A new housing solution: Converting vacant Phoenix offices into $850/month, dorm-style apartments

Metro Phoenix has been dealing with a housing shortage for several years, and many residents are finding that available housing options — either new or existing — are not affordable.

Alex Horowitz, director of the Housing Policy Initiative at Pew Charitable Trusts, has a potential answer for at least some of those would-be renters: converting empty office space into micro-apartments in co-living spaces.

It's a little different than the standard idea of turning vacant offices into apartments, which is an expensive and difficult process. Horowitz said in this case, the units would be smaller, more affordable and cheaper to build. That’s due, in large part, to the ability of developers to better use the existing bones of the building, rather than needing to adapt one use to a different one.

The Housing Policy Initiative at Pew Charitable Trusts looked at a handful of cities where this kind of development might be possible. Horowitz thinks rents in these kinds of units in Phoenix could be around $850 per month. Estimates of average rents in Phoenix vary, but are generally more than a $1,000 a month.

Horowitz joined The Show to talk more about this.

Full conversation

MARK BRODIE: Alex, can you please describe the vision here in terms of turning office buildings into co-living spaces — what would these units look like?

ALEX HOROWITZ: So Phoenix has a high level of office vacancy, around 23%, and that's above the U.S. average. Office vacancy itself in the U.S. is about the highest it's ever been. And we see that as rents have gotten higher and more people are struggling with housing costs, there is a dream to kind of turn this vacant office space into apartments.

But construction costs and layouts have proven too difficult. So we worked with the architecture firm Gensler to identify another path, which is to enable vacant office space to be used as dorm-style housing. That would have lower construction costs, smaller unit sizes and lower rents where people have private living space and then you have shared kitchens, laundry, living rooms, bathrooms. And that makes much more efficient use of that vacant office space and has a much lower conversion cost, so rents can be more affordable.

BRODIE: So what would be in sort of the private space itself? Like if I were a renter in one of these, what, what would personal space include?

HOROWITZ: So it would be small in the neighborhood of 150, 160 square feet typically. And that would mean a bed, a desk, a TV, a half-size refrigerator, a microwave, a pantry and a closet. Not much more.

So something bigger than a college dorm room that two students often share, but much smaller than a regular apartment, although it would live a little bit bigger because the bathroom and the kitchen would be in the shared interior space of the building and not in the Unit itself.

BRODIE: And so as you are describing it as like a college dorm, would it be the kind of thing where you use sort of the existing corridors in an office building and just have units up and down those corridors with bathrooms, you know, sort of sprinkled throughout? As you referenced a kitchen, you know, here and there, common living spaces, that kind of thing as well.

HOROWITZ: That's right. So the idea is to make as much use of the existing office building as possible. The most important cost savings from a construction perspective comes from keeping the plumbing in the middle. Part of why it's so expensive to turn vacant office buildings into apartments is moving the plumbing into every unit is a major cost driver.

So using as much of the building as possible with those common hallways and then bathrooms, kitchens, laundry, living areas in the middle is what makes this kind of conversion so efficient relative to a regular office conversion into apartments. Because not many of those are happening because of high construction costs and poor building layouts.

BRODIE: Is there a demand for this kind of housing? Like, do people who are not in college want to live in places that are like college dorms?

HOROWITZ: So people are looking for affordable rents. Rents have really never been higher in the U.S.. And if you look at Phoenix, going back to 2017, the median rent was under $900. Today it's around $1,300. So we're seeing households really struggling with affording their monthly bills because rents are so high, the cost to buy is so high.

And so is there demand? Well, if the price is right, than there is because people value living near jobs, living near stores, living near transit. But most of all, they value having something they can afford.

BRODIE: So in your mind then. the affordability would sort of trump the rest of the considerations in terms of like not having your own private bathroom, for example, or having to share a kitchen with a bunch of other people, things like that?

HOROWITZ: That's right. So if people can, can get something, this really is their own space. So they'd be living alone in a private unit. And then they can have as much or as little interaction with other residents as they really want, because they've got a fridge in their unit, they've got a pantry, they've got a microwave, and we're talking about individual shared bathrooms rather than office-style bathrooms.

But if we go back in time to say, the mid-1900s, housing like this was about a 10th of rental units in cities. And that is a housing style which is also more common in cities around the world where it hasn't been outlawed. Berlin, London, Singapore has some housing like this, in Seattle.

And in New York City, Washington, D.C., we're seeing this kind of housing be more common because there's a real demand for something that is well located, doesn't require much maintenance, comes furnished, and where all of your bills are included in your rent.

BRODIE: So you alluded to this, and I want to ask you more specifically. It sounds like there are cities in the U.S. that are doing this already. How is it working out?

HOROWITZ: Whole living has been popular in cities where it has kind of not been pushed out by restrictive zoning codes or building codes. So Seattle has seen a lot of housing like this get built in recent years. There's been growth in this area in Washington, D.C., and in New York City, where some of it still exists, even though the city banned creating new units like this in 1955.

Now they're taking some steps to re-legalize housing like this because the units that stayed around, that never disappeared are really about the most affordable housing that there is in New York City.

BRODIE: How big of a dent do you think that this could put into the housing shortage in the Phoenix metro area? If some number of office buildings are converted into this style of housing.

HOROWITZ: This could make a big difference — 36% of Phoenix renter households have one person, and that is the most under-supply type of housing, small housing that is inexpensive and is well located.

So if you look at a vacant office building that has a deep floor plate, so that means that there's a lot of surface area on each floor, in cities we've looked at, you can get 50 apartments out of a floor because the units are smaller, and they line the perimeter where everybody has a large window.

If you were trying to convert these into regular apartments, you could only get 15 or 16 per floor. So you're really tripling the housing potential of a vacant office building by enabling dorm style housing.

BRODIE: Have you had any conversations with either builders or policymakers here in the Phoenix area to talk to them about this and sort of gauge their interest in doing this?

HOROWITZ: We have, we've had initial conversations, and it's really just to share the findings of this research. So it'll be up to the city and up to builders in terms of whether they're interested in housing like this.

But there's a real advantage to enabling it to come to market. Homelessness has increased dramatically in Arizona broadly and in Phoenix specifically. And when we see that housing costs rise quickly, homelessness follows.

So housing like this could stretch subsidy dollars about two and a half times as far as conventional models. And that means Phoenix could get two and a half times as many homes per dollar by using subsidies for cost-effective housing like this rather than more expensive apartments.

EDITOR’S NOTE: Due to an editing error, this story’s headline has been updated to correct the projected cost of rent.