Adaptive Reuse Could Offer 72,000-Unit Solution To LA County Housing Crisis

There are 2,300 underutilized hotels, office buildings and retail centers in LA County that could be better used as apartments, a new study says, and the impact of doing so could be massive. 

The Rand Corp. study suggests that such conversions could create between 72,000 and 113,000 units of housing, depending on unit size, the Orange County Register reported.

The county, like the rest of the state, has long struggled with issues of housing affordability and homelessness, and increasing the supply of housing units has long been seen as part of the solution to those problems. But tapping into that potential isn’t going to be easy, the study’s authors acknowledged.

“Repurposing commercial buildings to help address Los Angeles County's housing shortage is a compelling idea, but the economics and logistics of such projects are complex,” Jason Ward, one of the study’s authors and an economist at Rand, said in a statement. “Significant incentives for the conversion of these properties to both market-rate and affordable housing may be needed to realize the full potential of adaptive reuse.”

Architects, developers and other CRE professionals have advocated for utilizing adaptive reuse for some time, a call that is beginning to be answered.

The city of Los Angeles is in the process of updating its adaptive reuse ordinance with an eye toward streamlining and encouraging repurposing buildings. The city’s original adaptive reuse ordinance, created in 1999, is widely credited with starting the loft conversion trend of the early 2000s in Downtown, generating housing and drawing wealthy young professionals back to the city center. 

Rand’s study found hotels the most cost-effective for these conversions, especially for studio apartments. But there are more office buildings than hotels in the most desirable areas for new housing — areas in or near job centers, close to certain public transit infrastructure and with relatively affordable rent levels in existing housing. The financial feasibility of converting office properties depends heavily on real estate prices of the individual properties and the unit sizes that would be produced. Studios would be more likely to pencil than two-bedroom apartments, for example.  

Rand Corp. defined underutilized properties as Class-B and C offices, retail properties between 10K and 100K SF with more than 20% vacancy, and hotels and motels classified as economy in the company’s real estate data. 

The importance of increased housing stock is ever-growing. The city of Los Angeles has just settled a lawsuit brought by Downtown property owners and stakeholders over its handling of the local homelessness and housing crisis, and terms included the city spending what will likely be billions on creating housing for more than half of the unhoused population. Compliance could include conversions of hotels and motels into permanent residences.