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The Biden administration is trying to make it easier to convert offices to apartments post-pandemic

A Biden administration official based in Philadelphia explains how the White House is trying to incentivize more commercial-to-residential conversions.

A late October policy announcement from the Biden administration sought to ease the path of more office-to-residential conversions.
A late October policy announcement from the Biden administration sought to ease the path of more office-to-residential conversions.Read moreYong Kim / Staff Photographer / Yong Kim / Staff Photographer

The University of Pennsylvania’s Vincent Reina has worked with a lot of governments over the years on housing policy, his academic specialty.

He helped the City of Philadelphia craft its first citywide housing plan before the pandemic and then established the Housing Initiative at Penn, which evaluated emergency rental assistance programs in a variety of cities and states after COVID struck.

Over the course of that last project, he was in touch with President Joe Biden’s administration, which approached Reina after the first semester of 2022. Since then he’s been a senior adviser for housing and urban policy on the White House Domestic Policy Council with a focus on how to address the myriad housing challenges facing the United States, from growing homelessness to renter protections to the web of local regulations that often kill new housing projects.

Reina talked with The Inquirer about a White House initiative launched last week to help ease commercial-to-residential conversion projects, especially as the office market continues to struggle.

This interview has been edited and condensed for clarity.

After offices emptied out at the start of the pandemic, there was a lot of excitement — even among people who don’t follow housing policy or real estate — about converting offices to housing. Why do you think it was such a compelling idea?

It’s very clear that there’s a need for more housing broadly and more housing that’s affordable. So when you see an opportunity for more housing to exist, particularly where buildings already exist, it just makes logical sense.

But it’s not as easy as just saying, oh, there’s a building; it was an office space; let’s just make it housing. Only certain buildings are in a good position to be converted. That said, it’s actually a fair number that are in a position to do that. What we’re trying to do with this investment [announced Friday] is to unlock those buildings where there’s a real opportunity to meet a real need.

Could commercial-to-residential conversions make a huge dent in the housing shortage?

There’s no one thing that will solve our housing problems, but there’s real opportunity here. We have federal tools that can actually make some conversions work and, in doing so, create tens of thousands of units.

There’s a real opportunity here, but we shouldn’t oversell it to say that if we convert commercial properties, we’re going to solve our housing challenges. That’s not our view, which is why this is within a broader set of actions around housing supply, housing affordability, and addressing homelessness.

» READ MORE: Here’s why Philly’s empty offices likely won’t become apartments anytime soon

What, in layman’s terms, is the White House doing to incentivize these conversions?

One of the biggest things we can do is actually just make the numbers work. These conversion deals need financing to convert a commercial property to residential uses. Oftentimes, that financing is not all that easy to get. What we’re doing today is bringing to bear a broad set of loan and grant programs that cover the spectrum of financing needs that could make these conversions viable.

What’s particularly exciting is this funding cannot just enable the numbers to work to make these deals happen, but to work in a way that allows these units to be affordable and reduces building emissions.

What programs are being rolled out?

We are unlocking $35 billion of loan authority from the Department of Transportation through two different programs that essentially provide financing for development that happens near transit.

This $35 billion of lending authority means that people can get loans for very large scale projects, below market interest rates. This is a really significant tool because a lot of these conversions are big properties that are going to be costly. A lot of times a big property that is very costly that you’re trying to convert requires a large loan. Any large loan is going to be seen as riskier: People are more exposed because the dollars are larger. What this does is create funding streams to allow these deals to happen and create lots of housing.

Beyond that, there are grant programs that essentially drag down the costs of financing. That allows the deals not just to happen, but for units within them to be more affordable. The more we can lower the cost of borrowing, the more grant support can flow into these conversions, the more the numbers work, and the more the numbers work in a way that can results in affordable development to low- and moderate-income households.

The Inflation Reduction Act, with its focus on fighting climate change, included programs to propel conversions. Why are these projects seen as so environmentally friendly?

You already have a building that’s in place. And oftentimes these buildings have systems that are old and need to be replaced. There’s a real opportunity to reuse that space and also invest in all the systems in a way that reduces the emissions that the building produces going forward and reduces the energy costs for people who live in that building.

And demolition is not very environmentally friendly.

Right, you’re not demolishing a structure, which has carbon implications. You’re also rehabbing a property in a way that actually reduces emissions, so throughout the process, you’re essentially meeting emission goals at multiple points.

What can local governments do to encourage office conversions?

Restrictive zoning and land use practices are barriers to development. [More localities] need to make the system work to allow for those conversions to happen smoothly. That is a really key part. But a lot of municipalities [including Philadelphia] have in place laws that automatically allow someone who wants to convert commercial property to residential to do it as-of-right, meaning that they don’t have to go through a long approval process.

There’s a lot of really exciting innovations going on by municipalities across the country looking at ways to facilitate these conversions. We’re at a really interesting moment, and we’re hoping that these federal resources serve as a leverage opportunity to help unlock those local efforts.