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California Converting Empty Office Buildings into Housing?
As some of you know, I am a California political refugee now living in East Tennessee. But I continue to click on a local news website I used to follow to be apprised of what was going on in my area of California. Checking in the other day, I came across a plan to convert empty office buildings into housing. Empty buildings are plentiful, housing not so much.
Assembly Bill 1532 would categorize office conversion projects as “by right” developments, relaxing the permitting and review process for housing projects by preventing a city or county from requiring certain permits to convert a vacant office into housing.
The bill is partially spurred by the hundreds of empty offices in downtown San Francisco, which has seen one of the slowest pandemic recoveries in the country among major metro areas.
According to the commercial real estate firm CBRE, some 27 percent of San Francisco’s offices were vacant at the end of 2022.
My immediate reaction is that this is a good idea. Entry-level housing has been highly problematic for decades in California. Unchecked migration hasn’t helped that any.
But I wonder if this isn’t too late? One phenomenon that Californians are all too familiar with is how a fire can become so big it creates its own weather conditions to stoke the fire and push it forward. Decades of responding to increasing housing prices through raises in wages without increasing inventory has raised prices for everything not manufactured in China. Each wage rise fueled price rises, each price rise fuels wage rises. With Covid reducing building material inventory for over a year, construction material prices went up substantially — if you could get it.
There may now be a structural problem in actually building affordable housing when you factor in material and labor costs in California. All those existing empty office buildings may be there, but converting them to housing actually incurs the most expensive part of home building — bathrooms, kitchens, and plumbing for the same. And for any of you who have done home remodeling you know that it rarely pays off if you use substandard material, and can be a nightmare, as well.
The real answer — at this point — is manufactured housing from a low-cost source, but that is not what Californians want. And truth be told, it is not what should be placed in some of the loveliest real estate around. The Mojave Desert? OK, but that’s not where the jobs are and the commute into LA or San Diego is a killer. The Central Valley? OK, but cutting back on arable land is a terrible idea, and don’t let them into the Sierra foothills. Again, the commute into San Fran or Sacramento is a killer.
But you don’t need to commute, you say. Let them work from home. That’s great, except that if you can work from home, you don’t need to live in California. You are not the one creating the housing demand. It is the people who can’t work from home who need housing in California.
That’s why I am not sure if it isn’t already too late. Too late, at least, for California to simply rebalance and get back to its 1950-2000 iconic status for freedom and opportunity. California is evolving and I am not sure into what it is evolving. In the near term, the control of the California Communist Party is absolute and getting stronger. Its policies will fail and things will move in a different direction with an unknown destination.
Of course, parts of California could turn into this:
I hear those people vote for a socialist government, as well.
Published in General
With respect to San Francisco, at least, it is useful to keep Mark Twain’s observation in mind: “I was never so cold as one summer in San Francisco”.
I’m a commercial property owner in the Seattle suburbs. Most class C and B real estate is leased. The challenges are coming from the obvious places, like downtown Seattle Class A property. I do think our residential housing cost crisis is destined to ease significantly over the next 5 years. Rapidly rising rates combined with virtually no population growth (granted there is regional growth, so it depends on where you live) seems to me like a recipe for price collapse.
Off topic, but an anecdote I think is funny. Just before I left Rochester, NY, a small 4 story office building a block from my office was being converted from single tenant (the local telephone company) to multi-tenant (but still office) use. A major complication arose: The building had no boiler or equivalent for generating heat for the HVAC system. The racks of computer servers in the basement the telephone company used in its business generated all the heat the building needed in winter. The converters figured out a solution to getting heat generation, but it wasn’t easy or cheap.
I couldn’t remember the architect, I think it was Le Corbu or one of that crowd, but he designed a building that had to be destroyed because it quickly became a criminal drug den.
Animal behavior varies strongly by population density, resources, and how possible it is to spend time with low stimuli.
You can warehouse the addicted and mentally ill, but then, you can also warehouse explosives.