The US housing market can be filled with real estate for home buyers with decent incomes. But it has long been difficult for low-wage earners to find affordable housing.

According to estimates by the National Low Income Housing Coalition, the US is lacking a whopping 7.2 million affordable housing units. 75% of all extremely low-income families currently spend more than half of their income on rent.

The question naturally arises: Why not convert existing commercial properties into apartments for low-income earners?

A large number of office buildings are currently largely empty across the country. The coronavirus outbreak has changed the face of working arrangements, and remote setups are likely to remain popular even after the pandemic subsides. This means that there could be a lot of office buildings in the coming years that are losing money month after month. Converting it into affordable housing reads like a sensible solution.

However, converting commercial properties into residential units is not an easy task. And unless local governments work with real estate investors to address these challenges, it is unlikely to happen on a large scale.

A cumbersome process

There's a reason some commercial property owners are reluctant to convert to residential units – the cost and complexities involved. By their very nature, commercial buildings are not so easily suitable for residential conversions. These buildings are usually set up in such a way that there is no even flow of light and air – something that you need when talking about building an apartment complex. And the distribution of windows is often such that in a residential application these buildings would not conform to the code.

Converting offices into residential buildings also means that plumbing and electrical work must be renewed. This is an investment property owners may not want to buy if the upside is uncertain.

Of course, some commercial properties are better suited for residential conversions than others. For example, hotels can be adapted more easily because they are already created as a series of individual units. But hotels could also have problems when they combine blocks of rooms to form new apartments. And that's a process that investors may shy away from.

So what's the solution? It could boil down to the right government incentives and support.

Investors may be more inclined to make sensible use of unused commercial space if municipalities find ways to simplify the home conversion process. For example, zoning laws can be relaxed to give developers more flexibility. Building regulations can also be revised if necessary in order to make conversions more profitable and cost-effective.

If the legislature really wants to solve the problem of affordable housing, it should of course also think about additional incentives for commercial property owners. Subsidizing conversion costs is a good place to start.

Right now there is a lot of commercial property across the country that is not in use. At the same time, there are millions of Americans who do not have access to affordable homes. At first glance, the solution to this problem seems simple. However, given the challenges of converting commercial space to residential, it's easy to see why so many investors are not taking this route.

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The Motley Fool has a disclosure policy. Editorial opinions are ours alone and have not been previously reviewed, approved or endorsed by the included advertisers. Millionacres editorial content is separate from The Motley Fool's editorial content and is created by a different team of analysts.

source https://seapointrealtors.com/2021/08/02/the-future-of-cre-affordable-housing/

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