Conversion is the Most Important Word in Housing
Conversion is the Most Important Word in Housing
We need to change land use, change ownership, and change our minds. But we need to do it carefully. Welcome to the 2023 housing word of the year.
Con·ver·sion (Noun)
The process of changing or causing something to change from one form to another.
The adaptation of a building or part of a building for a new use.
The fact of changing one's religion or beliefs or the action of persuading someone else to change theirs.
Conversion, Act 1: Downtown
I had dinner the other night with an old friend and colleague. He’s someone who’s been involved in housing and planning politics for decades, and has long been a big advocate for downtowns. With downtowns struggling across the US, and particularly in the Bay Area, he’s now engaged in all manner of debates about a newly vital question in housing and planning: should we, or can we, convert underutilized offices into housing?1
Should we, or can we, convert underutilized offices into housing?
As housing, planning and economic change nerds, this is a question he and I have debated for years, long before the pandemic accelerated work from home or work from anywhere for office workers. He urges caution. I dream of change. He’s a planner first and a houser second. I’m probably the opposite. The lessons of economic geography are clear, but they are also contradictory, offering both of us support and neither of us solace.
On the one hand, people have been predicting the ‘death of distance’ and the death of cities for as long as we have had computers, claiming that technology would make being in the same room obsolete. But it hasn’t. Turns out those chance encounters that come from being in the same place matter. Silicon Valley as a social place helped make it into the economic legend it is. Even as white collar work moves more and more online, being in the same room still has value. Try building trust on zoom. I ‘ran into’ some folks at an online event the other day, but let’s just say it’s not quite the same.
At the same time, look what happened the last time we believed that we couldn’t possibly ever abandon the buildings central to economic production. (Don’t make me get out the deindustrialized landscape ruin porn pictures). We’ve abandoned not only city blocks but whole neighborhoods and even towns and regions because either the means or the geography of production changed. The winds of economic change can be cruel, even to a place that is still the richest in the world by many measures.2
My friend would argue that too much conversion would be an economic disaster, and he’s right - at least under the current fiscal regime in California (and most of America). Our municipalities’ budgets depend on having business inside their city limits for tax revenue. Fear of the fiscal cliff is real. Hundreds of billions of dollars and many decades have been invested in building that employment infrastructure, including the transportation routes to get workers Downtown en masse and on time (more or less). Whole ecosystems of lunch providers and other services employ another multitude of lower wage but no less essential workers (although much more racialized and unequal), and depend on the system that we have.
He would also argue that converting offices to housing en masse is really hard to do. Downtowns are billions of dollars worth of real estate, much of it now owned by complex investment funds and leveraged to the hilt. Combine this with massive building floor plates with huge amounts of square footage far from windows and you basically have to knock the building down to build housing.3 These two facts make offices very expensive to convert to housing, which means the resulting homes would likely be very expensive. These conversions are also very risky, which makes them even more expensive, and less likely to happen without major subsidy. Add in the legitimate debate over how much demand there is to live in downtown, and you have some serious hurdles on the road to mass conversion.
As much as I love the idea of converting downtown offices to housing, the reality of what it would take is bracing. It’s certainly a good idea for some buildings, especially older ones with smaller footprints and the type of character that makes them cool to live in (after renovation) but less cool to work in. It makes sense to thoughtfully reconsider plans to build more single-purpose office towers, less we continue to be foolish in the face of the facts. The fact that so many of us will go to offices now for retreats and mini-conferences and workshops - sometimes from near, sometimes from far - should have us thinking about temporary housing in downtowns, especially for those opportunity sites that would have become an office tower in the ‘before times.’
This complex reality of ‘do we, or don’t we, convert?’ is also part of why conversion is the housing word of the year. As wonderful as housing is, to be pro-housing is not to always want housing everywhere all the time. Please do not become ‘pro’ or ‘anti’ conversion. Conversion should be a choice based on careful consideration and inclusive deliberation, not an ideology.
After all, Downtown was itself an ideology of sorts, one of the many quasi-religious beliefs in American housing and urban development about what should get built where for whom, most of which just push us further from the change we need.
Conversion isn’t just about changing land use. It’s about changing ideas. That’s another reason why it’s my housing word of the year.
Conversion, Act 2: The Mall
America may have given Downtown a new name and made it particularly monotone, but we invented the mall. We then built them everywhere. Not just the big covered malls, but millions of shopping centers and strip malls scattered everywhere from the the heart of downtown to small farm towns to everywhere in between. Retail space in America isn’t just a suburban phenomenon (even if most of America, and thus most retail, is suburban).
What it’s left us is with an absolutely enormous amount of retail space. A 2019 study by PwC found that the US had more than 23 square feet of shopping center per capita. This compares to less than 5 in Japan, less than 4 in France, less than 3 in the UK and Germany. (Canada and Australia, with 16 and 11 respectively, are the only places close to us).
2019 Shopping Center Gross Leasable Area SF per Capita
Having 10x the per capita shopping center space of Germany is an absurdity. If you’ve been there, you know that they somehow have clothes and household goods. They also have municipalities with intact budgets. And they are better housed with a better transport system by all modes, including cars. Amazing.4
A frothy mix of ideology, fiscal incentives and real estate business plans drove the overbuilding of single use retail space, just like with downtowns. Shopping centers aren’t quite as fiscally valuable as large corporations (unless tax breaks mess with the math), but they are still seen as better than housing by most fiscal regimes. Suburban design was just as much an ideology as modernist downtown imaginations. Both took Euclidean zoning and its obsession with the ’separation of uses’ to new heights. Both depended on massive public subsidies for transport networks, and both were driven by real estate companies who got very good at building one thing over and over again everywhere they could.5
Just like with downtowns, any conversion of the massive, insane, ridiculous amount of American retail space must be done carefully. Tiny strip malls have the best food in America. They have millions of immigrant and BIPOC-owned businesses. They have jobs and generate tax revenue, even if both don’t come in the quality and quantity that municipalities would hope for.
In downtown, one risk is that we move too fast or get lured into some ridiculous subsidy programs. More humans living downtown needs to happen slowly over time, but there is much to discuss about these transit-rich networks and the future of work, recreation, gathering and community. Downtowns are rare and few and hard to recreate.
In our shopping areas, a key risk is that we don’t put together complete programs for transformation. We can’t just rezone it and assume it will happen. We need new forms of investment willing to do adaptive reuse. We need dedicated small business support that helps small businesses relocate to some of the new (and often empty) ground floor storefronts in new housing. We need to ensure that the next generation of mixed use developments have better financing assumptions regarding their retail space, enabling more to be used by lower-income communities, nonprofits, small businesses, pop-ups, etc.
Then there is also the competition for space. The pandemic not only drove demand for housing square footage, it further lit the fire under logistics and warehousing. In places like Hilltop Mall in Richmond, one part of the commercial real estate industry is trying to fill space with goods movement. As important as it is for our economy, logistics can consume valuable land very quickly and very inefficiently without careful planning.
This is the thing about conversion and zoning. Some zoning is good. Original zoning wasn’t just about racism and classism. It was about smelly and noisy things - activities which we may need but nobody should have to live next to. Careful and smart commercial conversion will require keeping this part of zoning’s original purpose. We still need the separation of some uses from most of the others.
And that light industrial space we have? Let’s set the conversion meter on that to: “Not my first choices for conversion unless the public benefits are enormous.” The creative and innovative economic activity in this space is simply too valuable to lose. And in the case of so many secret food businesses in anonymous light industrial parks, too tasty.
Conversion, Act 3: The Single Family Home
The other night I was talking housing with someone at an event. The conversation turned to generalized dislike of Single Family Zoning, which I share. We also talked about how posh places have made themselves exclusionary over decades. Here too we were in lock-step.
But the challenge of single family housing isn’t just about exclusion, or about zoning. Low-income and BIPOC homeowners have taken a beating over the past two decades, and many of them live in single family homes too. The foreclosure crisis in 2007-8 was the largest loss of wealth of people of color in US history. Much of it came from single family homes in suburbia - the American dream turned nightmare.
If we only see the conversion of single family homes through the lens of exclusion and zoning, we risk furthering displacement of vulnerable residents of all kinds. Low-income homeowners remain some of the most vulnerable people in housing, in part because they have few advocates. They play an under-appreciated role in keeping whole families off the street. Residents of single-family homes are also less and less likely to own them. In 2020, a study I did with colleagues Deirdre Pfeiffer and Jake Wegmann showed that single-family rentals (SFRs) were the fastest growing housing tenure in the United States. SFRs are the most common housing tenure for American children. SFRs are also the least likely to have rental protections.6
The posh burbs and just as posh urban enclaves dominate some housing activism imaginaries, but they are just not the majority of single family homes in the US. A big part of my argument in Road to Resegregation was that throughout the postwar period, we largely ignored the suburban landscapes where people of color were actually already moving. We still do.
One of the sad legacies of how people have read The Color of Law and other segregation books is that it focuses so much energy on where people of color have been prevented from being, and not enough energy on the neighborhoods and communities where people of color actually live - especially all those suburban communities where they have actually moved in vast numbers over the past 50 years.
This is obviously a both/and question - I am a white guy from Marin, and I am not in any way suggesting that removing exclusionary barriers isn’t essential. But my first test for any policy or program aimed at transforming single family homes is: what does it do for BIPOC families already living in those homes - whether as owners, family of the owners, renters, or something in between. They cannot continue to be a side story in the war over exclusion - no matter how important that fight must remain.
Like with other land use conversions, doing right by BIPOC single family homes will require building finance and technical support programs to ensure that good conversion actually happens, and low-cost quality legal and financial support to ensure people don’t get swindled. It means (re)building the small scale building industry, this time with racial equity in mind for both builders and homeowners. Going to 2 or 3 units on your property can be transformative for some households and communities, potentially enabling long term intergenerational stability and transition, wealth building in different ways, and just more opportunity for good things at a small scale.
Housing groups who want to support equitable conversion of single family America have to find ways to shine the light on the vulnerabilities and the opportunities of land use conversion, especially in communities of color. Remember that for many communities, they’ve born the brunt of our segregation twice - once in the city during the redlining era, and once again in suburbia during subprime and foreclosure. There cannot be a third.
Conversion, Act 4: Landlords, Condos and Co-ops
If you spend time in our state and municipal code, our housing word of the year appears many times, mostly after the word “Condominium”. Condo conversion laws were put into place in cities across the United States starting in the 1970’s, as condos grew in popularity.7 Housing and real estate has a terrible habit of taking something that can be wonderful - in this case, a way for people to co-own denser housing with less personal maintenance and often shared amenities like pools and gyms and garden - and make it a tool for unscrupulous actors to displace poor people. Investors would target rental buildings, at times rent controlled buildings, and begin a process of mass evictions.8 Imagine the money you could make buying an old building, kicking everyone out and selling each unit one by one to somebody much wealthier.
So, cities like San Francisco passed condo conversion ordinances, strictly regulating the process. This regulation helped to make it harder for assholes to evict and flip. But it also made it harder for tenants to buy out landlords or smaller groups of people to find ways to own small scale multifamily.9 Like so many housing interventions, it intended to prevent a bad thing from happening, rather than making a good thing possible. It also started to turn ‘condo’ into a pejorative. People become ‘against condos’ - which can house people of all income levels just like most tenures - as opposed being against those behind the evictions.
As movements for community- and tenant-controlled housing grow, we need to shift how we see condo conversion, and our condo conversion laws. We have a historic opportunity to use our laws, money and institutions to build clear legal and financial pathways for large-scale ownership conversion in California. Our condo conversion laws can only continue to truly protect the vulnerable if they also help convert their tenures.
To build this system, we must keep the protections for tenants, building different conversion pathways for different people and different buildings. Converting our homes requires converting our thinking about homeownership and resident control, starting to see my fee-simple homeownership and the Habitat and CLT across the street from me as part of the same spectrum. It means changing what ‘condo’ means to people, and what it is like to own one, especially if you are not wealthy. It means insisting that wealth-building (or just ‘rent-saving’) be an option for people who want it. And it means acknowledging the sins of homeownership past, while insisting on homeownership’s diverse and necessary future.
Changing who owns our homes is just as much part of our larger housing conversion as converting land uses. And these two conversions must be linked. If those old shopping centers and strip malls (and the occasional downtown office building) become housing or mixed use, they must also become opportunities for homeownership and resident-control. When we consider the transformation of single-family subdivisions into small-scale multi-family compounds, it has to be done in a way that increases ownership and control opportunities, especially for extended and multi-generational family. If the land use and ownership conversions aren’t linked, neither conversion will be truly successful.
Conversion, Act 5: Changing minds
Last week, one of the most well known housing journalists in the US published a very frustrating piece about housing investors and the housing crisis.10
This is someone I respect, someone whose essay on changing their mind about rent control is one of the most important pieces in American housing journalism in years. That essay is an amazing admission that they were wrong about one of the most (unfairly) controversial housing policies we have. They were against it because they had originally approached it ideologically. When confronted by the clear evidence that it helped people, especially vulnerable people, they changed their minds.
What I loved about the rent control essay was that it also was unafraid to stray from what many of their fans believed. In doing so, she was part of an important group of leaders who encouraged others in the YIMBY or pro-housing camp to do the same. There is now a not insignificant population of YIMBYs who actively see rent control and tenant's rights as necessary parts of a healthy housing system.11 Some of whom will even admit that they too have changed.
This is the kind of change I look for in the housing world - people converting away from an ideology-driven perspective that makes them blind to the facts on the ground, especially the reality of being poor in our housing system. If we can wean ourselves from the 19th and 20th century ideologies that so dominate our housing policies, we will have a much better chance of changing housing on the ground.
But I recognize how hard it can be. These urban, political and economic ideologies are our modern religions - whether they be about capitalism or the role of the state or the proper height of buildings. Conversion is controversial and can even be dangerous. It can lose you friends and allies and even your job.12
Just like with converting land use and ownership, we should be careful, and cautious, in changing our minds. But it is necessary. The pathway out of our semi-permanent housing crisis can’t just come from converting land uses. We have to start changing our minds.
See this article from Axios for a quick overview of cities pushing to convert office buildings into housing.
We also worsened deindustrialization by imagining it to be complete. We always kept making things and have even seen upticks in recent years of different kinds of manufacturing. Economic restructuring is rarely complete or universal. Be wary of following economic trends too closely - the actual economy is a lot stickier than any trend line.
Bedrooms in homes generally need windows by law. There is only so much you can do with all that deep interior space.
At least the USMNT finished above them at the World Cup.
In a previous life I would have given you a vast literature review after all these grand statements about US cities, suburbs and ideology. In the future I will do something more pedagogical. For those looking for an intro, try the late, great Mike Davis’s City of Quartz.
CA’s historic AB1482 rent law does extend rent control to SFRs owned by investors of a certain size. This is (I believe) the first law in the nation to do so.
For this and so much more amazing knowledge about condo history, read Matt Lasner’s masterful High Life: Condo Living in the Suburban Century. For this section, page 272.
An oldish but visceral article from the Los Angeles Times describing the phenomenon in more detail.
To get around these laws, lawyers invented a whole new housing tenure - the tenancy-in-common (TICs) - which is now common throughout the city. TICs are seen as less desirable for a few reasons - lenders don’t like them, so it’s harder to get a loan. They don’t like them because you have less recourse as an ‘owner’ if a fellow owner doesn’t pay maintenance. I’ll write more about TICs and all these tenures in multiple upcoming posts on housing tenure and multifamily homeownership.
I will also come back to the investor issue. Promise.
See for instance YIMBY Action’s recent statement on the Biden Administration’s Blueprint for a Renters Bill of Rights, where they push the administration to go further and adopt recommendations from the National Low Income Housing Coalition. For more on YIMBY + Equity conversations, especially around tenant’s rights, see Shelby King’s latest work at Shelterforce.
I’m lucky. I have friends in this business with who I can debate with gusto - and who can get me to change my mind, or slow my roll. I think this is so important that I will feature good friends who are on different ‘sides’ of the housing debate in an upcoming podcast.