The housing supply problem: Part 3

This is an audio transcript of the FT News Briefing podcast episode: ‘The housing supply problem: Part 3’

Marc Filippino
Good morning from the Financial Times. Today is Thursday, June 8th. This is your FT News Briefing.

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The US is boosting military co-operation with Taiwan. India’s deadly train accident happened despite years of rail investment. And in Baltimore, Maryland, two guys are renovating a historic office tower. We’ll look at office-to-home conversions like this and whether they’ll ease the country’s housing shortage. I’m Marc Filippino, and here’s the news you need to start your day.

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Washington is stepping up its military co-ordination with Taiwan in case China attacks the island. A US defence contractor is scheduled to deliver four maritime drones to Taipei in 2025, and sources tell the FT that the US, Taiwan and Japan plan to share real-time data from those drones. Now, we should mention that including Taiwan in this data-sharing agreement is extremely sensitive. China sees Taiwan as its territory and has threatened to take it by force. A senior US military official told the FT that China will probably see this data-sharing agreement as escalation.

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India is still reeling from its deadliest rail disaster in decades. Several trains collided last Friday, killing at least 275 people and injuring nearly a thousand. The government thinks a signalling error caused the crash. The FT’s John Reed reports that this rail disaster comes despite massive investment and modernisation in India’s railways.

John Reed
India has been investing record amounts of money in the railway system and indeed accident rates have been falling over the past decade. They’ve more than doubled the length of electrified rail lines and the percentage of track electrified is now about two-thirds of the total, which is a higher rate than in France or the UK or many other developed countries.

Marc Filippino
Opponents of prime minister Narendra Modi have accused the government of failing to invest in safety measures.

John Reed
It’s being argued that perhaps they have indeed expanded too fast or have not had their priorities in the right place in terms of how they spend the money. And indeed, the data shows that they’ve spent much more on constructing new lines than on renewing existing tracks, investing in the existing network. So there’s been questions about maintenance and indeed whether the human resource capacity, training and deployment of staff has kept up with this huge expansion in the network in recent years.

Marc Filippino
John Reed is the FT’s south Asia bureau chief based in New Delhi.

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The News Briefing is taking a close look at housing shortages in the US and the UK. And today in the third instalment of our housing series, we’ll go to the US city of Baltimore. It’s the biggest city in the state of Maryland and there’s a shortage of homes in the state that’s driven up prices to the point where one in five Marylanders say they would leave the state to find cheaper housing. Now you can’t build enough housing to meet demand overnight, but we’re gonna meet a couple of guys who are trying to be part of the solution. They’re converting abandoned office buildings into apartments. I went to Baltimore to check it out.

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Marc Filippino
The Fidelity building in downtown Baltimore is nearly 130 years old. And I got to say, it’s charming as hell. It has beautiful features, like a giant clock in the lobby and a marble staircase. But for more than two decades, it’s been empty.

Patrick Lundberg
This was the kind of main entry lobby for the office building of its time with an elevator bank of six total elevators. This was a high-traffic area with hundreds of office workers coming in and out of it every day.

Marc Filippino
Patrick Lundberg is a local architect. He’s showing me around this historic building. He leads me through a pitch-black room and then . . . 

Oh, wow, look at that vault. It’s amazing.

It’s a 10ft high, shiny copper bank vault. It is the Fidelity building, after all, nearly home to the famous asset manager.

Is it weird that I’m kind of scared to go in there and get accidentally locked? (Laughter) Like, locked in it?

Patrick’s turning this 15-story office building into residential apartments. For Patrick, this kind of work isn’t just about a building, though. It’s about improving Baltimore, too. Moved here right out of college and fell in love with the city that’s kind of in Washington DC’s shadow. I mean, the nation’s capital is less than an hour away. But Baltimore has its own charm. In fact, its nickname is Charm City.

Patrick Lundberg
You know, I got to live in a city at a young age that was affordable and could offer all the things that a young person would want out of a city. Great, you know, recreation, entertainment, nightlife, and just kind of a really interesting and unique mix of people.

Marc Filippino
But the city’s downtown business district has emptied out over the past two decades. High crime and a lack of investment will do that to a place. The pandemic and the work-from-home culture made it even worse. Now the city is trying to revive downtown. Patrick wants to be a part of that.

Patrick Lundberg
This project is gonna add, you know, hundreds of new units and hundreds of new residents to the area as well as other work that’s happening in the vicinity. So, you know, story being is that this project is part of, kind of, the redevelopment and reactivation of this entire district.

Marc Filippino
Patrick’s working with a local developer who’s similarly attached to Baltimore and also named Patrick. Patrick Grace is part-owner of the Fidelity building. The building sold last year for $6mn, and he says it’s gonna take another 54mn to renovate. And it’s not the only office-to-housing conversion he’s doing. So he has been busy.

Patrick Grace
Swamped. Swamped. I mean, I just hired people and we manage the buildings on the back end, too. So, and it’s like five conference calls a week.

Marc Filippino
And converting old office buildings into apartments isn’t just logistically tricky. It’s architecturally challenging as well.

Patrick Grace
No matter how well you plan or tour the building or inspect the building, there’s a lot of, during construction, a lot of unforeseen building conditions that you run into that cost money or a headache. And it takes a lot of time. People don’t just want to take it on.

Patrick Lundberg
Another thing that’s really unique about this floor that’s gonna be a pain in the butt is because we are above the bank vault space here. You have all these units for 15 floors that are sitting on top of that bank vault space.

Marc Filippino
Remember that beautiful copper bank vault? They really can’t mess with that because this historic architectural feature is tied to a tax credit. So they have to figure out a way for things like pipes to bend around it. Now, if all goes according to plan, the building will open to residents sometime next year and it will provide more than 200 new units.

So, can these types of conversions really solve the local housing crisis?

Jake Day
And I don’t think this one is a silver bullet, but I think it’s still something that can help.

Marc Filippino
That’s Jake Day. He runs the state of Maryland’s Department of Housing and Community Development, and he says the crisis is not just in Baltimore. Maryland needs around 120,000 more units of housing, according to the National Association of Realtors.

Jake Day
And I don’t want to leave any stone unturned because when you’re in a crisis, I think you’ve got to claw your way out.

Marc Filippino
In addition to taking pressure off the housing crisis, these office conversions can also help revive downtown because Day is really worried about what happens if these empty buildings stay empty.

Jake Day
The consequences are significant and are going to be boarded up retail. They’re going to be dead street life. They’re going to be an effect on what it feels like for a visitor to come.

Marc Filippino
So he needs people like Patrick Lundberg and Patrick Grace to build housing. And they’re excited about being part of this larger renaissance in downtown Baltimore.

Patrick Grace
It’s very simple. I have a building that I can build and I can bring people in here and it can be a profitable business. You know, ten years from now, you’ll come down here, go, “Oh, my God, There’s much more restaurants and more buildings are open” and things like that. That’s the goal, you know, but we can only do our part, I guess, to help that.

Marc Filippino
Big cities like Baltimore, Boston and even New York all hope that converting office buildings will make some sort of dent in the country’s housing shortage. But we’ll find out next week in the final instalment of our housing series that you can’t just build your way out of this housing crisis. The economy is weird right now and it needs to be a little less weird before things get any better.

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I want to give a special thanks to the FT’s Josh Chaffin, whose help was essential for this story. He’s got a great piece about converting office buildings in New York, which you should definitely check out. We’ve got the link in the show notes.

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Before we go, we’re keeping an eye on the White House today. UK prime minister Rishi Sunak is meeting with US president Joe Biden. The two are expected to talk about, among other things, western governments and their involvement in the war in Ukraine.

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You can read more on all of these stories at FT.com. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.

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