Is Conversion the Solution to California’s Housing Crisis?

Image courtesy of Office of Governor Gavin Newsom

California’s governor Gavin Newsom signed two bills into law that incentivize developers to convert commercial buildings into much-needed housing. As first reported by The Los Angeles Times, the two bills, Senate Bill 6 and Assembly Bill 2011, are designed to make the approvals process more streamlined for developers interested in turning vacant or defunct commercial properties into residential communities.

The bills were aimed at creating more housing units for low- and middle-income California residents since the state is currently experiencing a major housing crisis. The new law would let residential use replace underutilized commercial sites that are currently zoned for retail, office or parking uses. More specifically, the Senate bill allows developers to build residential projects in areas that are zoned for office, retail or parking use, while the Assembly bill streamlines the approvals process for the residential conversion.

“In Los Angeles, we don’t have an office inventory issue. We have a housing issue,” Josh Kimmel, vice president of Project Management Advisors, told Multi-Housing News. “So we have to be creative and implement strategies that expedite additional housing for the market.”

In theory, the new laws should give developers more incentive to opt for adaptive reuse projects, like turning old shopping centers or vacant office buildings into housing units. There are also additional benefits from this law, including generating thousands of jobs and increasing the use of public transit by building more housing near transit corridors.

First Steps of Multi-Pronged Approach

For those involved in the California multifamily market, these two bills are just the first steps in a long process to address the ongoing housing crisis. Peter Belisle, market director for the Southwest region for JLL, told MHN that these two bills are putting the issue back into the limelight and creating the necessary initial momentum.

“This is one of the many levers that needs to be pulled to really turn the Titanic, if you will, and really accelerate the development of more housing in the state,” Belisle told MHN.

Beslisle added that the other necessary measures to help address California’s housing crisis include a way to lower current construction costs and municipalities looking at some kind of property tax relief.

Kimmel told MHN that the new laws could be the push that developers need to move forward with an adaptive reuse project that they otherwise might have overlooked. For Kimmel, these new measures are also one of many strategies needed to start addressing the overarching housing availability issue.

“We need multiple types of strategies to really make a dent in the problem,” Kimmel told MHN. “So it’s baby steps, but it’s baby steps in the right direction.”