Cleveland has a lot of empty commercial real estate and a glaring need for affordable housing, especially downtown. So a new development there aims to address both things. It’ll turn most of a sprawling old bank building into 868 units of “workforce housing.”
Rents in the complex will be affordable for people earning 50 to 80 percent of Cleveland’s median income. The project, which is being financed by tax breaks for the developers, is meant to keep teachers, tradespeople, and service workers from being priced out of the city.
Originally the building was going to be converted into a hotel and luxury apartments, but the pandemic upended those plans — and offered an opportunity for something more creative.
“The office and hotel markets dried up. People weren’t traveling,” says Tom Mignogna, senior tax credit developer with the Millennia Companies, which owns the building. “So we put the project on hold and took a good look at the community needs, the markets that still needed to be served.”
It’s a timely twist on an old idea.
Developers have converted commercial space into housing for decades. Old mills, factories, and hospitals have become residential lofts and apartments. A wave of tax breaks aimed at developers sparked the conversion of many office buildings into apartments in Lower Manhattan in the early 1990s.
But rarely have these efforts been steered specifically toward affordable housing.
Now, however, with remote work emptying downtown offices while affordable housing in metro areas continues to be scarce, cities have a chance to deal with both issues at once, as in the Cleveland project. New York Governor Andrew Cuomo has said he’d like to transform offices into apartments to mitigate the housing crisis afflicting New York City.
What if Boston transformed some of its empty offices into affordable housing? It wouldn’t be easy, but with some foresight and strategic vision, it could happen.
Structurally speaking, converting an office building into residential units presents challenges that can be both daunting and tempting for an architect. The heavy lifting isn’t just installing new plumbing and electrical infrastructure or ensuring that the converted building has an energy-efficient wall-to-window ratio. The new housing units also need to be located near essentials like grocery stores and transit stations, and they should also be aesthetically familiar and welcoming to potential new residents.
“Wealthier people in big cities are accustomed to living in glass high-rise towers, but if we’re talking about moderate- or lower-income housing, it’s the question of ‘How do you make a big boxy office building feel more like a residential environment?’” says Alberto Cárdenas, a principal with DHK Architects, which has converted schools into housing. “Single-family housing elements like porches, double hung windows, pitched roofs, and yards can give housing a traditional appeal. It doesn’t have to be that way. I love modern buildings, and I could certainly live in a glassy building myself, but a lot of people just don’t go for that.”
That said, the nuts-and-bolts problems of turning newer office buildings into housing don’t appear to be deterring architects and officials in some cities from considering such projects. The New York architecture firm Architecture Research Office recently joined forces with the website Curbed to explain how a cramped office building on Madison Avenue could be converted into a mixed-use tower with more natural light and greenery-filled terraces.
The percentage of office space in Boston that’s unoccupied has nearly doubled in the past year, to 16 percent, and more downsizing seems likely as remote and hybrid work becomes the norm rather than the exception.
However, an empty office is not necessarily vacant and available. Matt Daniels, the executive managing director of Jones Lang LaSalle, a commercial real estate firm, believes the forecast of hollowed-out offices in Boston is overstated. “People are still renewing leases and paying their rental rates,” Daniels says. Open offices downtown are also being taken up by commercial tenants moving in from the suburbs. “We’re not seeing an exodus here,” Daniels says.
Even if Boston’s white-collar workforce remains largely remote beyond 2021, office leases can last for years, and there’s not much stopping leaseholders or landlords from sitting on empty spaces, waiting for the tide to turn. Converting one of those spaces into housing would require buying out the lease.
Multiply that transaction by several floors and you’re looking at huge preliminary costs before construction even starts. This could reduce the affordability of residential units wrought from offices — especially if the project is helmed by a private developer working with limited support from the state. Most of the apartments would likely be priced at market rates, to justify the project’s costs.
But what if the state were to muscle in, buy some of Boston’s office buildings itself, and then hand those buildings over to nonprofits and affordable housing developers?
This might sound like overreach. It would be unprecedented in Boston. But as more offices gather dust in New York, that state’s legislature and Governor Cuomo are debating how the state should intervene.
Earlier this year, the New York legislature introduced the Housing Our Neighbors with Dignity Act, a.k.a. HONDA, which would establish a program through which the state could buy distressed commercial real estate and transfer it to partners for conversion into affordable housing. It was a much bolder approach than the plan promised by Governor Cuomo, which would create a five-year window for landlords to convert their commercial spaces into housing with support from the state. Cuomo’s idea would potentially be a rerun of the office-to-housing conversions that the city catalyzed in the 1990s. It yielded housing units, but those units were not rent stabilized.
For now, the New York legislature has set aside only $100 million for such conversion projects, which doesn’t bode well for HONDA’s being realized anytime soon.
Massachusetts has the same dire need for affordable housing stock. A recent report by the Brookings Institute found that between 2009 and early 2020, housing prices in Greater Boston rose by 35 percent, with two-thirds of low-income households spending more than half of their income on rent or mortgage payments. But what’s lacking here is a vision for where some of that housing could take root and a plan for making it happen if the opportunity arises.
Imagining the possibilities
Not every office building is suitable for conversion, but as Cárdenas sees it, some of Boston’s newer ones have the potential to be transformed into housing units for less money than building housing from the ground up.
“In most office buildings, you’re dealing with large open spaces, and it’s much easier to insert nonbearing partitions to make your walls,” he says. “You can readily subdivide those office spaces without the expense of destruction and heavy structural redoing.”
It’s also worth remembering that the Biden administration has committed to reforming exclusionary zoning in cities and funding new affordable housing, clearing the path for conversions. If Massachusetts were to pass something like New York’s HONDA bill, or even enact a commercial vacancy tax to deter landlords from holding on to vacant office space indefinitely, the state could position itself to scoop up commercial real estate if the decline of offices continues. If the state isn’t ready for this outcome with a plan for acquiring offices, a historic opportunity for much-needed housing could be wasted.
To better imagine the possibilities, I took a self-guided vacancy tour around some of Boston’s most prolifically developed neighborhoods. My first stop, John Hancock’s former Seaport building on Congress Street, was recently acquired by BioMed Realty for conversion into a 14-story lab. A short walk delivered me to Post Office Square, where an overhaul of the looming One Post Office Square high-rise will add even more office space to the Financial District. Serenaded by the clanging of heavy machinery, I wandered around the tower periphery, only to find a more modest prospect tucked away on Broad Street. The Insurance Exchange Building at 40 Broad offers 11 floors of office space, and more than half of it is currently available for leasing. There would be several leases to buy out, but perhaps some of the existing tenants, such as the ground-level restaurant, could coexist with new apartments.
But my most intriguing find was 25-29 Beach Street — an older six-story office building and investment property on sale for $15 million. Permit applications for converting the building into a 14- and 27-story hotel have been filed. Much of the interior would have to be rehabbed, but one day, people could stay here.
Or better yet, people could live here.
Miles Howard is a journalist in Boston. Follow him on Twitter @milesperhoward.