As the Real Deal reports, many office buildings are being repurposed for multifamily use, as the B and C office market continues to struggle to keep up with Class A offerings for new office tenants. This is welcome news for a multifamily market that is thousands of units short of demand.
This shortage grew in large part from the sunset of 421a. There are some highlights to 485x, 421a's replacement, such that apartments not subject to the affordability requirement can be leased at free market in perpetuity and will not be subject to Good Cause Eviction for the first 30 years. However, there is a prevailing wage requirement, and affordable units must remain affordable in perpetuity. Prevailing wage requirements often backfire on the municipalities insisting on them, as the added cost to the project often cancels, and even outweighs, the benefits sought under the applicable incentive program.
It remains to be seen whether 485x will have the desired effect of jumpstarting new multifamily development. The repurposing of struggling office buildings is an intelligent and forward-thinking way to deal with both the need for more rentals, and the overabundance of Class B and C office buildings struggling to find tenants.
Filings for new rental developments ground to a halt when 421a expired. It took lawmakers two years to come up with a replacement program, 485x, which went on the books earlier this year. But many developers have voiced concerns over the wage requirements in the new regulatory scheme, raising questions about whether the new incentive will produce the number of desired units.
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