While state lawmakers continue to debate bills on housing — specifically so-called "middle housing" and accessory dwelling units, essentially casitas — Gov. Katie Hobbs signed a separate bill into law that some say could have an impact in creating more housing in Arizona.
The measure, among other provisions, requires some cities and towns to set aside up to 10% of their office, commercial and mixed-use buildings to be turned into multifamily housing. This adaptive reuse would not require zoning changes, which are often a point of contention between developers and municipalities.
Reid Butler, the owner of Butler Housing Company and past chair of the Arizona Multihousing Association, said the law could put a dent in the state’s housing crisis. He’s been in the housing business for around four decades and says about half of what he does is urban infill, which often involves using existing buildings.
Full conversation
MARK BRODIE: Are there particular kinds of sites or buildings that are better suited to be converted into housing?
REID BUTLER: Yes, the, the, years ago, 10 years ago, we converted a prior nursing home into affordable housing for veterans in the Garfield neighborhood downtown, so buildings like that, that have already had people living there. Hospitals, not really living there, but hospitals, hotels, skilled nursing, those kind of, schools are another one that would be a pretty good fit. That's not exactly where this law is headed. This law is really focused on retail buildings as well as office buildings. And so you need to find that right building that can really be adapted into housing.
But, but that's the main goal, is obsolete shopping centers, vacant office buildings. I didn't fully answer your question. How do you really adapt them? I mean, that really is the fine point. You know, how do you find the right one to adapt?
BRODIE: Right. Well, that seems to be the question, right? Like how do you take for example, a high rise that used to be a law office or a doctor's office or just any kind of office, and make it into a place that, that people can live. It seems like there's a lot of work that would have to go into that.
BUTLER: Well, you have to buy it, right. You'd have to start there. And by definition, if these buildings are obsolete and largely vacant, economically, they're past their prime so that you, you probably as a developer as the repurpose or you can probably buy it, right? But you have to fit into an equation that is equivalent to if you start from scratch.
BRODIE: Because you're going to be doing a lot of work to it after you've bought it.
BUTLER: Well, correct, because these buildings we're talking about were not providing housing before. So they don't have enough kitchens, they don't have enough bathrooms. That is the big challenge is you've got to come in and add all that to what was an office building or what was a retail building before. So some of this comes down to having the right dimensioning of the building so that you can actually create apartments that have normal windows, lights, access points and all that. So you actually need a building that's a little more rectangular than a little more square. If it's a little more rectangular, if you, if you think about how corridors work, if you have a building that maybe had corridors in it before, you probably have a better shape to start with. I'm way into the weeds, Mark.
BRODIE: Well, no, it's interesting because, you know, we've all been in these kinds of buildings in terms of either retail or office type buildings, and it's interesting to walk through them and think, how could this become an apartment building? And, you know, you walk through a, you know, a suite of, you know, a doctor's office, for example, that's a suite of exam rooms and a waiting room and all sorts of other offices. And like, it's hard to sort of visualize moving from one to the other.
BUTLER: Well, that's correct. And that, and that is part of why the law has flexibility to allow for both adaptive reuse if you have the right building as well as new construction. So you can do, an example of that, which we talked a lot about a lot when we were working on the bill, is what you saw happen at Seventh Avenue and Osborn, where you had a prior Basha's building that needed to change. And a developer came in, That building became a Sprouts and other things happened on that corner with a five-story apartment building as part of the same site. So we use that example a lot to show what's possible. In that case, Mark, the, the retail building became another grocery store. It did not get converted to housing. But as part of the overall plan, you ended up having high-density housing right next to a Sprouts and other retail.
BRODIE: Well. And as you alluded, I mean, it's the old saw about real estate, right? Like location, location, location, that seems to be a pretty big component of this, too.
BUTLER: All the benefits of urban infill, which we've talked about for a long time in in metro Phoenix. All the benefits of urban infill are the locations work. But by definition, you have a good location that works, it either worked for an office building or it worked for retail. Other benefits, Mark, you have existing infrastructure. So the streets are already there, the water, sewer, this again, all the nuts and bolts are already in place. Sometimes that has to be upgraded and that's all part of what our bill requires, when you really get into the details of the bill. The new project, if it places new demand on water services, sewer services, other services, those all have to be updated.
BRODIE: Are there a number of people who do what you do? Who now that this bill is law are going to be looking and buying and converting these types of buildings or at least the land into more housing?
BUTLER: Well, I think so, I, these kind of projects are are not for everybody. In metro Phoenix, well in the state of Arizona, and to be clear, the law is really for the metro regions, it's got a threshold of 150,000, a population of 150,000. But in these metro regions, we have all kinds of developers, both local and national. It may take some more of the national developers who who've worked in other cities where they've had existing buildings, but there are local developers as well.
The key will be to collaborate with the cities because one aspect of the law, the cities need to designate these areas where the repurposing can take place. So within these designated areas, now you need to find a building that is going to be able to be either repurposed or potentially removed in a whole or in part. So there will be some challenges but but because the zoning is in place, if you're now the developer, builder looking for that site, you have the certainty of knowing if you can find the right site working with a city, it's zoned as a matter of right.
BRODIE: So ultimately, let's say you're right that there are some number of developers who are going to try to be using this. How much of a dent do you think this can put in the shortage of actual affordable housing and housing in general that we have here?
BUTLER: Well, big picture, I mean, the way I try to look at it is with the population growth that we have, 100,000 people a year plus or minus up, up and down a little bit, we need about 15,000 new apartments every year. This is in Maricopa County, and we haven't averaged that for a while. I think, you know, some of these details from other other work you've done, Mark.
So let's use that as a number that you needed to hit, 15,000 a year. Can we hit 10% of that a year in these programs on sites that are already zoned under the state law? Maybe could we hit more than that? When you add up the math for the geography, it could be 150,000 apartments. I mean that that's the number we just see mathematically from the land areas we could have. But but if this became 10% of the annual production, or 10% to 20% on these urban infill sites that are, that are near other infrastructure which help balance the growth that we have on the perimeter of metro Phoenix. There would be something.
BRODIE: Sounds like a tool, not, not the silver bullet here.
BUTLER: We need more supply. We need more housing. I, yeah, we need more housing. I, I've been on that soapbox for at least 40 years. We need more housing
BRODIE: Right, and this is a way to, to achieve it along with other things that in theory the state will be doing or cities will be doing or developers will be doing.
BUTLER: Correct. This, I like the way you framed it. It's a tool not for every developer, but as I've seen and I've done a number of projects like this urban infill over the years. The additional impact of having more housing near everything else, it can make a lot of other things work.
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