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Portland City Council's bold plan to deliver shit that sucks 💩

Remember how voters in Seattle just passed a social housing initiative? Not to be outdone when it comes to housing, Portland City Council just passed some dumb shit that sucks: incentives to convert offices into housing.¹ I’m being a little mean here, but hopefully, you’ll see why by the end of this piece. To put it bluntly, converting offices into housing is expensive and provides no guarantee of affordability.

An apartment? In my office? Probably not.

It seems obvious at first to turn offices into apartments. After all, tons of people stopped going into the office at the height of the pandemic and are in no hurry to return. Lots of big companies moved out of major cities to save money in the meantime, and now loads of buildings in the middle of America’s most expensive cities are sitting mostly empty while renters wait for anything to drive down rent prices. The answer seems pretty clear, right? But time and again, conversion efforts stagnate, fall short, or fail outright to significantly increase urban housing stock (except apparently in Philadelphia, so look out for a piece on why that is). What gives?

Offices aren’t supposed to be houses! The floor plans, utilities, windows, and all sorts of things are completely different in an office than they are in residential buildings. To convert your typical office building, you’d need to install exterior windows that open and decentralize utilities, and that’s the bare minimum. Offices tend to be somewhat cavernous, utilizing space deep into the building’s interior that gets little to no natural light. Some residential floorplans can make that much interior space work, but apartments with little natural light don’t rent for nearly as much as their well-lit alternatives. That shouldn’t be too much of an issue, but our best pal the free market has determined that it is.

And that brings us to our next problem: there are so many upfront costs to office conversion that the resulting apartments need to be prohibitively expensive for developers to even consider the project. This, to me, is the central issue with converting offices to housing. When left in the hands of the much-vaunted free market, office conversions simply won’t happen, and if they do will only produce luxury apartments. Neither, you’ll notice, will have any meaningful impact on the housing crisis. Decisive government intervention could change that, but our neoliberal insistence to let the market play out ensures that vacant offices will remain just that.

But how could we incentivize such a bad plan? 🤔

I’m getting ahead of myself. Let’s get back to Portland and talk about what City Council did and what they hoped to accomplish, even if in vain. They passed two incentives: one that exempts office conversion projects from systems development charges, and another that lowers standards around seismic retrofits. Both are intended to reduce costs to incentivize office-to-housing projects.

And both will reduce upfront development costs. Systems development charges can add up to tens of thousands of dollars, and a seismic retrofit for a large building can cost well over a million. These incentives are nothing to sneeze at, but I highly doubt they’ll be enough to incentivize any significant addition of housing stock in Portland. If the thing holding developers back from office conversion projects was a suite of fees that, while significant, ultimately account for a fraction of a building’s total cost, then these incentives might bear fruit. Unfortunately, that’s just not the case for projects as fraught and complex as office-to-housing.

So the incentives probably won’t work, but the good news is that they’re also bad policies regardless of their ultimate impact on the housing market. Fun, right? Let’s start with waiving systems development charges. SDCs are meant to offset the infrastructure costs that new buildings represent to the city, namely sewer/water, electrical, and transportation. If you ask any city planner, they’ll tell you that shit is expensive (pun intended). Whether developers like it or not, construction does burden infrastructure, and the money to maintain and upgrade it needs to come from somewhere. I’m sympathetic to the point that SDCs probably aren’t the best revenue stream, but it’s not like the people who oppose SDCs would support higher taxes to pay off infrastructure bonds, so I don’t think their opinions on the matter should be taken all that seriously. Developers, like all capitalists, suffer from an acute case of wanting to have their cake and eat it too, which only ends up fueling the housing crisis when we try to appease them via policy.

And we haven’t even talked about the seismic retrofitting incentive yet! City Council lowered the seismic retrofit requirements for office conversion projects in an attempt to make said projects less expensive. Care to guess why that’s bad? If you said “making buildings less safe so developers and landlords can make money,” then you nailed it. You get an A in Housing Authority. Now you’ll get into law school for sure, nice.

If you didn’t know, the entire Pacific Northwest is overdue for a massive, devastating earthquake, so seismic retrofitting on residential projects is a crucial safety concern.² Appeasing developers by making it more likely for a building to collapse on its residents is ghoulish and doesn’t bear a ton of discussion for reasons I hope are obvious. That being said, I want to point out a couple of heinous quotes from the council meeting when these incentives were passed. 

First up is Jim Atwood, a developer: “If it was financially feasible to seismic upgrade our buildings, we’d do it. If you can reduce or eliminate the seismic update requirements, you’ll do something to contribute to more downtown housing.” I’m not sure what dollar value Jim puts on people crushed under rubble in an earthquake, but this is the type of sentiment that drives Portland city politics. It’s worth thinking about whether or not a profit-driven housing system is a good thing if developers’ money takes precedence over residents’ safety in a natural disaster.

Next is noted reactionary shitstain Councillor Rene Gonzales. “We are protecting future citizens against a seismic event, which by definition is likely catastrophic. And we’re balancing that against a real true emergency on our streets and lack of affordable housing right now.” Except you’re not, are you Rene? The new policy quite literally provides less protection from an upcoming seismic event while providing essentially no affordable housing. Must have been a tough choice.

In conclusion, this policy is bad and City Council should FEEL bad. 👎

Office conversions are great for making useless city councilors feel like they’re doing something, but they’re just not feasible when it comes to truly improving affordability. They’re expensive and complicated and city governments are all too eager to allow developers to deliver a substandard product to make it work. Fortunately, developers across the country are fairly unanimous in their belief that it would be easier to tear an office down and replace it than to convert it into housing. And loath as I am to take private housing developers at their word, I think they’re correct here. So what should we do? As always, my recommendation is for robust government intervention and a step away from the free market economics that got us in this mess to begin with.

If it’s easier to demolish offices than convert them, fine. Demolish them. If we can safely and feasibly convert offices to living spaces, that’s great too. But policies like the incentives in Portland miss a key detail when it comes to building our way out of the housing crisis: newly built (or converted) housing needs to be affordable. Policy tweaks and market incentives that don’t ultimately challenge the for-profit housing model are destined to fail. Private developers and landlords have shown no desire to deliver a stable or sustainable housing system. Housing policy must acknowledge that simple fact and reallocate power to residents. Anything less is a waste of time.

1. Portland City Council approves incentives to help convert office buildings into apartments, Alex Zielinski for Oregon Public Broadcasting

2. The Really Big One, Kathryn Schulz for the New Yorker