California cities cut red tape to turn unused office buildings into housing

By Robbie Sequeira, Stateline.org

Nearly a fifth of office space across the country sits empty, a record high vacancy rate that’s expected to keep growing.

Seeking both to boost their economies and ease their housing shortages, cities are taking steps to encourage the conversion of unused office space into much-needed housing. They include reductions in approval times, exemptions from affordable housing rules and changes in building code requirements. Some cities and states also are providing tax incentives or subsidies to developers.

“Cities need to focus on making conversions feasible by removing unnecessary regulatory barriers,” said Alex Horowitz, project director of the Housing Policy Initiative at The Pew Charitable Trusts.

“The U.S. is short millions of homes, and office vacancy rates are at record highs. It makes all the sense in the world to convert underused commercial space into housing, but the cost per square foot is just too high.”

Purchasing and converting an office building for residential use costs an average of $685 per square foot. Buying a completed multifamily property costs an average of $600 per square foot, while building a new multifamily development costs about $588 per square foot.

Regulatory hurdles — such as outdated building codes, minimum unit sizes and natural light requirements — push up costs. Cities are trying a variety of ways to overcome these obstacles.

From coast to coast

In September, Minneapolis peeled away several regulations in an effort to encourage conversions, including removing public hearing requirements, requiring less intensive traffic studies, and exempting converted buildings from the typical requirement that 20% to 30% of units be rented at below-market rates.