More than 50 developer and investor applicants are seeking funding under a new state of California program to incentivize the conversion of commercial space into housing in a positive sign for the nascent program aimed at bolstering badly needed residential units.
Roughly 55 applications have been filed for roughly $105 million in grants to fund the conversion of offices, commercial spaces or business parks into affordable and market-rate housing, according to Communications Specialist Alicia Murillo with the California Department of Housing and Community Development. The state agency is charged with accepting, reviewing and awarding applications after California approved $400 million to incentivize commercial-to-housing conversions.
The program is being watched across the U.S. as other governments look to convert office space into housing to combat a worsening national housing crisis.
Since the start of the pandemic, some office buildings are out of favor due to the popularity of working from home, freeing up this space to be converted into housing. So far, California's $400 million in funding is among the most ambitious plans in the U.S. to spur this sort of real estate conversion. However, these types of conversions face numerous challenges and will not be feasible for all office buildings.
A list of the projects and applicants seeking funding from the department of housing and community development wasn't immediately available to CoStar News. Developers are submitting final applications for these grants, and the applications are due before the end of the month, according to HCD's website. The funding is expected to be released in June or July.
Roughly $90 million in grants are being set aside for large jurisdictions while $15 million is being set aside for small jurisdictions, or counties with less than 250,000 people, according to HCD's website.
More grants may be given "should funds be available" in another application round in 2023-2024, according to HCD. The $400 million in adaptive reuse funds went into HCD's Infill Infrastructure Grant Catalytic Qualifying Infill Area Program, Murillo said.
Meanwhile, it may get easier for developers to redevelop office space into affordable housing if the state bill "Office to Housing Conversion Act" is passed in Sacramento. The bill was announced in February and would put restrictions on governments from stopping and imposing fees on these types of conversions.
California, the nation's largest state by population, regularly ranks as one of the most expensive places to live due largely to a lack of housing production. Nine of the Golden State's cities rank in the top-15 nationally for highest apartment rent, according to CoStar data.