A few blocks from the White House and other government offices, a 243-unit luxury apartment building is advertised to open this summer. Accolade at 1425 New York Ave. NW in Washington now stands in glamour with a clean white squared facade and curved glass panels that reflect the sunlight. Upon completion, it will be the closest residential property to the White House. That proximity had required developers to secure Secret Service approval before construction.
Formerly home to the Department of Justice, Accolade is one of several ongoing office-to-residential conversion projects in the District of Columbia. In 2024, the local government’s Housing in Downtown (HID) Program provides tax abatements to commercial real estate owners and developers who convert their properties into housing, with the goal of adding 15,000 residences. The program was designed to ease the District’s housing shortage while boosting the downtown economy, which has been suffering since the pandemic because the shift to remote work has drastically reduced foot traffic and activity. HID is separate from the Office to Anything Program, which incentivizes conversions to other non-residential uses.
HID currently has five publicly announced projects representing more than 1,100 new housing units, according to the Office of the Deputy Mayor for Planning and Economic Development (DMPED). “All these new housing units will contribute to sustaining vibrant and thriving neighborhoods in our beautiful Downtown,” Gwen Cofield, acting DMPED Communications Director, said in an email.
But whether office-to-residential conversions can revitalize the downtown economy remains an open question. Office-to-residential conversions have “more talk about them than actual action,” said Robert Dietz, senior vice president and chief economist at the National Association of Home Builders (NAHB). “That also speaks to some of the challenges of this type of conversion.”
Still, Dietz acknowledged that the short supply of housing provides opportunities.
The shift to remote work since the pandemic began has brought significant challenges to the District. Real property taxes make up more than a quarter of its revenues, but increasing office vacancies downtown have been driving that revenue down. According to DMPED, downtown D.C. accounts for only 2.3% of taxable properties but contributes roughly a third of all property tax revenues.
The decline in value of office space is also projected to reduce revenue by $464 million over the next three years, according to the Office of the Chief Financial Officer. This threat is exacerbated by the District’s outsized share of federal employment, which has been plummeting because of mass layoffs.
Aside from cuts in the federal workforce, the Trump administration is also terminating federal leases through the General Services Administration (GSA). Washington accounts for the largest share of rentable space among U.S. jurisdictions, with 51.6 million square feet under GSA ownership or lease.
In the first half of the year, the office vacancy rate rose to 22.6%, the highest in over three decades. Data provided to Issue Number One by the real estate brokerage CBRE showed negative net absorption of over half a million square feet.
“Federal government contractions and termination notices were drivers of an uptick in vacancy in Q2,” said CBRE. “Space coming offline for conversion or redevelopment to alternative use has partially tempered a further rise in vacancy.”
But the success of office-to-residential conversions can be fairly limited. They are “not just a matter of going in and replacing offices with residential units,” Dietz said. Some commercial real estate firms do not handle office-to-residential projects because of the challenges in structure, policy, and economics.
Most office buildings are laid out differently from residential spaces. They tend to be tall and rectangular, with windows that don’t open or too much space from wall to wall.
“Residential buildings are typically designed like a T, an X, or an L to maximize window space and window access, and that’s done for design and safety purposes,” Dietz said. “So not all properties are going to be immediately redeveloped, and some buildings would have to be completely torn down.”
In converting the former Justice Department to Accolade, Clark Construction had to complete interior demolition.
Another complication was bringing in light to adhere to residential building codes. “While Accolade’s existing structure already boasted a full-height, enclosed atrium with a skylight, shaping it into the ideal size to achieve the developer’s vision and accommodate daylight requirements became one of the project’s major challenges,” the builder posted on its website.
Only one in about 20 office buildings in D.C. is a good candidate for residential conversion, Josh Bernstein, chief executive of property management company Bernstein Management, told the New York Times. He added that in many cases, conversions can be costlier than new buildings.
To cut construction costs, the nonprofit Pew Charitable Trusts suggested building co-living spaces instead of luxury units. Each floor would feature “microunits” with shared kitchens, bathrooms, and other spaces at the center. According to the report, co-living conversions would trim construction costs by up to 35%.
“There isn’t really a shortcut to improve affordability without enabling more housing,” said Alex Horowitz, project director of the Housing Policy Initiative at Pew Charitable Trusts. But one quick solution, he said, is converting office buildings into dorm-style housing “because that can produce a lot of housing quickly.”
The success of conversions relies primarily on demand. The converted apartments, with their proximity to workplaces and transit stations, are expected to attract residents. Developments under HID were also required to make at least 10% of their units affordable for families making under 60% of the area median income.
The average rent in the District is $2,500, 19% higher than the national average, according to real estate and rental listings firm Zillow. Accolade advertises units at $3,000 to $14,000 a month. The 163-unit Elle at 1111 20th St. NW — the first conversion in downtown D.C. completed since the pandemic — leases apartments for $2,300 to $6,000 a month. Elle housed the Department of Labor and, until recently, the Peace Corps headquarters.
Elle does not offer affordable housing units because its construction began before HID was finalized. (Its property manager, Bozzuto Group, is being sued by the District for overcharging rents.)
The housing market in D.C. has been cooling following federal layoffs. This “continued market uncertainty in many office markets, which translates into continued uncertainty about the financial value of existing buildings for owners, renters, and financing partners” lead to the slowdown of conversions, according to think tank Brookings Institution.
Many workers in D.C. live in nearby parts of Maryland and Virginia, where housing costs are much lower. Raissa Marques, a hotel manager’s assistant, travels at least an hour by bus and Metro from her apartment in Arlington, Va., to work in D.C.
Marques, 34, used to live on Capitol Hill with roommates but was priced out of the neighborhood. “I tried to find another place in D.C., but it’s very expensive,” she said. “I can pay, but I’ll be suffering because I cannot save money.”
Affordable options “fit one single bed and a small window, very tiny, and that’s it,” Marques said. “I cannot consider that as a room. That thing looks like a box.”
In Arlington, she said, she now has a large room and her own bathroom.
New policies under the current administration add to the challenges in redevelopments. Tariffs are jacking up costs of imported construction materials, and inflation has increased the cost of borrowing. Aggressive immigration policies are also affecting the workforce in an industry strongly dependent on immigrant labor.
In D.C., developers also voiced their concern that First Source, a policy that requires residents to be given priority for new jobs created by municipal funding and development programs, would be a significant driver of construction costs. So HID exempts conversion projects from First Source during construction to help temper the challenges of project viability. For operations, First Source will still apply.
Accolade could test HID. The developer, Foulger Pratt, has pushed back its opening to fall. Some announced projects have yet to begin construction.
Among redevelopments, NAHB’s Dietz said, there is “less success” in office-to-residential conversions. “The greater success cases are from medium-density conversions, particularly from vacant commercial rather than vacant office.”
Examples include strip malls that can be turned into townhouses or dining and shopping spaces converted into urban villages. “Tear-down there is easier,” he said.
Downtowns are only one type of neighborhood, and they tend to be a dense but tiny area in most U.S. cities. The Brookings report said the solution to the housing crisis in cities “requires adding new housing in all neighborhoods.”
(All photos by Cherry Salazar)
