To overcome political resistance to new housing starts, we should focus on deregulating land that currently does not have housing so that cost-effective construction can begin.
In addition to commercial areas (as you and Cowen argue), we also need to allow housing construction on the outskirts of major urban areas where land is cheap. We need to abolish urban containment zones.
This is a largely invisible issue to political leaders. If a professional service company wants one space but passes on it because it would take too long and cost too much to get permitted and build out, no one on the outside ever sees that decision.
Totally on board with the idea of diversifying traditionally single-use commercial areas into mixed use precincts. Not sure what it's like in USA these days, but in Australia this transition is already happening with big box retail precincts and CBDs are exploring ways to diversify away from the post-war model.
However - I do think this piece misses what the commercial real estate crisis actually is.
The problem is that the post-pandemic paradigm has as you said, created a massive oversupply of commercial floor space. In most cases, transitioning this stock into housing or something else is more expensive than it is actually worth - and needs to be analysed on a case by case basis. So if commercial real estate investors can't find a commercial tenant, can't sell the building and can't transition the building into other uses, then they have to default on their loan. If this happens at the mass scale, we see banks collapsing, massive reduction in lending, shrinking economy, recession and so on and so forth, ala 2008.
So if an unused commerical tower is forced to be refurbished, knocked down or sold for a massive discount in order to enable the transition you discuss here, then each time that happens we are a bit closer to this crisis point.
Again, I support your end destination, but I think it's missing a middle step - perhaps the government needs to step in and buy out these failing assets, with the goal of taking a leading role in transitioning them to mixed use precincts via a dedicated public development authority of some kind. A "too big to fail" commercial real estate bail out!
Yes!
To overcome political resistance to new housing starts, we should focus on deregulating land that currently does not have housing so that cost-effective construction can begin.
In addition to commercial areas (as you and Cowen argue), we also need to allow housing construction on the outskirts of major urban areas where land is cheap. We need to abolish urban containment zones.
This is a largely invisible issue to political leaders. If a professional service company wants one space but passes on it because it would take too long and cost too much to get permitted and build out, no one on the outside ever sees that decision.
Totally on board with the idea of diversifying traditionally single-use commercial areas into mixed use precincts. Not sure what it's like in USA these days, but in Australia this transition is already happening with big box retail precincts and CBDs are exploring ways to diversify away from the post-war model.
However - I do think this piece misses what the commercial real estate crisis actually is.
The problem is that the post-pandemic paradigm has as you said, created a massive oversupply of commercial floor space. In most cases, transitioning this stock into housing or something else is more expensive than it is actually worth - and needs to be analysed on a case by case basis. So if commercial real estate investors can't find a commercial tenant, can't sell the building and can't transition the building into other uses, then they have to default on their loan. If this happens at the mass scale, we see banks collapsing, massive reduction in lending, shrinking economy, recession and so on and so forth, ala 2008.
So if an unused commerical tower is forced to be refurbished, knocked down or sold for a massive discount in order to enable the transition you discuss here, then each time that happens we are a bit closer to this crisis point.
Again, I support your end destination, but I think it's missing a middle step - perhaps the government needs to step in and buy out these failing assets, with the goal of taking a leading role in transitioning them to mixed use precincts via a dedicated public development authority of some kind. A "too big to fail" commercial real estate bail out!