- The capital city's downtown business district is struggling as many workers remain remote.
- DC's mayor has proposed an expansion of tax relief for developers who convert offices into residences.
The mayor of Washington, DC, Muriel Bowser, wants to expand the capital city's stock of residences downtown to give both an economic boost to the business district and address the housing shortage.
In her fiscal 2024 budget, Bowser has proposed expanding a 20-year property tax break for these office-to-residential conversions from $6.8 million in 2027 to $41 million in 2028 to help encourage developers to transform commercial buildings.
DC's downtown has long suffered from high office and retail vacancy rates made significantly worse by the pandemic-induced shift to remote work.
Many federal government employees, who occupy a third of downtown jobs, aren't required to come back to the office. And a slew of major companies, including Amazon and Boeing, have chosen DC suburbs — from Arlington to Bethesda — for their offices. The Washington metro area had a 46% office occupancy rate as of January 2023 — 54% below pre-pandemic levels, according to data compiled by Kastle Systems, a building security company.
The city has more than 20 million square feet of unused office space — an unprecedented vacancy rate, according to the DowntownDC Business Improvement District's 2021 report. Almost 2.5 million square feet of vacant offices are already being turned into residences, the Washington Post reported in December.
—Mayor Muriel Bowser (@MayorBowser) December 15, 2022
The mayor and city officials say the tax relief, called the Housing in Downtown (HID) Abatement, is necessary to incentivize and speed up costly commercial building transformations.
"We have approached our downtown reimagination strategy from three lenses: Change the Space, Fill the Space, and Bring the People," DC's deputy mayor, John Falcicchio, said late last year. "We know that creating new housing in downtown will lead to a more vibrant neighborhood and 24/7 economy. The Housing in Downtown Abatement Program will incentivize more conversions, and bring about more housing affordability and retail opportunities."
Some progressive groups have criticized Bowser's expansion of HID for reducing the percentage of affordable units required of these construction projects, waiving the requirement that DC workers be prioritized in hiring, and exempting the developers from a law giving tenants a first right to purchase when a building is up for sale.
"We all want a thriving downtown. But the Mayor's proposal is tailor-made for developers—and it comes at the expense of DC residents and the District's commitment to equity," the DC Fiscal Policy Institute said in a recent press release.
DC Council member Robert C. White Jr., a Democrat, told the Post that progressives "are going to have to be open to things we don't like" in order to rebuild the capital's downtown.