- Historic tax credit and tax abatement programs facilitated the conversion of one
of Kansas City’s
most problematic vacant office buildings to affordable housing.
- Reuse of the Lanahan Building in Baltimore involved several interventions,
including preserving
the historic front façade and designing floorplans that accommodate existing
structural elements.
- These two office conversions are examples of the interplay among building
conditions, the
regulatory environment, and local incentives that support downtown
revitalization.
With the COVID-19 pandemic changing longstanding patterns of living and working, several U.S.
cities are
promoting the conversion of vacant and underutilized office buildings to residential use to
boost their
housing supply and revitalize their downtowns as mixed-use neighborhoods. Even before the
pandemic,
however, the adaptive reuse of underused office buildings was prevalent in many downtown
markets. Although
office-to-residential conversions offer cities several advantages, they can also present
challenges
depending on the building form, local market conditions, land use regulations, and the
availability of
public subsidies and incentives. These challenges can be particularly acute for conversions
to affordable
housing. This article examines office-to-affordable-housing conversions in Kansas City,
Missouri, and
Baltimore, Maryland, which, as of 2020, were among the 10 U.S. cities with the most adaptive
reuse
projects resulting in residences. In these two cities, office buildings were most often the
buildings
being converted.1 In Kansas City, the Professional Building was renovated in
2006 to create
132 units of affordable housing. The six-story Lanahan Building near Baltimore’s Inner
Harbor, which was
constructed in 1906, was converted to affordable housing during the pandemic.
The historic 16-story Professional Building in downtown Kansas City, which was
constructed in 1929 as a
medical building for doctors and dentists, was repurposed as a 132-unit affordable
apartment building.
Photo Credit: Manginelli Productions
Kansas City has undergone several stages of downtown revitalization efforts since the 1950s,
and the city
has seen $5.2 billion in new development between 2000 and 2010. During this time, adaptive
reuse projects
became a significant component of these revitalization efforts as Class B and C office
buildings were
converted to residences.2 In 2006, one vacant downtown building, the Professional
Building,
was converted to affordable housing by The Alexander Company (TAC), a Wisconsin-based
developer that
specializes in affordable housing and historic preservation.3
While searching for new business opportunities, officials from TAC scheduled exploratory
visits with
stakeholders in Missouri’s two most populated cities, Kansas City and St. Louis, to learn
which obsolete
buildings concerned them the most.4 The 16-story Professional Building, standing
vacant and
blighted on a principal downtown street, was one of the buildings that Kansas City officials
identified as
a priority for conversion.5 This building, constructed in 1929, was vacated in
1991 and had
fallen into disrepair. The city issued numerous code violations and eventually declared the
building
dangerous.6
TAC acquired the building in 2004 and began converting it into Professional Building Lofts
with
apartments and commercial spaces.7 Despite its poor physical condition, TAC saw
several
advantages in the old office building. The building, which is listed in the National
Register of Historic
Places, in part because of its architectural significance as one of the first
Modernist-style buildings in
Kansas City, has two distinguished street façades. Stone piers rising to the crenelated
parapet
dramatically accentuate the building’s full height. Bas-relief carvings of geometric shapes
on the piers
and between them under the bands of windows enhance the building’s curb appeal. The windows
run the length
of the building’s façade, set between the piers in pairs and triplets, flooding the
interiors with ample
light. 8
According to Kendra Bishop, director of marketing and public relations for TAC, the building
was vacant,
so financing and construction could begin without waiting for existing tenants’ leases to
expire. In
addition, the layout of the building was conducive to residential conversions.9
Like most
office buildings constructed in the early 20th century, the Professional Building had a
relatively small
floor plate measuring 96 feet by 118 feet. Unlike modern buildings with larger floor plates,
which must
supplement exterior wall windows with costly lightwells to meet building code requirements
for light and
ventilation, older buildings such as the Professional Building can often meet code
requirements using
existing windows, simplifying their conversion to apartments. Furthermore, because
multifamily residences
were already allowed by right, TAC did not need to undergo a costly rezoning
process.10
The apartments in Professional Building Lofts, which are affordable to residents who
earn less than 60
percent of the area median income, have full kitchens and laundry rooms. Photo Credit:
Manginelli Productions
The renovated Professional Building Lofts offers 132 apartments above 11,000 square feet of
first-floor
commercial space.11 The apartments are reserved for households making up to 60
percent of the
area median income (AMI), except for 2 units that serve households earning up to 50 percent
of AMI.
Seventy-two of the units have one bedroom, and the remainder have two.12 All
units have a full
kitchen with stainless steel appliances and a laundry room. The building also offers a
community room,
rooftop terrace, and fitness center. The first-floor commercial space is partially occupied
by a
restaurant and law firms. Residents are within easy walking distance of jobs, services, and
amenities.13 The city’s three high-frequency, bus rapid transit routes and
several local bus
routes stop in front of the building, and the KC Streetcar is two blocks away.14
The conversion of Professional Building Lofts cost more than $21 million (approximately $32
million in
2023 dollars), nearly one-third of which was financed through federal and state low-income
housing tax
credits (table 1).15 A similar amount came from federal and state historic tax
credits, which
required TAC to preserve the building’s façade.16 The federal Historic
Rehabilitation Tax
Credit program allows developers who rehabilitate certified historic structures to claim a
tax credit
equivalent to 20 percent of eligible costs if they meet the Secretary of the Interior’s
Standards for
Rehabilitation.17 Missouri’s Historic Tax Credit program, which was one of the
first
state-level equivalents to the federal program, gives investors a credit equal to 25 percent
of eligible
costs.18 Financing for the development also included funds from the HOME
Investment
Partnerships Program provided through the Kansas City Missouri Homesteading Authority and
tax-exempt bonds
from the city’s Industrial Development Authority.19 In addition to this permanent
financing,
the city’s Planned Industrial Expansion Authority granted Professional Building Lofts a
property tax
abatement. The abatement, authorized by Missouri’s Chapter 353 program to encourage the
redevelopment of
blighted properties, was granted for 25 years.20
| Federal low-income housing tax credit equity |
$5,700,000
|
| State low-income housing tax credit equity |
$1,800,000 |
| Federal historic tax credit equity |
$4,390,000 |
| State historic tax credit equity |
$2,900,000 |
| Industrial Development Authority tax-exempt bonds |
$4,900,000 |
| HOME Investment Partnerships Program financing |
$535,000 |
| Deferred developer fee |
$815,000 |
| Total |
$21,040,000 |
TAC executives believe reuse projects can help create affordable housing and activate city
streets, but they note some difficulties. The company currently has trouble finding office
buildings that are fully vacant. Chris Qualle, director of design and construction for TAC,
notes
challenges in making older buildings accessible or bringing them up to code, such as
remodeling
older staircases, which often are narrower and steeper than current codes
allow.21
Qualle and Dave Vos, a development project manager for TAC, also say that most office
buildings
constructed since the 1960s have larger floor plates that make conversion to residences more
difficult. Furthermore, Vos says that zoning requirements can hinder development, although
he has
noticed that cities are reducing their parking requirements because automobile use in
downtowns is
generally lower than in the suburbs. Vos also believes that more cities should offer
property tax
abatements for historic rehabilitation projects, especially those for affordable housing,
and he
suggests that local governments expedite the permitting process for adaptive reuse
projects.22
Professional Building Lofts is located near jobs, amenities, services, and public
transportation
options. Photo Credit: Manginelli Productions
The Professional Building Lofts’ opening in 2006 catalyzed downtown growth, according to
Bishop.
In subsequent years, downtown Kansas City saw significant investment, including a new
stadium and
new corporate headquarters for H&R Block.23 Throughout the 2010s, the city’s
downtown
also saw a significant increase in residents, netting more than 4,000 new households through
both
new construction and rehabilitated housing. These projects, including conversions of offices
to
residences, continued to benefit from state historic tax credits, property tax abatements,
and
favorable downtown zoning regulations.24 The city has also established a housing
trust
fund and created a department of housing and community development to facilitate affordable
housing projects. In addition, the city offers floor area and building height bonuses and
requires
inclusionary housing in developments that benefit from city financial
incentives.25
High office vacancy rates and increased demand for multifamily housing have made the adaptive
reuse of downtown office buildings in Baltimore increasingly common in the 2020s. In 2022,
Baltimore added nearly 400 new apartments through office-to-residential conversions, the
third-highest number of conversions in the nation.26 One such conversion project
is
the 1906 Lanahan Building, which originally was the headquarters and distillery for a whiskey
company and later served as the Baltimore Oriole Cafeteria.27 In 2018, the
building’s
owner proposed an off-market sale to Osprey Property Company, a local developer that
specializes
in constructing new affordable housing.28
The conversion of the Lanahan building included preserving the windows and ornamental features of the
building’s historically significant front facade. Photo Credit: 2 West
Photography
In January 2020, Osprey purchased the 6-story building to convert it into a 40-unit
affordable
housing development.29 The renovated building, renamed 22 Light Apartments,
opened to
residents in June 2021.30 Thirty-six of the units are available to residents
earning
up to 30, 50, or 60 percent of AMI, and the remaining units rent at market
rate.31 The
units, ranging from 650 to 1,050 square feet, have one to three bedrooms, a living and
dining
area, and a kitchen with energy-efficient, stainless steel appliances. Common amenities
include a
community room, business center, fitness center, and laundry room.32 Rooftop
solar
panels reduce utility costs in these common areas.33 The ground level has two
street-facing retail spaces, one of which is occupied by a convenience store.34
As the company’s first conversion of a nonresidential building into residences, 22 Light
Apartments expanded Osprey’s portfolio into a new category of construction and presented a
challenge. Tyler Grote, executive vice president of Osprey, says that the company had to
assemble
design and construction leaders who understood that this project required close teamwork and
a
willingness to learn as the project progressed.35
22 Light Apartments is a contributing building in the city’s Business and Government Historic
District, which is listed in the National Register of Historic Places, and its
rehabilitation had
to follow the Secretary of the Interior’s Standards for Rehabilitation. Osprey coordinated
with
the Maryland Historical Trust to preserve the detailing and character of the façade and
alter it
as little as possible. Joe Ijjas, senior associate for Soto Architecture and Urban Design
and lead
architect for the project, says that his firm accomplished this goal by cleaning and
repairing the
façade details and retaining the large wood-framed windows. To improve the energy efficiency
of
the existing windows, the developer installed storm windows inboard of the original windows
while
replacing the windows on the other façades with modern, energy-efficient windows.
36
Inside the building, the developer demolished the original bathrooms at the center of each
floor
and removed the old office walls to accommodate modern apartments. Some of the building’s
interior
features were repurposed; for example, the developer used an old elevator shaft in the
middle of
the building to run ductwork, wires, and cables to each floor. Another feature required a
more
significant workaround: a load-bearing, 3-foot-thick masonry wall with limited openings that
bisects the building. The wall, which extends through all six stories, along with the
completely
windowless south façade, limited both natural light penetration into the building and layout
options for the apartments. The project team needed to cut a 10 foot by 20 foot lightwell
into an
exterior wall to admit natural light into the units on each floor. Without the lightwell,
and with
the structural interior wall, Ijjas says, “you basically had a third of the building that
would
have had a really hard time getting more than two small units on each floor.”
37
All but four units in 22 Light Apartments are reserved for households earning up to 60 percent
of the area
median income. Photo Credit: 2 West Photography
One of the project’s bigger challenges was that the office space was partially occupied by
tenants, which delayed testing for asbestos contamination and structural soundness until the
purchase was finalized. In March 2020, COVID-19 restrictions halted construction, which was
able
to resume shortly afterward once health protocols were enacted. Fortunately, the
pandemic-related
delays in the supply chain felt by many in the industry were not a major issue during the
conversion.38
The project’s location offered several advantages, according to Grote. The building is in a
zoning district that created no significant constraints: multifamily residential development
is
allowed, and no off-street parking is required. The building is in one of the city’s most
transit-friendly areas, with easy access to the subway and light rail systems as well as
several
bus routes.39 The apartments are also close to two regional rail stations, one of
which is served by Amtrak. Residents are a short walk from grocery stores, pharmacies,
healthcare
providers, restaurants, and other services. Popular attractions such as the Inner Harbor,
National
Aquarium, Oriole Park at Camden Yards, and the M&T Bank Stadium are also within a 15-minute
walk.
Two-thirds of the $21 million development cost for the conversion came from low-income
housing
tax credit (LIHTC) equity (table 2). The state and the city also provided loans, the latter
of
which was from the HOME Investment Partnerships Program.40 The loans were
competitive,
although Grote says those awards quickly followed the LIHTC award.
41
| Federal LIHTC equity |
$14,250,000 |
| Baltimore City Department of Housing and Community Development loan |
$1,000,000 |
| Maryland Department of Housing and Community Development loan |
$2,000,000 |
| Private bank loan |
$3,000,000 |
| Total |
$20,250,000 |
22 Light Apartments’ development team inserted a light well on the building's windowless
southern facade
(bottom) that provides natural light to rooms in two apartments on each floor. Photo
Credit: Soto Architecture & Urban Design
Grote says the city appreciated the needed affordable housing, which not only brings
workers and customers for nearby businesses but also contributes to the vitality of
downtown.42 Downtown Partnership of Baltimore (DPOB), a nonprofit that
promotes the
downtown’s community and economic development, considers rapid residential growth the top
priority for downtown, as stated in the organization’s 2011 strategic plan.43
A guiding
principle of the plan is that a diverse economy and population are fundamental to a
thriving city and that finding new uses for underused buildings is an important component
of the area’s revitalization.44 “Downtown needs more residents, and the
broader goal to
activate downtown post-COVID is to lean in on the residential growth and lifestyle,” says
Lauren Hamilton, DPOB’s chief marketing officer. “The development of 22 Light Street is
very helpful to the street as a whole.”45 Although 22 Light Apartments is
currently one of
the only conversions to affordable housing in downtown Baltimore, other adaptive reuse
projects with low- and moderate-income housing are under construction.46 A
city-owned
property is being converted into 62 apartments.47 Two former hotel towers near
the Inner
Harbor also will be transformed into 558 apartments in 2024.48 These projects
are part of
more than $3 billion in new development that has been completed or is under construction
in downtown Baltimore since 2018. Additional downtown developments totaling $3 billion are
planned.49
In several ways, Professional Building Lofts and 22 Light Apartments exemplify the
advantages of converting older office buildings in downtown areas to housing. The
buildings’ small footprint and layout simplify their conversion. Both projects benefited
from public policies and incentives intended to promote downtown revitalization. Following
decades of public-private efforts, the downtown locations of these buildings are walkable,
with nearby entertainment, shopping, services, and employment opportunities, and city
officials and their partners continue to make these downtowns more attractive places to
live, work, play, and learn. Both cities’ zoning ordinances permitted downtown
office-to-residential conversions without changing any zoning, density limitations, or
additional parking requirements. Federal, state, and local support for the conversions in
the form of tax credits and financing supported the buildings’ use as affordable housing.
These strategies and supports, along with additional incentives as needed, can be useful
tools for other cities needing to increase their affordable housing supply and revive
their downtown areas through the adaptive reuse of underutilized office buildings.
Hotel to Housing: Santa Fe Suites
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