The current worsening economic situation is attributed to Russia and the war in Ukraine, worldwide oil supply shortages, limited oil refinery capacity, supply line delays and speculation. Whatever the causes, there is a self-sustaining economic vicious circle: price inflation continues; consumer confidence and spending decline; unemployment increases; and economic circumstances worsen even more.
For real estate, additional factors add to these challenges. The coronavirus pandemic, along with technology, has changed the behavior of citizens and businesses, making it difficult to forecast the real estate market.
In the nation’s capital, tens of thousands of federal and non-federal workers, whether out of necessity or personal choice, continue to work at home. With fewer weekday workers in office buildings, much of the street-level commercial real estate is vacant and marginally viable for shops, restaurants, and other commercial activities that enliven life on and around urban streets. civic. Consequently, millions of square feet of office and commercial real estate in DC, even if still leased, remain underused or unoccupied.
Post-pandemic, converting office buildings to housing may become a new ‘normal’
Will the office market ever return to what it was before the pandemic? Nobody knows it for sure. But it is certain that a shrinking economy coupled with partial occupancy conditions will have an impact on future real estate values, prospective investment and property utilization.
There is often talk of the need to reuse existing underutilized office buildings and other commercial buildings, especially older ones, by converting them for residential use. But this is not a panacea. Such conversions are also very challenging. They involve not only coping with the same adverse economic conditions that all real estate faces, but also overcoming construction and regulatory hurdles that can make conversion difficult and costly.
Given the ongoing economic difficulties, is there anything that can be done to address real estate issues and especially housing challenges?
In the short term, the options are limited. But from a broader perspective, states, counties, and municipalities could and should undertake regulatory reform to increase future housing production, affordability, and, equally desirable, the quality of the designed physical environment.
The primary goal of the reform would be to reduce unnecessarily restrictive land use policies, obstructive zoning laws, and regulatory complexity that greatly increase implementation time and costs. Too often, jurisdictions impose arbitrary and counterproductive limits on land use and plans, types and range of uses, real estate development densities, and building heights. On-site parking requirements are often excessive for the types of development envisioned, given changing modes of travel, work, and housing.
Most zoning regulations are too broad in scope and not detailed enough. Enacted by politicians, conventional zoning laws create separate, single, exclusive-use zones intended to ensure public safety while protecting private property interests and real estate values. However, they rarely reflect unique and specific attributes of local sites and neighborhoods subject to development or redevelopment.
Builders see Maryland project as the future of telecommuting and post-pandemic housing
In general, the cultural and social history of a locality is not taken into account; natural landscape and microclimate; current and future public infrastructure and services, including public transportation and pedestrian accessibility; and traditional subdivision and architectural patterns.
Zoning ordinances with their two-dimensional maps have generally been written by lawyers and engineers, not city planners or town planners. Even when jurisdictions regularly update comprehensive plans for future growth, plan goals are often not met because key zoning regulations are also not properly updated or amended.
Here in the Washington metropolitan area, fortunately, some counties, cities, and towns have embarked on zoning and regulatory reform initiatives. In parts of DC, Montgomery County and Northern Virginia, for example, transformative steps have been taken to address the aesthetic aspirations of three-dimensional design; delineate the form and function of civic spaces and public streets; and establish clear and rational architectural guidelines. We see this at the Wharf and Yards in DC; in Silver Spring and Wheaton; in North Arlington; and on the Alexandria waterfront and Eisenhower East area.
How will regulatory reform positively affect future economic conditions and, in particular, the housing outlook? With higher development density, more housing units and other uses, private and public, can be built on a given parcel of land or subdivided lot. Consequently, land and property values rise, as do property taxes and income tax revenues received by jurisdictions, a tax advantage that benefits everyone.
And higher-density development allows for the creation of more pedestrian- and bike-oriented communities, whose residents will own fewer cars, drive less, and buy less gas. In addition to saving money, people in these communities will exercise more and enjoy better health.
Of course, politics is always a factor in undertaking future reforms. The search for flexible planning, higher development densities, more housing and higher economic benefits may find Nimby-ism (Not-in-my-backyard). Some skeptical and oppositional local residents, believing that the potential changes will negatively affect them, worry about impacts to traffic and parking, overcrowded schools, loss of neighborhood character, and generally prospective social and cultural changes, which are usually not expressed.
Fortunately, opponents now face ample evidence of jurisdictions and their citizens enjoying the benefits of regulatory reform and smarter zoning policies. Nimbys can see a growing number of successful redevelopments and community makeovers in the United States. Thus, despite all the bad economic news, there may be good real estate news in the long run.
Roger K. Lewis is a retired architect and professor emeritus of architecture at the University of Maryland.