Adaptive reuse could address Michigan’s housing crisis. The state estimates roughly half of renters and 18% of homeowners were paying too much for housing before the pandemic, noting “this situation worsened” in recent years. Construction of new units has dipped; the average number of building permits issued between 2016 and 2020 is less than half of what it was between 1986 and 2006.
“As a result, existing housing – historically the main supply of housing for middle-income and low-income families – is scarce,” according to the Michigan State Housing Development Authority’s statewide housing plan. To address this, Michigan set a goal of developing 75,000 housing units by 2026. This shortage, in the state and across the country, is why one developer is turning hotels into housing.
Repvblik, backed by Michigan-based developer PK Companies, started buying empty hotels in 2018. It now has projects sprinkled across five states, including an effort to transform a former Sterling Heights Wyndham Gardens hotel into a 213-unit building. “There were so many disused commercial real estate buildings of all different descriptions across the country,” said Repvblik Founder and CEO Richard Rubin.
Repvblik developments target people who are low- to middle-income – or those earning between 60% and 120% of the area median income. The company says it costs less to repurpose hotels than undergo new construction, meaning lower rents for tenants.
Hotels are one of the most popular types of buildings to be converted into housing, growing by two-thirds since 2018 and 2019. RentCafe says they remain a key source for adaptive reuse because of the “straightforward transition from hotel rooms to apartments.” But jumping ahead of hotels, former offices have taken the lead.
With the shift to remote work, nearly 70% of businesses have permanently closed at least some of their offices since the pandemic, research firm Digital.com found. This empty space has created ample opportunity for new housing. “There’s so much raw material from which to actually work with at the moment,” Rubin said.
Office buildings were turned into 11,090 apartments between 2020 and 2021, accounting for 40% of all adaptive reuse projects, RentCafe research shows. This overshadows the 2,702 office conversions recorded a decade ago. Large or sprawling office buildings in downtown business districts are “better suited to conversion” than smaller complexes scattered across suburbs, said Doug Ressler, manager of business intelligence at Yardi Matrix.
Some projects include turning a former skilled nurses center into senior housing, converting a historic school building into 39 apartments and renovating a three-building complex into affordable units.
