What is the path to profitability you see? They pretty much have to gut rehab the building to add kitchens and bathrooms, in an economy where loans are pretty expensive. Is that competitive with people selling existing move-in ready housing stock in a down market? Do you want to be the first person to sign a contract in one of these conversions? (Not to mention the usual "new construction" taxes that are seller-paid on existing housing, but buyer-paid on new construction.)
I think everyone is incentivized to sit on what they have now and offer cheap leases. I also think that cities are incentivized to bring workers back to the office. Like in NYC, we spent billions of dollars on a new commuter railroad terminal that opens this year, and upgrades to run more trains per hour during rush hour. I don't think the state is going to step in and offer free money to make more housing.
All in all I love the idea of converting offices to housing. Working from home is great, and affording your own home is even better. But, I don't think the economy wants either of them :/
> we spent billions of dollars on a new commuter railroad terminal that opens this year, and upgrades to run more trains per hour during rush hour.
This is my problem with trains in general — they make very long term expensive assumptions about where people want to go. But when the trends change (such as remote work,) then there are hundreds of billions invested in trains going places people don’t need to go.
Unless you're referring to something besides the baseline interest rate (in which case you might need to clarify, as it's non-obvious why it would be the case), loans aren't "pretty expensive" now: they were "absurdly cheap" for the last decade.
Setting your baseline during the post-financial-crisis period of permanent zero interest rates is not particularly realistic.
My understanding is commercial real estate operates a bit differently than residential. The value of the property is based on a multitude of factors and the people that invest in commercial are not making an investment in residential.
For example, the value of the property is based on the last or current rent they have received. It is better for the property owner to not have a tenant, than it is to accept a lower lease because it impacts their financing agreements and property valuations.
> The value of the property is based on a multitude of factors and the people that invest in commercial are not making an investment in residential.
This represents a set of assumptions about the operation of the market that a durable shift would invalidate; its not a stable situation that supports keeping units empty forever.
Scarcity drives prices up. If we keep the housing supply lower than it needs to be, landlords can continue to excuse raising prices on their X*mortgage < rent condos, apartments and *plexes.