advocated for adaptive reuse of older and unused commercial space. The association continues to support Congress on a number of legislative efforts, including legislation that provides a 20% tax credit for qualified property conversion expenditures.
“Even relatively modest steps will reduce the underbuilding gap while unleashing tremendous economic activity into our communities, creating millions of new jobs and igniting economic growth where it is needed most,” Kasper says.