NYC Proposes New Zoning Rules To Incentivize the Creation of Residential Units

Commercial vacancy rates are at a 17-year-high, and cities across the United States are looking for ways to convert empty office space into new homes.

What's going on: New York City is one of the latest cities to take action. Mayor Eric Adams has announced a plan to create a single point of contact within City Hall for all renovation projects of more than 50 housing units. He is also proposing to update zoning rules to allow more residential units in Midtown South.

The plan is touted as having the potential to produce 20,000 new homes. However, some experts are skeptical that it will be easy to convert office space into residential housing.

The complications: “Building residential housing is incredibly complicated,” said Gary Kerr, who runs the Northeast region for Greystar Real Estate Partners. “Converting offices into residential units is possibly one of the most complicated conversions you can do. It is, in most cases, infeasible.”

In many cases, residential conversion requires a total gut of the commercial building’s interior. Utilities, loading docks, and glass walls all need to be modified to meet residential code. The process can take up to a year, and the cost can be prohibitive.

A silver lining: Despite the challenges, Kerr believes that the steps that New York City is taking are promising. “It is definitely a significant cost-benefit,” he said. “It really comes down to the individual building.”

What the future holds: Only time will tell whether New York City’s plan to convert office space into residential housing will be successful. However, it is clear that cities across the United States are looking for creative solutions to address the rising commercial vacancy rate and the growing need for affordable housing.