One solution for downtown Minneapolis‘ vacant offices: affordable ‘co-living’ housing

There’s a glut of vacant office space plus a shortage of inexpensive housing in downtown Minneapolis, and one team of urban planning and design experts has come up with a solution for both: ultra-compact rentals about the size of a cruise ship cabin at half the cost of a typical Twin Cities apartment.

The plan, presented Tuesday, is a how-to guide for transforming empty office buildings into dorm-style micro-apartments that offer residents private sleep and work spaces, but shared kitchens in a “co-living” arrangement that’s an updated variation of the once-common “single-room occupancy” (SRO) model.

“We’re adding a lower rung on the housing ladder,” said Alex Horowitz, project director of the Pew Charitable Trusts’ housing policy initiative, who collaborated with Wes LeBlanc, strategy director and principal for national planning firm Gensler.

They focused on showing how building owners, investors, city planners and others in Minneapolis, Denver and Seattle can transform urban office buildings into vertical neighborhoods for service workers, retirees and other budget-conscious renters.

In Minneapolis, the report focused on showing how a theoretical 21-floor office building could be converted into a mixed-use building with 1,080 co-living units. The ground floor would have a lobby, management office and just shy of 13,000 square-feet of retail space. The second floor would have 10,000 square feet of office space, and the third would have shared amenities, including a fitness center. Beneath the building, there’s room for 343 cars and 250 bikes.

The residential floors, on levels four through 21, would have an identical layout with single-occupant sleeping rooms with 130 to 157 square feet of fully furnished space, including an oversized twin bed, desk and chair, nightstand, microwave and standard-depth, half-sized refrigerator, that wrap around the share living spaces (living room, kitchen and laundry) clustered toward the center of each floor. Each rental has its own private entrance, and each floor would require key-card elevator access.

At about half the size of today’s traditional studio apartment, which typically has a full kitchen and bathroom, they’d rent for about $750 on average, including all utilities, which is about half the cost of a typical rental in downtown Minneapolis.

The project comes at a time of intense interest in finding new uses for empty office buildings. The pandemic drove up the prevalence of remote work, and in all three cities there’s a growing mismatch between the housing developers are building and the housing people need.

Specifically, the average household size is shrinking, but new housing isn’t. Nor is it getting more affordable. The majority of renters are now singles who earn less than area median income, he said, and homelessness is on the rise at a time when more than a quarter of the downtown offices are vacant.

In Minneapolis, the report said there are about 110 office buildings of more than 50,000 square feet in around what’s known as downtown’s central business district. Together, those buildings have about 39 million square feet, and an estimated 66 of them are at least 30% vacant.

Horowitz said Monday while the SRO concept isn’t new, and some developers are building co-living rental apartments, he’s not aware of any office-to-SRO conversions currently underway.

“This is something new,” he said. “This would have been hard in any of these cities five years ago.”

The time is right for such a vision, Horowitz said, becuase Minneapolis has already updated its comprehensive plan to allow for such housing, office buildings have become less expensive and rental housing has grown scarce and more expensive.

“There’s a reason why we haven’t seen this until now, but this could make a lot of sense,” he said.

The team said Minneapolis is a prime target for such conversions because there’s “notable local political will to encourage new housing typologies,” along with other policy solutions aimed at addressing housing affordability.

LeBlanc said the concept makes sense for big office buildings because there’s enough space in them to include a variety of uses. Such mixed-use buildings are increasingly hailed as an antidote to the single-tenant office buildings that are increasingly obsolete.

“You can break these buildings down into zones and pieces depending on the type of users,” he said. “The reality is that we have plenty of building inventory throughout the country that’s not well aligned to [current] needs.”

SROs can have a negative connotation. Once known as “flop-houses,” they were common in big cities throughout the country in the early part of 20th Century, but many were under poor management and had a reputation for being last-resort housing for people with addiction issues.

The assumption is that these buildings would be operated by a non-profit, government agency or health care firm, and the cost of managing and maintaining them is factored into the cost of conversion.

Minneapolis is especially well-suited for the co-living concept, Horowitz and LeBlanc said, because more than half the downtown office space has been built since the 1980s. Such newer office buildings can be difficult - and expensive - to convert into a typical, fully self-contained apartment in part because the buildings don’t have operable windows, and the floor plates are too deep to provide enough windows for all the rooms. Generally, older office buildings are more suitable for such conversions because they’re smaller and have windows that open and close.

In Minneapolis, a typical co-living conversion would cost $167,300 per unit, while the current cost of developing a traditional studio apartment with its own kitchen and bathroom can easily surpass $400,000 per unit, making such conversions difficult without tax credits and public subsidies.

The lower cost of co-living conversions, Horowitz and LeBlanc said, means Minneapolis could see quadruple the number of low-cost units for the same subsidy.

“This seems to me one of the most exciting findings,” Horowitz said. “Cities can stretch their subsidy dollars so much farther.”