Reimagining Real Estate: Repurposing in the U.S.

Affordable housing in the U.S. - how do we solve the problem?

In the United States, affordable housing, or rather the shortage thereof, is a theme across all major urban markets and their surrounding areas.  Elected officials decry the lack of affordable housing. But what does the term actually mean?  And what do governmental officials mean when they say they want to solve the problem?  It depends.  When asked to define affordable housing, renters in big cities will have a different answer than prospective first-time buyers in the exurban South; affordable housing means different things to Midwestern suburbanites and farming communities.  If there is a common thread, it is this:  housing used to cost less than it does today, and something must be done about it.  In the U.S., reimagining real estate is sometimes as simple as imagining real estate as it is, only cheaper. 

The picture in NYC - will legislative reform, tax incentives and relaxing zoning restrictions help to spur investment?

In New York City, legislative proposals to control rent increases and mandate affordable housing for developments in emerging markets have been adopted, with stricter versions of the same being debated. 

Post-covid office markets have struggled in cities large and small, and one response is for downtown business centers to be reconceived as mixed-use, live-work neighborhoods, with outmoded commercial and industrial buildings being converted to housing and retail. 

Local and state governments have relaxed zoning code requirements and created new tax incentive programs to spur investment in conversions.  Unfortunately, results have been mixed due to construction and financing costs. 

New mortgage loan programs have been proposed at the federal level, which, if adopted, would make homeownership in suburban and rural areas significantly easier for low-income families.  Most experts view these programs as little more than tinkering at the margins.  They view housing costs not as a supply issue, but as the natural result of growing economic inequality owing to wage stagnation.   

What does this mean for our clients?

Our clients—lenders, developers, and investors—have differing visions of what’s next.  Optimists see new loan programs, falling interest rates, and government incentives as a signal that a new housing sector boom is on the horizon.  Pessimists see continued stagnation in markets owing to political gridlock, an ageing population clinging to its assets, and young workers remaining unable or unwilling to pursue homeownership.  As counsel, we must be the pragmatists; however, even as pragmatists, we consider the affordable housing crisis—and potential growth opportunities in the market—too big to ignore. 

Authored by Ross Moskowitz and John Egnatios-Beene.