After failing to approve legislation during 2024’s short legislative session, the state General Assembly is once again considering several bills that seek to incentivize converting commercial and industrial buildings into residential developments.
The proposed bills are being considered as many commercial office markets continue to struggle, including in the state’s Capital City. Real estate services firm CBRE has estimated that downtown Hartford’s office vacancy rate for Class A buildings was 26.7% at the end of the third quarter, while Cushman & Wakefield calculated an overall downtown Hartford office vacancy rate of 35% at the end of the second quarter.
Of the six bills proposed in the current legislative session, five have been submitted to the Housing Committee, while the sixth has been referred to the Planning and Development Committee.
That latter bill, Senate Bill 703, was sponsored by Sen. MD Rahman (D-Manchester) and states that its purpose is to allow converting any commercial building into a residential development “as of right.” It would also prohibit “the revaluation of any commercial building subject to such conversion for not less than three years,” and require that municipal inspections of any commercial building “subject to such conversion be completed within a reasonable time.”
Two bills, Senate Bill 778 and House Bill 6121, would create a tax credit for converting commercial or industrial buildings to residential or mixed-use developments. The House bill, sponsored by Rep. Mary Welander (D-Orange), would also require that at least 25% of the residential units in such a development be affordable. Neither bill offers any specifics on what the tax credit would be.
Separate legislation, House Bill 6110 sponsored by Rep. Nick Menapace (D-Niantic), proposes specific incentives that include:
- Waiving parking requirements in transit-oriented development zones.
- Allowing phased compliance and alternative paths for meeting energy standards for older construction and expediting environmental review for such conversions.
- Offering guidance to municipalities on such conversions, and
- Requiring that each conversion be included in the calculation of the threshold for exemption from the affordable housing appeals procedure.
Conversion of office space into apartments has been a hot topic nationally since the pandemic led to significant increases in office vacancy rates as employers embraced more flexible work arrangements, including remote work, though more recently many have been requiring workers to return to the office.
Meantime, the city of Hartford has been in talks with the Lamont administration about a “one-time” request for state funds to support the conversions of a large chunk of downtown office space into apartments.
