Government not letting real estate change with times

Historically, the real estate industry adapts to changes in society — turning industrial buildings into apartments, for example, as the economy shifted. But increasingly, government won’t let it.

Across office buildings, hotels and other property types, logical conversions are being blocked, the New York Times reported. Despite conditions that make them appealing, draconian zoning restrictions and cultural attitudes against housing are dissuading redevelopment throughout the nation.

In New York, zoning has been a major impediment for office-to-resi conversions. Even as buildings sit primed for reinvention in places such as the Financial District, projects fail to pencil out as the need to meet extremely specific standards sends costs soaring.

Richard Coles, managing partner of the Vanbarton Group, told the Times that 175 Water Street, built in 1983, would be perfect for an office-to-resi conversion — a specialty of the firm.

But the state legislature killed a bill that would have changed a 1977 cutoff date on certain zoning requirements, leading Vanbarton to sell the property. Albany’s inaction cost the city at least 800 homes on that site alone.

Zoning has become more strict across the country, slowing redevelopment activity. Many municipalities require time-sensitive — if well-intentioned — environmental reviews and public meetings that opponents exploit to delay or kill projects. The rigid specificity around zoning also makes it challenging to switch uses for a building.

“You’ve completely lost sight of what kind of city you’re trying to get with all those rules,” University of Chicago professor Emily Talen told the publication. New York’s zoning code, for instance, is about 3,500 pages long, or 3,486 pages longer than it was in 1916.

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The stringency also allows multiple opportunities for the public or local politicians to reject conversions. NIMBYism is often driven by fear regarding how new housing next door would affect home values, as many Americans’ wealth is wrapped in their homes’ equity.

These factors are preventing conversions that could help New York and other cities with their housing shortages and affordable housing crises. As hotels spring back to life and offices chart new beginnings, opportunities for conversions are on borrowed time.

— Holden Walter-Warner