Can a New Federal Tax Credit Jump-Start Office-to-Housing Conversions?

Downtown office markets are still learning to live with less demand. Remote and hybrid schedules shifted where people work and when they come in. Before the pandemic, only seven percent of workers telecommuted. By 2024, that figure had climbed to twenty three percent. Special servicers are seeing the strain as well, with the office CMBS special servicing rate hitting 16.4 percent in June. Those numbers explain a lot about the empty floors in central business districts and the anxiety inside lender portfolios.

The other side of the ledger is just as stark. The country needs millions of additional homes, including an estimated 4.3 million apartments by 2035 to meet demand. Nearly half of renters now spend more than thirty percent of their income on housing, and forty nine percent of Americans say the lack of reasonably priced homes is a major problem in their community. At the lowest incomes, the shortfall of available affordable homes is measured in the millions as well...

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RSK: A lot of costs involved in converting office to residential, since the floor plates and HVAC cores were not set up for it. it is happening with older buildings, especially in CBD`s. This tax credit may help, but it comes with many caveats.