Working Paper: NBER ID: w31530
Authors: Arpit Gupta; Candy Martinez; Stijn Van Nieuwerburgh
Abstract: The conversion of brown office buildings to green apartments can contribute towards a solution to three pressing issues: oversupply of office in a hybrid-and-remote-work world, shortage of housing, and excessive greenhouse gas emissions. We propose a set of criteria to identify commercial office properties that are are physically suitable for conversion, yielding about 11% of all office buildings across the U.S. We present a pro-forma real estate model that identifies parameters under which these conversions are financially viable. We highlight several policy levers available to federal, state, and local governments that could accelerate the conversion, and that may be necessary should policymakers desire the creation of affordable housing. We highlight the role that the Inflation Reduction Act could play.
Keywords: office conversion; green apartments; housing affordability; greenhouse gas emissions
JEL Codes: G1; Q51; Q54; Q58; R21; R23; R32; R38
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| conversion of brown office buildings to green apartments (R31) | increased housing availability (R21) |
| conversion of brown office buildings to green apartments (R31) | lower greenhouse gas emissions (F64) |
| financial viability (G32) | conversion of brown office buildings to green apartments (R31) |
| federal climate funding under the Inflation Reduction Act (H23) | conversion of brown office buildings to green apartments (R31) |
| existing lease agreements and physical characteristics (R33) | conversion of brown office buildings to green apartments (R31) |
| conversion of brown office buildings to green apartments (R31) | preservation of asset value (G32) |
| declining cash flows (G33) | struggle to afford necessary retrofits (P18) |