In a state with a need for cheaper housing, some in California are looking to commercial properties along main roads:

Joe DiStefano sees boulevards like El Camino Real as more than just spots for takeout or an oil change. He sees a “perfect storm of opportunity.” Cofounder and CEO of UrbanFootprint, a software company that builds urban planning tools, DiStefano has done numerous studies on the housing potential hiding in California’s commercial strips. According to UrbanFootprint’s analysis of El Camino Real, this lone corridor could theoretically accommodate more than 300,000 new units if the road was upzoned to allow residential development and its parking lots and big-box stores became low-rise apartment complexes…

Converting underutilized retail and office space into apartments is not a novel idea, but it’s gaining fresh attention from California lawmakers, especially as pandemic-fueled e-commerce and remote work trends continue to empty brick-and-mortar stores and business parks across the state. In December, California State Senator Anna Caballero, who represents the Central and Salinas valleys and cities such as Merced, helped introduce Senate Bill 6, which would fast-track the creation of walkable infill development and make it easier to turn land zoned for commercial uses into housing. Another member of the state’s legislature, Assemblymember Richard Bloom, has a similar proposal to encourage commercial-to-residential conversions, Assembly Bill 115. (California has a bicameral legislature.) And Senator Anthony Portantino introduced AB15, which would incentivize turning vacant big box sites into workforce housing…

But more than 40% of commercial zones in California’s 50 largest metros prohibit residential development, according to a recent report from the Terner Center for Housing Innovation at Berkeley. “Residential Redevelopment of Commercially Zoned Land in California” highlights the growing potential of such rezoning proposals. “It’s a perfect infill option,” says David Garcia, a co-author and policy director at the Terner Center. While legislation like these proposed bills hasn’t been passed in other states, he believes they address a universal problem. “You’re really plugging in gaps left by shifts in the commercial marketplace, by Covid and the shift to e-commerce.”

There are three main types of projects ripe for this kind of reuse, Garcia says: commercial strips in more urban areas, often along existing transit lines; former big box retailers in more suburban areas; and vacant land in the exurban landscape that’s been reserved for future development. Researchers found there was actually more acreage of available commercial space per person in more suburban/outlier areas, an opportunity that, if paired with increased investment in transit, could quickly bring more density and valuable walkable development to fast-growing and diversifying suburban centers, some of which have already done a relatively good job of building new housing. “Instead of thinking about a bill like this as another state mandate cities need to adhere to, it should be looked at as a tool for doing the good planning they need to do anyways,” Garcia says. 

This might be hard sell before COVID-19 but the severe issues for retailers and businesses may make a lot of properties available.

Even with these issues, I wonder how many communities would quickly give up commercial properties to be rezoned for residential use. Many communities rely on commercial properties along major roads for sales tax revenue. If commercial property disappears from the local zoning map, how would a community make up those revenues?

Of course, providing possibly cheaper housing could be desirable to residents, even if it comes at the expense of commercial properties. And new residential units might even revive some local commercial activity.

If this is enabled at the state level, it would be interesting to see how quickly communities and developers would move. Vacant property is not desirable for any municipality. Would this move more quickly in certain kinds of communities compared to others?