Cruise Ship Living: Thinking Outside the CRE Affordable Housing Box
No state has an adequate supply of affordable rental housing for lowest income renters, according to the National Low Income Housing Coalition. Further, according to the Urban Institute, there are only 29 units available for every 100 households in need. While this statistic is shocking, it also illuminates a problem that often accompanies economic prosperity and market growth. As development accelerates and rents scale, local legislators look to strike up a deal with developers to incorporate low income units into new multifamily builds. These grants often do not meet demand, or the requirements tenants must meet make such units too exclusive.
Some cities are now thinking outside of traditional housing strategies in order to address the affordable housing crisis. Cruise ships, considered a staple of luxury by many rather than a permanent residence, are the latest solution to generate housing buzz.
Cruise Ships in Tourism
A cruise ship is a large vessel meant to ferry large groups of people between exotic destinations, providing dining and entertainment along the way. Cruise ships gained popularity after flight caused a downturn in the popularity of boat travel, creating a need for transformation within the industry. Today, according to Marine Insight, most cruise ships contain lodging and dining facilities, fitness centers, spas, pools, cinemas, and live theater spaces. These features combine traditional amenities and popular features of walkable retail and entertainment. However, cruise tourism is starting to decline globally, facing a drop of up to 8% in some international markets. This trend is generating conversation centered around how to best repurpose ships that are no longer profitable.
Cruise Ships as Housing
Repurposing of cruise ships is a hot topic, and many consider it a creative solution worth exploring. However, critics believe that such nontraditional housing may negatively impact the psyche of potential tenants because they would prefer to feel like members of society and live in more traditional housing arrangements. Despite controversy, repurposing cruise ships that have been decommissioned is still a more profitable option than sending them to a scrapyard due to the potential for ongoing income generation.
The Benefits
Cruise ships are already built to lodge large numbers of human beings. Cruisemapper reports that the average cruise ship is prepared to comfortably accommodate 3,000 people. Further, because these ships contain facilities for dining and entertainment, they are ideal co-living spaces. Repurposing cruise ships for housing also has benefits for local economies as a whole. Providing affordable housing in a single, freestanding community can increase desirability and property values in surrounding areas, as integrating affordable units into multifamily developments can dissuade higher income tenants from occupying certain neighborhoods due to risks. Cruise ships also do not require land like traditional developments, creating more development opportunity in urban areas.
Common Objections
What about land-locked cities? It’s true that cruise ships are only a viable housing solution in coastal cities. It’s also, true, however, that gateway cities that represent the vast majority of primary markets are coastal and contain massive populations. Property offerings in these cities are fiercely competitive, so low income housing that occupies no land may open up new opportunities in these already congested markets. Location will largely determine the viability of cruise ships as an affordable housing solution, but even small bodies of water such as inlets and lakes can house “flotels”—floating, short-term housing—and other nontraditional multifamily and hospitality assets, which could be precursors for a longer-term solution.
Cruise ships also have a shorter life than most housing, lasting only about 30 years. Lack of longevity makes them only a temporary solution that may not be cost-effective in the long run, but keep in mind that this figure is in reference to a ship’s seaworthiness, which may not be a factor in redevelopment. The real question will be whether there is a path to profitability in using cruise ships as affordable housing or if they may better serve as transitional shelters for those facing economic hardship.
Time will tell if this housing trend gains any traction, but housing ideas such as these illuminate the creativity and proactive thinking that brings innovation to commercial real estate and drives growth.
To learn more about repurposing in CRE, check out Adaptive Reuse: What to Do with Vacant Commercial Property
