The Blubber

White House opens $45 billion in federal funds to developers to covert offices to homes, per Bloomberg.

The White House has initiated a collaborative effort among multiple government agencies to support real estate developers in the transformation of vacant office buildings in major cities, which were left empty during the pandemic, into affordable housing. This initiative aims to address the nation's housing crisis.

The plan seeks to leverage the existing $35 billion fund of low-cost loans provided by the Transportation Department to finance housing developments in proximity to transit hubs. It is integrated into the Biden administration's clean energy agenda.

Additionally, the program introduces various funding sources and tax incentives. It offers developers a comprehensive guidebook to access 20 different federal programs and provides technical assistance for navigating the complex and costly conversion process.

Another key aspect of the program involves the federal government identifying and making public a list of its own properties that could be available for sale to support housing development.

Transportation Secretary Pete Buttigieg emphasized the advantages of this approach, stating, "These downtowns and central business districts that we are talking about today are often already designed and oriented around public transit. Our intention is to make the most of this opportunity to add more housing near transit in ways that not only reduces the cost of housing but also often reduces the cost of transportation."

Office vacancies in the United States have reached nearly 25%, in contrast to Europe's 8%, according to real estate firm Savills. Particularly hard-hit cities like San Francisco have experienced even higher vacancy rates, setting new records as property values decline and more property owners default on their mortgage loans.

Nathan Berman, a founding principal of Metro Loft, a prominent firm known for office-to-residential conversions in New York City, emphasized that the primary obstacle to these conversions is a lack of financing. He noted that it's largely the prevailing interest rates that are impeding progress. The increase in borrowing costs due to the Federal Reserve's actions to combat inflation, coupled with ongoing uncertainty among companies about their space requirements and budgets, has resulted in a credit squeeze for building owners with looming debt obligations.