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Construction materials and a lease sign at 18 King St. West, on Jan 11.Fred Lum/the Globe and Mail

Matthew Alexandris is a freelance writer based in the Greater Toronto Area.

To address the growing concern of rising vacancy rates in downtown workplaces, many Canadian cities and political leaders are attempting to make use of the unused office space by converting it into residential housing. The idea has become increasingly popular across the political spectrum: Not only would office conversions bring in more revenue, they would also address the country’s housing shortage, killing two birds with one stone.

Ottawa and many local governments have implemented incentives to help developers launch conversions. In 2021, the federal Liberals promised to invest $600-million to help developers convert office space into new rental housing. That same year, Calgary’s city council approved the downtown development incentive program, which grants developers $75 per square foot of vacant office space to be converted to residential.

But despite the financial help, office conversions have failed to take off. That’s because it doesn’t work all that well.

Calgary has only been able to convert 10 different buildings and create less than 1,300 housing units under its program. Nationwide, office buildings do not present the opportunity to create enough housing to address the shortage, either. According to a report from the Canadian Urban Institute, there is the potential to only create between 18,000 and 22,000 housing units in 11 cities.

The small number of new housing from conversions isn’t surprising. Developers face many challenges when trying to convert commercial properties to residential use, such as larger floor-plates, having washrooms clustered together and access to daylight in all living spaces. In many cases, office buildings are not compatible with the spatial configuration for housing.

Office conversion to housing costly, say developers

Turning offices into homes could help address the housing crisis, but can it be done?

When it is possible to convert office space into housing, the cost of doing so is not worth it for developers. In some cases, office conversion can cost more than demolition and rebuilding from scratch. Now, in an environment of high interest rates and the credit that developers need for these projects being hard to come by, office conversions are even harder to accomplish.

Rather than spending money on incentivizing conversions, cities and the federal government would be better off investing in incentives for new housing construction and the removal of barriers to new housing development.

Building new homes would bring more walking traffic, more users of public transportation and improved productivity, helping to revitalize downtown cores. A report from the Brookings Institute found that there is a strong positive correlation between downtown job market share and downtown population share. In other words, downtowns do better as job centres when they have more people living in and around them.

There are plenty of ways that cities could help incentivize more housing construction in their downtown cores. For example, cities could provide density bonuses to developers for building larger multifamily housing, lower development charges and speed up the approval process for new housing projects so developers are subject to less interest costs.

Moreover, with many cities still employing restrictive land use bylaws, cities could upzone to allow for larger multifamily units, allow housing in commercial zones through mixed-use zoning, eliminate parking requirements on proposed developments, and remove setback and lot size regulations to allow for more dense projects.

Office conversions seem like the easy solution to the most pressing issues cities are facing. But if we want to revitalize cities, then they must be more imaginative and act more broadly in the ways we create places for people to live and work.

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