Solution to some of state's housing problems — building conversions — is finally at hand
Remember Fry's Electronics, the warehouse-style stores that shut down completely in 2021? Those stores joined 41 California Bed, Bath & Beyond locations, 17 Disney stores and more than a dozen Best Buys in the state that shuttered just in the last year.
They joined hundreds of locations once occupied by Borders Books & Music, Kmarts, K-B Toy stores, Linens-nthings warehouse-style stores, Mervyn's stores, Circuit City, Radio Shack, Sport Chalet and Blockbuster Video outlets.
No one has tracked just how many of those store locations have been reoccupied by other retailers, but anyone driving around California cities can readily see that many have not. Big box stores and their parking lots often sit empty. So do scores of minimalls. They probably won't for long, though.
Tens of millions of square feet of office space vacated during the depth of the coronavirus pandemic remain empty today, as law firms, insurance companies, stockbrokers and many other types of white collar businesses reduced their rental footprints and allowed millions of workers to keep working from home, wherever that may be.
Fears of contagion were also part of the reason for the many store closings around the state during the last three years, as shoppers avoided crowded spaces and ordered merchandise of almost all kinds online from home instead. Many jilted properties are also about to be reassessed at far lower tax rates than today's, as rent reductions reduce the market value of office towers and other types of commercial property.
It was plain from the beginning of the pandemic that the eventual answer would have to be conversions, as all those vacancies coincided with a declared housing shortage, one variously estimated by the state's Housing and Community Development Department at anywhere from 1.2 to 3.5 million dwelling units. The vast differences in official state estimates of need are likely due to the sort of incompetence noted in a state auditor's report on that department in 2021.
It took years for legislators to realize they must remove obstacles to building conversions, making residential properties from structures originally designed as commercial. They finally acted last year, though, passing two measures that greatly ease conversions, which are already taking off in significant numbers, with more than 10,000 such permits issued by the end of last year.
The latest example: an eight-story tower in Emeryville soon to be redeveloped near the eastern foot of the San Francisco-oakland Bay Bridge. Expect the more than 10,000 permits to grow exponentially by the end of this year, especially if the first redesigned units sell easily and quickly.
One new law that took effect Jan. 1 makes new zoning unnecessary for remaking commercial properties. That had previouslt been a big obstacle to conversions, as some cities took purist attitudes toward separation of residential and commercial property.
Cities and counties will still have authority to inspect newly redesigned structures during reconstruction, just as they do with any building. Unless they find flaws that can't be fixed, though, projects will proceed and new housing will result in big numbers. New units can be of all price levels, from lowerfloor apartments and condominiums exposed to street noise to penthouse units more than 30 floors above the racket.
Emptied big box stores and their parking lots will also morph into housing, with parking lots a place where homes are built from scratch. Even excess property owned but little used by religious institutions will be available for new residences.
Some estimates from legislative aides predict that as many as 1.2 million new units will appear where offices and stores were formerly. Two positives here are that under the new laws, not only will most projects be immune from lawsuits under the California Environmental Quality Act, but conversions will leave existing neighborhoods largely undisturbed, while avoiding most changes in the footprints of large buildings.
In some ways, this promises to be the best of all housing worlds, letting building owners recoup their investments via rents and sales proceeds and giving neighbors little reason to be annoyed, let alone angry. The bottom line: The solution to some of California's housing woes is at hand, about to become a very visible reality.