By Anthony Hennen | The Center Square
(The Center Square) – A pilot program in Pittsburgh would use federal funds to convert downtown office space into residential units for affordable housing.
Pittsburgh City Council will consider legislation that would use $2.1 million in funds from the American Rescue Plan Act to make downtown “a more vibrant and resilient neighborhood,” according to a press release.
The funding is part of a $9 million effort from county and state officials to increase affordable housing in the city. The $2.1 million effort would give a boost to $3 million granted by the commonwealth to the Urban Redevelopment Authority of Pittsburgh for affordable housing.
“The city of Pittsburgh is the heart of Allegheny County and the economic engine of western Pennsylvania,” said Sen. Wayne Fontana, D-Pittsburgh. “The Downtown Pittsburgh Conversion Program is a bold and innovative idea to ensure that the city continues to drive economic prosperity, while ensuring equitable access to housing.”
Fontana, who also serves as a board member of the Pittsburgh Land Bank and Habitat for Humanity in the Pittsburgh area, has been critical of the General Assembly for not doing more to lower rents and make housing more affordable in Pennsylvania, as The Center Square has previously reported.
Pittsburgh has an office space vacancy rate of almost 22% according to Newmark, a real estate services firm. That’s an increase of about 5 percentage points before the pandemic, though Newmark noted the overall outlook for 2022 is “more optimistic” than in 2021. The vacancy rate increase is in line with major cities, though Pittsburgh’s dependence on office space instead of residential units downtown is one factor that contributes to its vacancy rate being much higher than Philadelphia’s (10.6%).
Converting vacant office space to residential use can be difficult, however.
“Barriers to market-driven office-to-residential conversions include: the higher profitability of office space compared to multifamily residential conversion; the spread of office vacancies across several buildings so that there are very few completely vacant office buildings; incompatible residential housing regulations and building codes; and lack of conversion construction experience, including uncertainty over the costs and logistics of conversion,” the report noted.
Downtown conversions are also often more expensive to buy than office buildings closer to residential neighborhoods. Conversions in DC during the 2010s were “more likely to occur outside of central employment areas,” the report summarized.
Office conversions aren’t a panacea to a lack of affordable housing; they are a minor help, the report found. Pittsburgh’s downtown may benefit from office conversions into apartment units, but the city will need more housing built in and out of downtown to affect market rents.
“??Each year, there may be a few office buildings that have the right combination of financial and structural circumstances to make conversion to housing feasible, including affordable units. Such conversions would grow the affordable housing stock marginally,” the report noted. “However, such conversions would provide a small, unpredictable contribution to alleviating the affordable housing challenge in the District.”