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MANAGEMENT UPDATE.

A TRICKY TASK: CONVERTING OFFICE SPACE TO HOUSING

With office vacancy projections rising in Austin, the City Council recently asked its city auditor to investigate the potential for converting unused office space into residential housing.  The result: A special report, released in April, which provides resources and advice that should be useful to many cities.


The auditor was only able to find one building in Austin that had been successfully converted, and that was back in 2004. So, the lessons the audit contains draw upon interviews as well as the experiences from the 20,000 housing units that have been created from office space since 2016 nationally in places like Boston, Chicago, Dallas, Los Angeles, Memphis, New York City and Washington D.C. 



In Austin, there is good reason for City Council interest in this topic. In December 2023, nearly 17% of office space in Austin was vacant, with industry projections for 2024 rising to 21%, according to the special report. The report covers five topics requested by the council – identifying potential vacant buildings to convert; properties in peer cities in which conversion has been successful; a summary of research studies that delve into cost, return on investment, and economic feasibility; identification of barriers, and other alternative conversion options.


A prominent message throughout the report is that office-to-residence conversions are not easy. Some of the problems stem from undesirable ceiling heights, elevator locations, large interior floor plans with limited window access and – in older buildings – aged heating, plumbing and electrical systems, with wiring and other elements potentially not up to current code. Other complications include different residential requirements for bathrooms and kitchens, while zoning restrictions may also create barriers.


One of the problems cited is that conversions tend to be expensive, which means they often end up producing luxury housing as opposed to affordable housing – a disappointing finding for Austin and other cities that are looking to solve this increasingly troublesome issue. In Austin, a November 2023 study found a shortage of affordable housing in all ten council districts for four-person families whose incomes were 80% or less than median income (or about $93,450). 


“Staff expressed concern that any conversions in Austin would be unlikely to add to the stock of affordable housing without substantial City subsidies,” according to the report.


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