The District of Columbia Promotes Housing in Downtown

The District of Columbia Promotes Housing in Downtown

The conversion of a downtown office building will open as the Elle Apartments in early 2024, a precursor to additional conversions that will include affordable units through the Housing in Downtown program.

In May 2019, District of Columbia Mayor Muriel Bowser announced a goal to create 36,000 new housing units by 2025, of which 12,000 will be affordable. To accomplish this goal, the mayor set out a strategy with focus issues that include increasing and accelerating housing production, promoting fair housing equitably distributed across the city, and encouraging homeownership. As the mayor announced this goal, the District's Office-to-Affordable Housing Task Force was preparing a report on the feasibility of one avenue toward achieving the goal: using office-to-housing conversions to produce affordable housing. The task force's report, issued in September 2019, concluded that conversions would not be an effective tool for housing production because rental office space was highly profitable and few office buildings were vacant. The task force determined that converting Class C office buildings outside of the downtown core might be feasible if, along with offering tax abatements and other financial assistance, the city changed zoning regulations to permit mixed-used development and sufficient residential densities. Less than 2 years later, however, the COVID-19 pandemic changed the situation, and the District's office vacancy rate grew from 11 percent to 14 percent. In the central business district, the vacancy rate was nearly 17 percent, and the mayor issued a request for information from property owners about incentives to encourage the conversion of commercial space to housing and increase the number of affordable housing units in the downtown.

Based on this information, the city approved the Housing in Downtown Abatement (HID) program in 2022 to provide tax abatements for 20 years to projects involving commercial buildings that have been converted into developments providing at least 10 residential units, at least 15 percent of which must be affordable to households earning up to 60 percent of the area median income. The District changed the program's affordable housing requirements the following year to reduce the minimum number of units affordable to households earning 60 percent of the median income and to include an option to provide more units affordable to households earning up to 80 percent of the median income. The revised program also reduced two regulatory barriers. To facilitate securing financing, the District relaxed its Tenant Opportunity to Purchase Act for HID projects, exempting the first sale of the project from the act if the sale occurs within 10 years of the project's opening. To reduce the effect of increasing costs, the District removed its First Source requirement for hiring local construction workers for HID projects.

A larger effort to increase postpandemic economic activity in the city's downtown encompasses policies supporting additional housing, including affordable and workforce units. According to the mayor, converting office space to housing is key to achieving a more vibrant, mixed-use downtown, and the abatement program served as the major housing initiative for the first stage of the downtown transformation. The District set a goal of attracting 15,000 new downtown residents in 7,900 converted and newly constructed residences by 2028. The HID program is expected to account for 90 percent of that goal.

Downtown revitalization is a major part of the framework of DC's Comeback Plan, which seeks to overcome the pandemic-related challenges of the District's weakened revenue stream, population loss, and softened tourist market. The Comeback Plan contains initiatives to support opportunity-rich neighborhoods and a thriving population. These efforts involve various housing programs in addition to the HID program. A similar tax abatement program will continue incentivizing affordable housing in areas of the District with a high need for affordable housing. The District has proposed funding for emergency rental assistance for households facing eviction, home purchase assistance for first-time and Black homebuyers, and single-family repair and accessibility improvements for homeowners. The plan also identifies new policies to ease regulatory barriers such as permitting processes and building code provisions that inhibit the conversion of office space to residences and suggests increasing allowable building heights and densities as other possible regulatory changes. In addition, the plan calls for technical analyses and interviews with stakeholders to determine additional effective policies.

The Comeback Plan incorporates the 2019 goal of producing 36,000 residential units, including 12,000 affordable units, by 2025. As of October 2023, the District has achieved 88 percent of the total number of proposed units and 67 percent of the goal for affordable units. In the downtown, two office conversions are expected to be completed in the first half of 2024, and nine other office building conversion projects have been announced. With HID program funding available in fiscal year 2024, developers will be able to apply for HID tax abatements, and the mayor can approve tax abatements for downtown conversions totaling up to $2.5 million before the end of the fiscal year, with authorization for equal amounts through fiscal year 2026 and escalating amounts in subsequent years.

Click here to access the revised HID program and information about how it addresses regulatory barriers. Find more plans, regulations, and research that state and local governments can use to reduce impediments to affordable housing at HUD USER's Regulatory Barriers Clearinghouse.

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