How COVID and Biden's climate law could usher in an era of green housing
The Inflation Reduction Act combined with an urban real estate market reshaped by COVID, brings an opportunity to boost housing supply and cut emissions at the same time.
The big picture: Remote and hybrid work is here to stay after the pandemic, leaving lots of urban commercial space empty or under-utilized. Meanwhile, residential rent increases have outpaced income growth for years.
Driving the news: A new analysis from researchers at New York University and Columbia University explore possibilities to profitably turn office spaces into housing.
- Overall, they find that roughly 11% of commercial office buildings in the 105 largest cities are suitable candidates for conversion.
- The study sees potential for around 400,000 new apartment units — and note that for comparison, roughly 260,000 units are created annually in the U.S.
Why it matters: It's all connected, man!
- Housing is too scarce and expensive. Converting "brown" commercial stock into "green" housing can cut emissions by making these buildings cleaner and avoiding new construction.
- It also helps prevent urban "doom loops" — under-utilization lowers tax revenues and business activity; services and values decline; safety risks rise, more flight ensues and on and on.
What we're watching: The paper finds the maze of local zoning laws, permitting policies, and building codes could play a major role in encouraging conversions — or stymieing them.
- At the federal level, the authors see potential for the new climate law to help subsidize green conversions several ways, such as energy efficiency and renewables tax credits.
- One big one: The multi-purpose $27 billion Greenhouse Gas Reduction fund run via the Environmental Protection Agency. The authors see a path to supporting emissions-friendly conversions, and create affordable units.
Of note: In late July, the White House name-checked the fund as an avenue for these kinds of conversions, so keep an eye on what's ultimately supported with federal money.
Yes, but: Your mileage may vary. Lots of forces affect the economic viability of conversion projects, ranging from material costs to rental market conditions and plenty in between.
The bottom line: "While challenges abound, the potential to reimagine urban spaces for an economically and ecologically more sustainable future is immense," the paper concludes.