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Affordable Housing: Convert and Acquire Buildings COVID Has Made Available

By Nicholas Kelly and Soni Gupta

March 5, 2021

Nicholas Kelly recently earned his PhD from the Massachusetts Institute of Technology in Public Policy and Urban Planning. His research and advocacy focuses on housing policy and segregation, with a particular focus on affirmatively furthering fair housing.

Soni Gupta leads the Neighborhoods and Housing strategy at the Boston Foundation, which is currently working with housing partners to develop a racial equity rubric for housing and is in early stages of launching the Carpe Diem Fund for housing.

The COVID-19 pandemic has revealed the many ways in which our existing systems reinforce inequality. In housing, we’ve seen the devastating consequences of overcrowded homes and an over-capacity shelter system where the virus easily spreads. While the reasons for Boston’s persistent housing crisis are numerous, one stands out: a lack of affordable units. The efforts of affordable housing advocates and developers have been severely hampered by restrictive zoning and slow-moving construction and permitting processes. Today, however, the economic ravages of COVID have led to an oversupply of certain existing building types that could be converted and preserved into long-term affordable housing. Specifically, we see opportunities to convert/preserve four types of structures and institutions in Greater Boston: vacant office space downtown and in the suburbs, shuttered college campuses, underutilized suburban hotels and nursing homes, and naturally occurring affordable rental housing.

Real estate uses are continually changing. But the COVID-19 pandemic has slashed demand for office space more quickly than we’ve seen in years. According to the latest data, Greater Boston’s office spaces now have a vacancy rate of 14 percent—the highest since the Great Recession. Moreover, the market is weakest in the suburbs. The suburban office park so popular in the 20th century had been falling out of favor, and that trend has accelerated during COVID: while developers have been converting office spaces into housing for years, the precipitous drop-off in suburban office demand—which may become permanent as more employees work from home—suggests a significant opportunity. As more and more families look to live in the suburbs—Boston’s suburban real estate market was stronger than ever in 2020—converting office parks could help meet this demand, especially for much-needed affordable rental housing.

Of the state’s 351 municipalities, 208 have not built any multifamily housing in the past decade, and many, especially heavily White, affluent suburbs, have not met the Commonwealth’s “40B” requirements that 10 percent of the housing stock be classified as affordable against local median income. Given local control over land use and restrictive zoning, there has been little incentive to produce more affordable housing in suburban locations. Housing developers who attempt to construct a multifamily affordable development in these towns, either by requesting zoning variances or through the Massachusetts 40B override process, typically face intense local backlash and slowdowns from abutters complaining about traffic, community character and public services. Building more affordable housing in existing office parks in exclusive suburban communities could begin to overcome these barriers—and be a welcome solution for those towns.

Suburban areas also present another opportunity for affordable housing development: colleges that are closing down. Several small colleges across New England had closed their doors even before the pandemic and sadly with the COVID-driven loss of revenues, more and more colleges are being forced to close. In the past five years, Massachusetts alone has seen three mergers (The Boston Conservancy and Berklee College of Music, The School of the Museum of Fine Arts and Tufts University, and Wheelock College and Boston University) and three closures (Atlantic Union College, Mount Ida College and Newbury College). While a loss for many communities, alumni and students of these institutions, these closures represent another opportunity to counter Greater Boston’s affordable housing crisis. Campuses occupy large plots of land and many feature dormitory buildings. Furthermore, many campuses sit in residential areas with excellent schools. Colleges located in urban areas with connections to transit and proximity to job centers, retail and healthcare contain adaptable facilities and infrastructure and represent rare opportunities for large-scale development in otherwise built-out metro areas. The cost efficiencies of renovating existing campus facilities partnered with the accessibility of urban campus locations could make it possible to develop desperately needed affordable housing in high-cost markets with scarce availability of land.

Underused hotels, especially outside the central business district, embody another promising possibility for developing affordable housing. Right after the pandemic began, the Boston hotel market crashed, with an occupancy rate in April 2020 of 11 percent as compared to 77 percent at the same time in 2019. Demand for hotels will certainly rebound once we have the pandemic under control, yet it seems quite likely that business travel may never rebound back to pre-pandemic levels, as most white-collar workers are now relatively comfortable using remote meeting technology. In conversations with local housing developers and owners about how to promote housing equity, hotels/motels were identified as an exceptional potential opportunity. Both the large number of units in hotels, and their ease of conversion to housing, make hotels prime candidates for transformation into affordable housing, especially as supportive housing for homeless households. These conversions are already underway locally and across the country. Indeed, Governor Baker noted that the Housing Choice bill just enacted by the legislature could help commercial buildings be converted into housing.

In addition to these housing production efforts, a strategy of acquiring Naturally Occurring Affordable Housing (NOAH) is critical to staunching displacement of present renters and to prevent the current housing stock from becoming even less affordable. Existing, moderately priced housing, especially in communities of color and in Gateway Cities, is increasingly at risk of being purchased by investors who could then convert the units to higher cost rentals. These NOAH conversions displace the existing tenants, who are often low and moderate income, when investor owners impose significant rent increases. As the effects of the pandemic stretch on, more NOAH owners may be pressured to sell to investors who can carry out modest upgrades and raise rents to unaffordable levels. Creating the financing mechanisms that allow mission-based housing developers and community land trusts to purchase NOAH properties and convert them to permanently affordable housing is a vitally important step toward housing equity.

Converting and preserving (in the case of NOAH) all of these property types will face tremendous hurdles. Hyper-local zoning restrictions often make it difficult to convert non-residential uses to housing, so pro-actively legalizing different building uses is one important step. These projects will also take significant capital investment. Working together, government, private capital and philanthropy can raise the necessary funding to purchase properties and convert or preserve them. They can identify and incorporate best practices and make capital available for these production and preservation strategies so that they become more widely used across the state. Now is a particularly opportune time for this action, given historically low interest rates. The opportunities exist in many municipalities that are looking for ways to increase their affordable housing stock. The Boston Foundation is working with partners across the region to develop a housing fund that will focus on NOAH acquisitions as a first step in addressing displacement and immediate housing needs.

The COVID-19 pandemic has demonstrated that structural problems like a lack of affordable housing cannot be solved without structural solutions. It also has presented a rare opportunity as more types of buildings previously unavailable can be converted to housing. We should employ every possible tool to increase affordable housing production and prevent displacement across the region, including not only converting other buildings types, but also providing funding for regional and local planning supports, and proactively rezoning to legalize housing since some of these spaces might not currently allow for it. We believe an approach to affordable housing in Greater Boston that thinks bigger and is more nimble can make a meaningful dent in the affordability crisis in Greater Boston.

Read more proposals in the Seizing the Moment series.