California Passes Adaptive Reuse Legislation To Address Housing Crisis

Real Estate

California has a housing problem. It needs to build 2.5 million new units by the end of the decade to meet residents’ needs, according to the Statewide Housing Plan, and at least 1 million of them need to be affordable. This is not a recent problem for the state, nor is it an easy one to solve. New legislation signed by Gov. Gavin Newsom on Wednesday might make it easier to get some of those units built sooner and encounter less local government, union, environmentalist and developer resistance in the process than past efforts.

What They Do

The Middle Class Housing Act – combining AB 2011 and SB 6 – aims to create new housing units for low and middle income Californians by allowing them to be built in underused commercial sites zoned for retail, office and parking uses. By locating them close to transit, the new units will also help support the state’s environmental goals by reducing the need for car trips. The state’s Senate President Pro Tem Toni Atkins described the combined legislation as “game changers when it comes to producing desperately needed housing for all income levels.”

“The Middle-Class Housing Act can result in the construction of at least 2 million housing units and is one solution to build up and avoid sprawl,” said SB6 author Sen. Anna M. Caballero. She sees the legislation providing expedited development to convert vacant buildings and lots into homes for middle and working class families.

It’s a win-win for suburbs and rural areas with deserted malls and urban cores with deserted office buildings and acres of parking lots that have become ghost towns. It may also encounter far less resistance from local officials than past legislation, as it can revitalize neighborhoods and remove eyesores.

Break from the Past

This legislative victory is a sharp departure from SB9, a law that took effect in January 2022 to allow duplexes and even fourplexes to be built on most single family lots across the state. More than 241 highly diverse California cities sent Newsom their objections: “SB 9 does not guarantee the construction of affordable housing, nor will it spur additional housing development in a manner that supports local flexibility, decision-making and community input.”

It’s not surprising that communities with multi-million homes like Beverly Hills and Coronado objected to such legislation, but less affluent areas with high minority homeownership like Elk Grove (72.3%), Fontana (63.4%) and Palmdale (61%) also objected.

It’s simplistic to label objections to expanding local housing opportunities for less fortunate households as classist or NIMBY protectionism – and this has certainly been done with fights over SB9 and its sister SB10 law that streamlines infill construction. Darrell Owens, a housing commissioner for Berkeley, described a NIMBY proponent to Curbed San Francisco as “somebody who is opposed to housing in their neighborhood, oftentimes for aesthetic or economic reasons that are anti-poor and anti-middle class.” Is the elderly Black homeowner who has owned a California bungalow in her quiet Inglewood neighborhood for 60 years anti-poor or anti-middle class for wanting to preserve her community? What about the young immigrant entrepreneur who finally found an affordable house in a San Diego exurb, only to find what he thought was a playing field for his kids across the street is now an apartment complex with resident-only recreational space?

New Life for Empty Offices

Adapting commercially zoned real estate has tremendous potential to help solve California’s housing crunch without crushing existing residents’ quality of life. It can also restore cities battered by Covid, according to author Richard Florida, who shared his thoughts on a Fareed Zakaria GPS special last year. With work-from-home trends continuing beyond the pandemic, there will be a surplus of less appealing office space available for new purposes.


It’s worth considering though that not all commercial buildings are easily transformed into livable spaces. Presumably the developers being incentivized with this new legislation know this already and have teams trained in the challenges of adaptive reuse. Newcomers wanting to break into the market should proceed cautiously; even with incentives, it’s easy to under-budget construction projects like these.

David Kennedy, housing design leader of Chicago-based architecture and planning firm Bailey Edward told Multi-Housing News, a trade magazine for the multi-family industry, that pre-1950 office buildings and hotels convert well to housing. (Some hotels in California have already been used by cities to house homeless residents.) David Block, development director at Chicago-based Evergreen Real Estate Group, in that same article noted that narrower buildings are easier to adapt, as are those constructed without central air conditioning. (Some older coastal buildings in California lack AC, depending on ocean breezes for cooling.)

New Life for Dead Malls

Shopping malls are a challenge, Kennedy noted. Think back to your last trip to an indoor mall and try to recall how many windows you spotted — an absolute necessity for housing. Outdoor malls have many more, to be sure, but they’re harder to convert than other building types. One approach with these retail properties is to build apartments or condos above the storefronts. This can spur new tenants for both the commercial and residential spaces.

Parking Prospects

Parking lots have great housing potential too. In a December 2021 presentation to the National Association of Real Estate Editors, New Urbanism pioneer Andrés Duany stated: “The great play in real estate is underutilized parking lots.” It’s difficult to quantify how many acres of paradise were paved for now unused California parking lots, but some can surely be used for tiny houses. These studio or one bedroom structures can meet the shelter needs of students, seniors, homeless individuals and others who don’t require extensive square footage.

Last Words

“California has made historic investments and taken unprecedented actions to tackle the state’s housing crisis over the past four years,” said Newsom. “But we recognize there’s more work to do – this package of smart, much-needed legislation will help us build new homes while rebuilding the middle class.” That’s a worthwhile goal and a workable new approach to meeting it.


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