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The commonwealth is struggling with a housing crisis. This is not news.

More precisely, permit issuance has plummeted precipitously.

The 2014-2024 average of housing permits issued across the state totals 15,847 units, and this number has been falling.

In 2023 and 2024, only 28,568 units were permitted in the state compared to 2021-2022 where 37,283 were issued.

In February, the state’s Commission on Unlocking Housing Production released a report warning that Massachusetts needs 222,000 units of housing supply by 2035 in order to satiate demand.

This would represent an unprecedented building boom – requiring the permitting of 39 percent more housing units per year, every year, for the next decade.

That will be a monumental task given elevated interest rates, restrictive zoning policies, land costs and a myriad macroeconomic factors that have stymied production to date.

Opportunity in Prime Locations

Office vacancies are historically high. This is also not news.

The city of Boston has instituted an office-to-residential conversion program, offering tax incentives to developers who convert outdated office assets into new housing in efforts to combat both the damaging effects of office vacancy and housing shortages.

More needs to be done outside of the city center, as the housing crisis and unoccupied offices are a state-wide concern.

Within the Interstate 495 beltway, Hunneman Research has identified more than 20 office assets with potential for conversion or full demolition. These properties were built prior to 2008 and have had occupancy rates of less than 20 percent for more than a year.

In fact, there is nearly 2 million square feet of entirely vacant office buildings within that geography that have been empty for over two years. They are in prime locations ranging across the eastern portion of the state including Billerica, North Reading, Waltham, Framingham and Andover.

There is more than 46 million square feet of office space presently available for lease, so it seems difficult to forecast that the removal of 2 million square feet would have a negative impact on the office market recovery.

Big Benefits to Conversions

Removing these properties from the inventory would fulfil a dual mandate for the state’s business and political leaders: increasing office fundamentals and improving a dire housing situation the state has been battling with for years.

More housing supply would help offset the state’s dramatically increasing prices, aiding affordability for the nearly 3 million families that live and work here.

This would enhance the attractiveness and competitiveness of our state, driving employers to expand existing operations as well as offering new entrants reasons to relocate here.

The Massachusetts Business Roundtable highlights this last point. In its 2024 Talent and Competitiveness Survey conducted by McKinsey, 83 percent indicated changes in the cost of living are likely to impact their decisions around their presence in the state, up from 34 percent in 2022.

Furthermore, 40 percent of respondents indicated they are planning to grow their workforce outside of the commonwealth or reduce their presence here – a figure that stood at 21 percent in 2023. These incredibly alarming numbers point to one key solution: more housing production.

Mark Fallon

All Hands Needed on Deck

Transforming these 2 million square feet of offices into new homes is not a simple solution.

Today’s high costs of capital, labor and materials have made these types of transformations prohibitively expensive. Nowhere is that more evident than the city of Boston, where, despite the tax incentives provided to developers, only nominal headway has been made under that city’s conversion program.

It is going to require concerted efforts and cooperation from the state legislature, municipalities, landlords and developers to resolve this three-pronged dilemma.

But there are powerful incentives for everyone to find a solution.

Demand is through the roof for housing, evidenced by the near-record home prices for the state.

Housing production creates productive jobs and helps lower the cost of living. Developments will garner higher property taxes – certainly more than vacant office buildings, whose owners are no doubt filing for abatements.

If we’re seen to be trying to lower our cost of living, more companies will enter and expand in the state, which will increase the tax base that provides our excellent quality of life and services.

Massachusetts and its residents take pride in our innovation and our leadership in so many quantifiable metrics. It is only logical that housing should be one of them.

Mark Fallon is director of research and strategy at Boston commercial brokerage Hunneman.