How cutting red tape can encourage housing conversions

Los Angeles has one of the largest homeless populations in the nation. During its last point-in time count in January, more than 75,000 people were unhoused—a 9% increase over last year. The number of unhoused individuals in L.A. make up 44% of the state’s total homeless population of 171,000. One of the reasons so many Californians are pushed into homelessness is the soaring cost of housing. 

But Los Angeles is leading the country in another field, too: commercial-to-residential conversions. Last year, the city accounted for 12% of the country’s adaptive reuse projects, creating more than 1,200 units, according to a recent report from Yardi Matrix, a commercial real estate research firm. That’s nearly double the number of converted units as Kissimmee, Florida, which ranked second at 648. 

When the pandemic made remote work more common, many communities eyed commercial-to-residential conversions as a way to kill two birds with one stone: reduce vacant office buildings and create desperately needed housing. More than 10,000 residential units were created nationwide through conversions last year, and tens of thousands more are expected to come online in the coming years, according to Yardi Matrix.

Today, office vacancy rates in some parts of Los Angeles are as high as 26%, the highest in the city’s history, according to local officials. That’s about 44 million square feet of unused space. 

But unlike other cities, Los Angeles has decades of experience encouraging conversion projects. Los Angeles adopted its first adaptive reuse ordinance in 1999, making it easier for developers to convert underutilized commercial spaces into housing. The policy helped bring 12,000 residential units to the heart of the city.  

The ordinance, however, only applied to downtown L.A. and a stretch of land south of Interstate 10. The city expanded the policy to include more neighborhoods in 2003, but “the vast majority of Los Angeles’ neighborhoods have not had the opportunity to take advantage of [adaptive reuse ordinance] incentives,” the Los Angeles City Planning Department said in an emailed statement.

City officials are looking to change that. A proposed update would expand the ordinance to cover the entire city, as well as reduce minimum unit size requirements and eliminate minimum parking requirements for projects within a half-mile of a major public transit stop. It would also allow a property’s many existing conditions—including setbacks, building heights and floor areas—to remain unchanged. The updated ordinance also broadens eligibility for these conversion projects.

Because repurposing existing buildings is seen as a way of getting affordable housing units online more quickly, “a key strategy … is to streamline approvals for housing projects by eliminating procedural hurdles” according to the planning department. Under the proposal, eligible projects would need to pass only a Department of Building and Safety review. Projects involving newer buildings—between five and 15 years—old are subject to Zoning Administrator reviews.   

With the current ordinance, only buildings built before 1975 are eligible for the streamlined review process that encourages conversions. Under the proposed update, eligibility would be on a rolling basis to include any building over 15 years old.

But commercial-to-residential conversions aren’t limited to large cities with empty offices. Kissimmee has about 75,000 residents, but was home to 6% of the country’s converted buildings last year, according to Yardi Matrix. Most of those conversions were hotels and motels. 

Just south of Disney World in Orlando, a roughly 15-mile stretch of highway is peppered with hotels and motels that once hosted families visiting the happiest place on Earth without shelling out for the park’s on-site lodging. 

But today, many of those buildings are getting more use as temporary housing for families struggling to find a place to live, according to Susan Caswell, sustainability director for Osceola County. 

There are a handful of factors that encourage development in the region, Caswell said. The area south of Disney World, called West 192, falls under a tourist-commercial zoning category. That specific category allows for a wide range of uses, including both hotels and multifamily housing, Caswell said. That means developers don’t have to navigate a rezoning process and aren’t subject to public hearings, she added. 

“If they have to rezone, in our case, it's about a 45-day process, but in other jurisdictions, that takes a lot longer,” Caswell said. That extra time adds a lot of cost to the conversion project, she said.

Hotel conversions bring much-needed diversity to Osceola County’s housing stock. About half of households in the county are small, with just one or two people, Caswell said, but only about 8% of the county’s housing inventory includes studios or one-bedroom units.

The new housing that currently is “being developed is single-family, three-bedroom-plus homes on the east side for people in Orange County” where Orlando is located, Caswell said. 

The location of the converted hotels are ideal from a sustainability perspective, too. The new apartment buildings are connected to some of the most-popular bus routes in the metropolitan area, shuttling residents to jobs at the nearby resorts, Caswell said. 

Parking requirements differ between uses; for hotels, there needs to be one parking spot for each customer, but that figure is slightly higher for housing. In part because of the access to the bus system, the county has worked with developers to allow projects to move forward with existing parking or add just a little more where necessary.

There’s one more benefit that doesn’t often come up in construction, planning and zoning conversations. Earlier this year, the U.S. Surgeon General issued a report, “Our Epidemic of Loneliness and Isolation,” that noted how loneliness can have dramatic health impacts on older Americans. 

Seniors without friends or family to lean on can find themselves in the double-bind of being both housing-burdened and lonely.

The conversions offer solutions to both issues, Caswell added. Hotels are almost always built with communal spaces, and she’s noticed developers in area are including pools, meeting rooms and picnic areas.

“We're trying to increase the diversity in terms of size, in terms of type and in terms of location,” Caswell said, “because we have needs in those areas that just aren't being met.”