Updated Oct 27, 2023 - Economy

How Biden's team plans to unlock more office-to-apartment conversions

Illustration of a hand holding a key surrounded by abstract shapes.

Illustration: Maura Losch/Axios

The Biden administration has a new plan to turn more empty office spaces into housing, officials announced Friday.

Why it matters: State and city governments are working on how to best incentivize those flips, in a push to revive America's downtowns and ease the housing shortage.

Driving the news: The White House released a toolkit highlighting more than 20 federal programs to make converting buildings easier.

  • The move comes as U.S. office vacancies have hit a 30-year high, according to Biden's Council of Economic Advisers.

What's happening: The Department of Transportation shared new guidance on how states, cities and developers can access financing for conversions near transit hubs.

  • Two programs combined offer over $35 billion in lending capacity at below-market interest rates, Transportation Secretary Pete Buttigieg said during a media call on Thursday.

The big picture: Office-to-apartment flips are here to stay, even as the hyped pandemic trend slowed in recent years, Axios' Kate Marino reports.

Reality check: Conversions require considerable time, money and effort.

  • A typical flip is financially feasible in six metro areas — New York, San Francisco, San Jose, Boston, Washington, D.C. and Denver — where rents are high enough to overcome costs, according to a recent paper from the National Bureau of Economic Research.
  • In Manhattan, the Flatiron building will be turned into luxury condos, the New York Times reports.

Details: The Department of Housing and Urban Development updated 15-year-old guidance on how certain block grants can be used for conversions.

  • Officials are also expanding efforts to sell surplus federal properties that could be redeveloped, among other steps.

What they're saying: "This presents an area of opportunity to both increase housing supply while revitalizing Main Street," White House National Economic Council director Lael Brainard said on the call.

Of note: "The marginal increase in housing from the program is beneficial, but the changes are at the margin. They will not dramatically increase the number of housing units," says Jeffrey Havsy, office conversion expert at Moody's Analytics, in an email.

Editor's note: This story has been updated with a comment from Moody's Analytics.

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