Biden Moves to Boost Residential Conversions

Lew Sichelman

The Biden Administration has thrown its considerable weight into the commercial-to-residential conversion movement as part of its overall plan to boost the nation’s housing supply.

To encourage more developers and localities to explore turning empty office and retail space into apartments and mixed-use spaces, the White House has released a new 54-page guidebook to help stakeholders find federal resources available to finance conversions, either in total or in part.

“If only a small percentage of underutilized commercial buildings were converted to housing, it could create thousands of units of much-needed housing while also reducing the carbon footprint of existing buildings,” according to the guide.

READ ALSO: Can Conversions Help Fix the Multifamily Supply Gap?

Among the resources Uncle Sam has available are: grants to cover pre-development, acquisition, construction and other costs; below-market rate financing; and land disposition permits. Tax incentives that fund energy efficiency improvements, tax credits to cover the use and creation of clean energy for and by buildings, and loan guarantees that support innovative zero emissions buildings that are part of virtual power plants.

At the same time, the White House announced its comprehensive, multi-agency plan, the Department of Housing and Urban Development released an updated notice on how its Community Development Block Grant funding mechanism can be used to boost housing supply, including acquisition, rehabilitation, and commercial-to-residential conversions.

The joint White House-HUD announcements came on the heels of the most recent quarterly issue of Evidence Matters, which focused almost exclusively on office-to-apartment conversions. The magazine is published by HUD’s Office of Policy Development and Research.

Citing a Council of Economic Advisers report that office vacancies have reached a 30-year high from coast-to-coast, the White House touched all bases on the need to give the conversion movement a boost: It will create much-needed housing that is affordable, energy-efficient, near transit and good jobs, the Administration said, and it will even reduce greenhouse gas emissions, nearly 30 percent of which comes from the building sector, it said.

The Commercial to Residential Federal Resources Guidebook lists more than 20 federal programs across six federal agencies that can be used to support conversions. These programs include low-interest loans, loan guarantees, grants and tax incentives, which, subject to the requirements of each program, may be used together to increase the economic viability of conversion projects.

To accompany the guidebook, the Biden Administration is planning to hold training workshops for local and state governments, developers, owners, builders and lenders on how to use federal programs for commercial-to-residential conversions as well as achieve additional goals, including affordability and achieving net-zero housing.

All agencies on deck

HUD isn’t the only agency joining the initiative. The Department of Transportation will provide technical assistance by directly engaging with other departments and third-party intermediaries to support municipalities and developers seeking to use DOT tools to finance conversions.

Meanwhile, the Department of Energy has produced a commercial-to-zero emissions housing toolkit that includes technical and financial guidance on how to achieve zero emissions. The Treasury Department has posted a blog detailing tax incentives for builders of multi-family housing. And the General Services Administration has been directed to step up its efforts to locate and sell excess office space Uncle Sam no longer needs.

Meanwhile, HUD is also increasing outreach efforts to support municipalities and developers seeking to use HUD tools to finance conversions. States and localities can also access up to five times their annual CDBG allocation in low-cost loan guarantees to fund conversions. And the housing agency will back research that can serve as roadmaps for other localities interested in pursuing conversions.

Finally, noting efforts by the National Association of Counties and the American Planning Association to advance conversions, the White House called on others in the private sector, including non-profits and other stakeholders, to “engage in capacity building” around conversions.