Biden Throws $45 Billion In Federal Funds To Convert Offices Into Homes

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by Tyler Durden
Tuesday, Oct 31, 2023 - 01:00 AM

Authored by Mike Shedlock via,

Questions abound. Assume you can convert offices into homes, who wants to live in them? Is a tear-down cheaper?

To ease the housing crisis, White House Opens $45 Billion in Federal Funds to Convert Offices Into Homes

Taking aim at the nation’s housing crisis, the White House kicked off a multiagency push on Friday to help real-estate developers convert more office buildings emptied by the pandemic into affordable housing.

The initiative aims to harness $35 billion in low-cost loans already available through the Transportation Department to fund housing developments near transit hubs, folding the initiative into the Biden administration’s clean-energy push.

It also opens up additional funding sources and tax incentives and offers a new guide to 20 federal programs that developers can tap and that offers technical assistance in what can be tricky and expensive conversions.

A third part of the program will see the federal government draw up a public list of buildings it owns that could be made available for sale to help bolster development.

The federal government owns about 1,500 office buildings nationally and had leases on almost 200 million square feet of additional space as of April, according to Barclays analysts, who said in a recent report that much of that office space was underused.

Questions Abound

Also consider San Francisco’s push to turn office buildings into homes hinges on this simple idea

“Hope is not a strategy,” said Nick Romito, co-founder and CEO of VTS, a leasing and asset-management data company. “The hope that if you convert it, they will come —well, a lot depends on where that building is.”

While New York City’s downtown financial district is home to a number of successful office-to-residential conversions, it also takes a vibrant neighborhood, with bustling cafés, grocery stores and more.

“That is not the same for San Francisco,” Romito said. “The infrastructure and the cost of converting a building — that’s part of it,” he said. “But I’d be more concerned about, even if you can convert it, who wants to live there?

“What’s cheaper?” Romito said. “Is it cheaper to add amenities in maybe a zombie building, add a floor or two, to create a better experience? Or is it cheaper to knock the entire building down, rebuild something else, and pray to God you lease it?

Warren Wachsberger, CEO of Aecom Capital, a subsidiary of Aecom ACM, said revamping old office buildings isn’t that simple. “Less than 1% of all apartment units underway, being built nationally, are office-to-residential conversions, despite everybody’s love affair with them,” Wachsberger said, speaking from Los Angeles.

Many buildings probably won’t work,” Wachsberger said, observing that thick, concrete office floorplates often need to be drilled through and plumbing and heating systems overhauled, with local building codes adding to the headache.

“It’s a lot easier and cheaper to demolish it and start over from scratch,” he said. “That means buying buildings essentially at the cost of land.”

Wachsberger said hopes for an expansion of an office-to-residential conversion effort in Los Angeles in the 2000s likely hinge on incentives for developers and the buildings being in places where people wanted to work, eat, live and shop. “Until that’s able to come back, it’s difficult to create the vibrancy that was there prepandemic,” he said.

Simple Idea

I had to read that article twice to find the simple idea mentioned in the headline. The article never really explained. But I believe It’s in that last paragraph above: Incentives and free money from governments.

With enough subsidies, developers will try nearly anything. Then when the projects fail, the developers ask for more money.

Clean Energy Question

What the heck does this have to do with clean energy?

The answer is clearly nothing. Nonetheless, $45 billion is siphoned from the Biden administration’s clean-energy push.

The government has 1,500 office buildings nationally and leases on almost 200 million square feet of additional space that it does not need. Instead of canceling leases and selling the real estate, it’s going to convert them into clean energy spaces.

Biden’s Green Energy Inflation Reduction Act Needs a Big Bailout Already

Please note Biden’s Green Energy Inflation Reduction Act Needs a Big Bailout Already

Surprise, surprise. Subsidies were not enough to make Biden’s energy projects profitable.

The Inflation Reduction Act (IRA) includes hundreds of billions of dollars in subsidies for green energy, yet now renewable developers want utility rate-payers in New York and other states to bail them out.

According to a report late last month by the New York State Energy Research and Development Authority (Nyserda), large offshore wind developers are asking for an average 48% price adjustment in their contracts to cover rising costs. The Alliance for Clean Energy NY is also requesting an average 64% price increase on 86 solar and wind projects.

What Will This Office to Apartment Conversion Ultimately Cost?

Supposedly, this office conversion idea will only cost $45 billion.

I assume it will eventually cost $450 billion minimum by the time Biden finishes. He is guaranteed to add subsidized low income, clean energy, free electric heat, and free child care into the mix.