Home from work – should offices be converted to housing?

There has been some speculation about large scale conversion of office space into housing since the onset of the covid-19 pandemic.

Cities large and small have witnessed a sharp decline in demand for office and retail space over the past year. Some analysts expect this trend will continue even after the health crisis ends for a few reasons:

  • Commercial office tenants are finding that some employees are just as productive working from home as they are working in an office. Therefore, these tenants will continue to reduce their office footprint.
  • Online shopping has grown steadily over the past two decades. Continuing demand for e-commerce will reduce demand for retail space.

So, the thinking goes, why not turn these derelict spaces into additional housing. A recent New York Times article explores what a large scale office-to-housing conversion might look like in the big apple.

Roughly 140 million of Manhattan’s 400 million square feet of office space is considered to be of average quality or is in older and less luxurious buildings, according to Cushman and Wakefield, a real estate brokerage. The real estate board puts the citywide supply of those buildings at roughly 210 million square feet.
The real estate group estimates that converting even just 10 percent of that office space to residential would create 14,000 apartments citywide, including as many as 10,000 in Manhattan — a significant amount in a city routinely short of enough housing, especially affordable homes.

Midtown Is Reeling. Should Its Offices Become Apartments? Dec. 11, 2020

Adding housing supply is a critical part of a solution to make housing more affordable. And considering the scale of the housing crisis in many communities, any proposal that can potentially bring hundreds or thousands of new dwelling units online is welcome.

However, mayors can’t simply wave a magic wand to reformat vacant office space. Serious proponents of office-to-housing conversion will need to overcome several barriers:

  • Solving zoning conflicts in districts where residential is not allowed by-right
  • Finding suitable buildings which have floor plates that can be turned into housing
  • Maintaining work-from-home patterns long after this pandemic

While there are certainly interesting questions regarding zoning and building suitability, it is the third barrier that I want to explore in more depth.

After nearly a year of working from home in some capacity, I have some serious questions about the long term prospects for telecommuting. I am skeptical that many firms will allow their staff work from home indefinitely. I also suspect many employees will be happy to resume working in an office as soon as they feel safe.

At some point in the not-too-distant future all K-12 education will move back into physical classrooms. Once this happens, I suspect many employers will be much less sympathetic to employee requests to telecommute.

Few home buyers and renters have considered long term telecommuting when choosing a home. The honeymoon is over for many of us who have been working from home since March. While it’s comfortable to work in sweatpants and slippers, it is also lonely and isolating.

Demand for office space may rebound quickly as employees regain their appreciation for the benefits of working near other humans. If this happens before office space is converted to housing, then it will be simpler and cheaper for landlords to sign leases for conventional office space, and the opportunity to add new housing will be lost.

On the other hand there are clear societal benefits to widespread telecommuting, primarily lower air pollution due to reduced transportation. Encouraging telework is the bread and butter of Transportation Demand Management. In my view, it’s in our best interest to help employers keep some staff working from home in some capacity.

Past federal tax credit programs have helped people invest in electric vehicles and solar panels. Perhaps its time for a new federal incentive to encourage us to keep working from home in the form of a new tax credit. I am sure there are more clever programs that employers, municipalities, and states can implement with similar effects.

While telecommuters save money on fuel and parking, they also must sacrifice a portion of their home to work. Clear financial incentives can help encourage many of us to keep working from home at least long enough for developers to start converting surplus office buildings into new homes.

The prospect of lower transportation emissions and additional urban housing supply may be one of the very few silver linings of this crisis.