In his recent testimony on behalf of IREM® (Institute of Real Estate Management) before the U.S. House Committee on Financial Services, Ralph Amicucci, Esq, CPM®, CCIM and owner of Amicucci Associates, PC, shed light on the obstacles hindering housing development. Amicucci's testimony in this field hearing, titled: “Restoring prosperity in American communities: Examining the failures of status quo housing policy,” on February 22, 2024, evaluates the current state of the American housing market. In his statement, Mr. Amicucci addressed barriers to development and burdensome laws, especially in the low and middle income housing sectors.
The burden of housing costs has surged over the years, with the portion of average household income in the U.S. allocated to housing rising from 30% in 1985 to 36.9% in 2021. To tackle this crisis head-on, Amicucci proposed a series of measures aimed at alleviating the affordability crunch and bolstering the nation's housing supply. These include the implementation of the Choice of Affordable Housing Act, the Low-Income Housing Tax Credit, and the Affordable Housing Credit Improvement Act. Additionally, Amicucci stressed the importance of eliminating exclusionary zoning and incentivizing adaptive reuse of underutilized commercial properties.
Furthermore, initiatives such as inclusionary zoning require developers to allocate a certain percentage of units in new developments for affordable housing or contribute to a housing fund. These policies aim to promote socioeconomic diversity and prevent the displacement of low-income residents in rapidly gentrifying neighborhoods. Additionally, housing subsidies and rental assistance programs play a crucial role in making housing more affordable for low-income households, providing financial support to bridge the gap between rental costs and household incomes.
Adaptive reuse of commercial properties, particularly office spaces, has emerged as a compelling solution to the affordable housing dilemma. As traditional office demand wanes and vacancies soar, developers are seizing the opportunity to repurpose these structures into residential havens. According to RentCafe, the office-to-housing conversion trend has witnessed exponential growth, with a staggering 357% increase since 2021.
The appeal of office conversions lies in their potential to breathe new life into aging urban landscapes while meeting the growing demand for housing. With 55,300 units slated for conversion in the U.S. this year alone, these projects signify a seismic shift in the urban fabric, transforming corporate hubs into vibrant residential communities. Notably, office conversions represent the largest slice of the adaptive reuse pie, comprising 38% of the total 147,000 units earmarked for future projects.
Amid this flurry of conversion activity, it's essential to address the underlying challenges facing the commercial real estate sector. With $150 billion of office financing due this year and a record-high vacancy rate of 19.6%, owners and developers confront mounting pressures to adapt to shifting market dynamics. With the Federal Reserve making little movement to lower interest rates any time soon, and, as work-from-home trends persist, the need for strategic interventions to revitalize commercial properties has never been more urgent.
It's imperative that policymakers, developers, and communities collaborate to unlock the full potential of increased housing development. By fostering an environment conducive to adaptive reuse, encouraging inclusive zoning and land use policies, providing targeted incentives for housing development and offering tax credits and other incentives, we can harness the transformative power of these projects to create more equitable, resilient, and inclusive cities for all. By leveraging the power of innovation and embracing a holistic approach to housing policy, we can build a more resilient and inclusive society where everyone has a place to call home.