Idea for fixing the housing shortage

[Banker & Tradesman]

This week, we've got a news story and an opinion piece looking into why Boston's seen so little office-to-housing conversions when other cities are seeing a lot more success.

In theory, Gensler (the architecture firm that's done the most modeling, surveying and actual design work on these sorts of things), says between 3 million and 5 million square feet of Boston's 70 million-square-foot downtown office market could support a conversion, but we've only seen ~500,000 square feet worth of projects so far, give or take.

In part, it's money (and affordability requirements):

Boston’s Conversion Conundrum

Tens of millions square feet of office space across America is undergoing conversion to apartments. So why is Boston seeing so little conversion activity?

bankerandtradesman.com

But another big factor, writes the co-head of Gensler's Boston office, is the small size of our office market relative to places like NYC:

‘Fear Factor’ Deters Residential Conversions in Boston

Boston is at a critical juncture as it faces a growing housing shortage alongside an abundance of underutilized office space. But the scale of conversions here has, so far, been underwhelming.

bankerandtradesman.com

New York simply has a much larger volume of buildings to work with. The city’s five boroughs comprise nearly 730 million square feet of office space, with the vast majority – 82 percent, or about 600 million square feet – located in Manhattan. This gives developers a broader range of potential properties to evaluate for conversion.

But maybe an even bigger issue is that there's a decent amount of fear out there whether consumers will take to a large-scale conversion like the NYC ones that have gotten so much press, he says:

One of the biggest challenges in Boston is the fear factor associated with being the first to undertake a large-scale office-to-residential conversion. Most of Boston’s current conversions are relatively small in scale. In contrast, New York has already seen substantial conversions. Developers in New York have had the benefit of seeing these large-scale conversions succeed, which reduces perceived risk for future projects.

 

[JeffDowntown]

This week, we've got a news story and an opinion piece looking into why Boston's seen so little office-to-housing conversions when other cities are seeing a lot more success.

In theory, Gensler (the architecture firm that's done the most modeling, surveying and actual design work on these sorts of things), says between 3 million and 5 million square feet of Boston's 70 million-square-foot downtown office market could support a conversion, but we've only seen ~500,000 square feet worth of projects so far, give or take.

In part, it's money (and affordability requirements):

Boston’s Conversion Conundrum

Tens of millions square feet of office space across America is undergoing conversion to apartments. So why is Boston seeing so little conversion activity?

bankerandtradesman.com

But another big factor, writes the co-head of Gensler's Boston office, is the small size of our office market relative to places like NYC:

‘Fear Factor’ Deters Residential Conversions in Boston

Boston is at a critical juncture as it faces a growing housing shortage alongside an abundance of underutilized office space. But the scale of conversions here has, so far, been underwhelming.

bankerandtradesman.com

But maybe an even bigger issue is that there's a decent amount of fear out there whether consumers will take to a large-scale conversion like the NYC ones that have gotten so much press, he says:

No mention that New York, particularly lower Manhattan 421-g tax abatement, and now all of Manhattan 467-m tax exemption is $$ billions in incentives over the next 25-35 years that make Boston's incentives seem paltry. (And the NYC incentives come with steep affordability requirements! so affordability does not cut it as an excuse. It is the State money driving conversions.)

Developers can afford to spend 2 to 3 X the purchase price of a building on conversion with those incentives (90% of the tax bill!).

 

[737900er]

I wonder how much of the conversion difficulty in Boston is driven by all the new construction in the Seaport, which isn't that far away, has more amenities, and is probably more prestigious. I think for most people a Downtown conversion would have to be cheaper than the Seaport to consider living there.

 

[737900er]

Wu proposes $110-million loan fund to help spur more housing in Boston; could get additional money from state

Mayor Wu says she will ask the City Council to approve a $110-million rotating fund to help tip the balance on new housing developments whose builders would otherwise hold back because of the high cost of financing these days - with the first project to be a mixed-income apartment building as...

www.universalhub.com

Mayor Wu says she will ask the City Council to approve a $110-million rotating fund to help tip the balance on new housing developments whose builders would otherwise hold back because of the high cost of financing these days
[...]
In recent years, developers have won city approval for roughly 30,000 housing units that they then never built.
[...]
At least 20% of the units in any project that receives a city loan would have to be rented or marketed as affordable

I think this is exactly the kind of market intervention that's needed when the Federal Reserve is trying to slow down all economic activity.