Adaptive reuse for affordable housing in our current market - by William Gati

The real estate industry throughout the country faces difficulty in many areas: higher mortgage rates, high inflation, and down trending stock market. The economy seems to be getting worse for professionals in our industry. With mortgage rates hitting 7% this week, we all have to earn and spend more to make developments feasible. Salaries are not keeping up with inflation, but fuel costs, rents, and consumer prices have risen faster than in decades.

The housing market has adjusted downward, too, from last year. The Feds are not planning to cut interest rates any time soon. People’s investments are getting hit hard too. It seems to me that increasing production, services, research, exploration, and manufacturing will also do a great deal to curb inflation. Recessions are never good for real estate development. However, there is a silver lining. Real estate is more affordable and will probably go down in price around the country.

We are now facing strong job and wage growth but inflation, recession, and high real estate prices are causing a slowdown in new development. But yet, there is a tremendous demand for housing. The other difficulty we face is increasing material prices, lack of availability and shortage of skilled workers.

What can we do to deal with this situation? We can take advantage of less expensive property values, more properties available, and longer purchase times. I believe that interest rates may peak and fall, so that ARM loans may be best. The rates are lower and easier to afford. Once rates drop, it is possible to refinance the loan and keep financial costs down.

In addition, it seems that more firms are available to work on projects. We can compensate for the higher carrying costs by keeping construction costs down. However, one must be careful to prepare construction documents and contracts and hire professionals to manage and inspect construction projects thoroughly.

My experience is that we are swamped, hiring more staff and taking on many projects. We are working on multi-family housing, commercial, and institutional projects. It seems that clients built up a high demand for construction through the Pandemic and afterwards. We are sure to find projects put on hold through the Pandemic.

One fascinating trend is converting single-family homes to multi-family homes. People are downsizing and joining others in communal housing. It seems to me that the big cities are facing another serious issue: the divide between the rich and poor. Poorer communities are now doing these conversions. This contrasts with other wealthier neighborhoods building more extensive and more elaborate structures.

How can we, as an industry, help everyone, rich or poor, have affordable housing and reduce homelessness? The answer can be converting factories, warehouses, and abandoned buildings into housing. Many find that projects like this are complex and costly, but keeping the structure, facades, mechanical, electrical, and plumbing of existing buildings can be a tremendous cost saving. There are also government incentives for adaptive reuse. I believe retrofitting has a lower environmental impact than demolition and rebuilding. I also love seeing how creative clients can adapt outdated and vacant buildings to residential use. A pipe factory building in Richmond Hill, NY, was converted to condominiums years ago. The project was highly successful. The façade was restored, the window openings were kept, and the layouts worked perfectly for the residential designs.

I also converted a warehouse in Long Island City to multipurpose use: offices, art studios, and manufacturing. The building department was very cooperative and approved the project with several re-considerations. The owner was able to sell the building at a significant profit. The incredible project allowed many artists to have studios and office space and even kept the grandfathered manufacturing from the turn of the century.

Of course, we all know that lofts throughout the country are the most versatile structures for adaptive reuse because of the ceiling heights, column spacing, fire-proofed structure, and existing sprinkler systems. Many come with elevators that can be replaced. The lobbies have to be retrofitted to be more residential. But many of the features can be reused. We must see, however, that specific energy, safety, and aesthetic qualities are included in the project.

In summary, we now need to be more careful than ever to be cost-effective and frugal in our efforts to bring affordable housing to all. Every person is entitled to affordable housing here in our wonderful country. My challenge to the industry is looking at abandoned warehouses, lofts, schools, office buildings, and institutional buildings as potential housing development structures. We are here to help you evaluate and determine the feasibility of any project that you consider.

William Gati is principal of Architecture Studio, Kew Gardens, N.Y.