How to overcome the challenges facing the housing world today
The current worsening economic situation is blamed on Russia and the war in Ukraine, global oil supply shortages, limited oil refinery capacity, delays in supply lines and profits. Whatever the causes, a self-perpetuating economic vicious circle exists: price inflation continues; decline in consumer confidence and spending; unemployment increases; and the economic circumstances are getting even worse.
For real estate, additional factors add to these challenges. The coronavirus pandemic, coupled with technology, has changed the behaviors of citizens and businesses, making real estate market forecasts difficult.
In the nation’s capital, tens of thousands of federal and non-federal workers, whether out of necessity or personal choice, continue to work from home. With fewer weekday workers in office buildings, much commercial real estate at street level is vacant and marginally viable for the shops, restaurants and other commercial activities that enliven life on urban streets and around civic spaces. As a result, millions of square feet of office and retail space in DC, while still leased, remain underutilized or unoccupied.
Following the pandemic, the conversion of office buildings into housing could become a new “normal”
Will the office market ever return to what it was before the pandemic? No one really knows for sure. But it is certain that a shrinking economy coupled with partial occupancy conditions will have an impact on future real estate values, potential investments and the use of properties.
There is often talk of the need to repurpose existing and underutilized offices and other commercial buildings, especially older ones, by converting them to residential use. But this is no panacea. Such conversions are also very difficult. They involve not only dealing with the same adverse economic conditions faced by all real estate, but also overcoming regulatory and construction hurdles that can make conversion difficult and costly.
Given the current economic distress, is there anything that can be done to solve the real estate problems and in particular the housing problems?
In the short term, options are limited. But in the longer term, states, counties, and municipalities could and should pursue regulatory reform to increase future housing production, affordability, and, equally desirable, the quality of the designed physical environment.
The primary goal of reform would be to reduce unnecessarily restrictive land use policies, obstructive zoning laws, and regulatory complexity that significantly lengthen implementation time and costs. Jurisdictions too often impose arbitrary and counterproductive limits on land use and plans, types and variety of uses, building development densities and building heights. On-site parking requirements are often excessive for the types of development envisioned, given changing patterns of travel, work and living.
Most zoning regulations are too broad and not specific enough. Passed by politicians, conventional zoning laws create distinct, unique, exclusive-use areas intended to ensure public safety while protecting private property interests and real estate values. Yet they rarely reflect the unique and specific attributes of local sites and neighborhoods undergoing development or redevelopment.
Builders see Maryland project as the future of post-pandemic telecommuting and housing
The cultural and social history of a locality is generally not taken into account; natural landscape and microclimate; current and future public infrastructure and services, including public transit and walkability; and traditional patterns of subdivision and architecture.
Zoning ordinances with their two-dimensional maps have typically been written by lawyers and engineers, not city planners and planners. Even when jurisdictions periodically update comprehensive plans for future growth, plan goals are often not met because major zoning regulations are also not updated and amended appropriately.
Here in the Washington metro area, fortunately, some counties, cities, and towns have undertaken zoning and regulatory reform initiatives. In parts of DC, Montgomery County and Northern Virginia, for example, transformative measures have been taken to meet aesthetic and three-dimensional design aspirations; delineate the form and function of civic spaces and public streets; and to establish clear and rational architectural orientations. We see this at the Wharf and Yards in DC; in Silver Spring and Wheaton; in North Arlington; and on the Alexandria Waterfront and in the Eisenhower East area.
How will regulatory reform positively affect future economic conditions and in particular the housing situation? With increased development density, more housing units and other uses, private and public, can be built on a given parcel of land or subdivided lot. As a result, land and real estate values increase, as do property taxes and income tax revenues collected by jurisdictions, a tax plus that benefits everyone.
And higher-density development allows for the creation of more pedestrian- and bike-oriented communities, whose residents will own fewer cars, drive less and buy less gas. In addition to saving money, members of these communities will exercise more and enjoy better health.
Of course, politics is always a factor in undertaking future reform. The pursuit of flexible planning, higher development densities, more housing, and increased economic benefits may encounter nimbyism (Not-In-My-Back-Yard). Some skeptical local residents and opponents, believing the potential changes will affect them negatively, worry about impacts on traffic and parking, overcrowded schools, loss of neighborhood character, and, usually unspoken, potential social and cultural changes .
Fortunately, opponents now face ample evidence that jurisdictions and their citizens are reaping the benefits of regulatory reform and wiser zoning policies. Nimbys can appreciate the growing number of successful redevelopments and community makeovers across the United States. So, despite all the bad economic news, in the long run, there may be good real estate news.
Roger K. Lewis is a retired architect and professor emeritus of architecture at the University of Maryland.