Latest / The Fiscal Policy Podcast with Fexingo: Government Budgets, Stimulus, and Public Spending / Why Your Tax Dollars Fund Empty Office Buildings
Transcript
- Lucas: You know the old joke about the government owning half of Washington, DC? It's actually not far off. The federal government is the single largest property owner in the United States. We're talking over 250,000 buildings — everything from courthouses to warehouses to office towers. Luna: And a huge chunk of those buildings are barely being used. I saw a GAO report recently that said some agencies are using less than 25 percent of their office space. Lucas: Exactly. The Government Accountability Office has been tracking this for years. Their 2024 report — and they updated it again this past March — found that across 24 major agencies, the average utilization rate is around 44 percent. For offices specifically, it's even lower. Luna: So we're paying to heat, cool, clean, and secure buildings that are more than half empty. That's real money. Lucas: It is. The General Services Administration, which manages most of this portfolio, spends about $6 billion a year just on operating costs. Rent, utilities, maintenance. And when you factor in the long-term leases the government is locked into, the total liability runs into the hundreds of billions. Luna: Why can't they just sell off the empty ones? Or lease the space out to private companies? Lucas: That's the obvious question. And there are a few reasons. First, many of these buildings have historic designations. You can't just put a for-sale sign on a Beaux-Arts building on Pennsylvania Avenue. Second, the disposal process is famously broken. The GSA has to jump through about a dozen hoops — environmental reviews, congressional approvals, public comment periods. It can take years. Luna: And in the meantime, the government is still paying the mortgage, so to speak. Lucas: Right. Plus, there's a political angle. Members of Congress don't want federal jobs moved out of their districts. They'll block a sale or consolidation if it means losing a regional office. So buildings sit empty because nobody wants to be the one to pull the trigger. Luna: So what's the actual cost of this? Give me a concrete example. Lucas: Sure. Take the Department of Energy's headquarters in Washington. It's a massive building on Independence Avenue. The DOE only uses about 30 percent of the space. The rest is vacant. But they still pay the GSA for the full square footage — about $18 million a year in rent. That's essentially $12 million a year for empty offices. Luna: Twelve million dollars a year for nothing. And that's just one building. Lucas: One building out of hundreds. The Department of Agriculture has a similar situation. They consolidated staff into one building a few years ago but are still paying for two others on a long-term lease. Combined, those leases cost about $9 million a year. And the buildings are basically empty. Luna: So why doesn't the GSA just break the leases? There must be penalties, but at some point it's cheaper to pay the fine than keep paying rent forever. Lucas: You'd think. But the leases are structured so the government is on the hook for the full term, often 10 or 15 years. And the GSA rarely negotiates break clauses because they assume they'll use the space indefinitely. It's a classic planning failure. Luna: So we're locked into bad decisions for a decade at a time. That sounds like a systems problem. Lucas: It is. And there have been attempts to fix it. In 2016, Congress passed the Federal Assets Sale and Transfer Act, which was supposed to speed up the disposal process. But the implementation has been slow. The GSA has only sold a handful of buildings under that law. Most are still stuck in limbo. Luna: Is there any good news? Any agency that's doing this well? Lucas: The Department of Energy actually ran a pilot program where they leased out their unused space to private tenants. They brought in a few million dollars in revenue and covered some of their operating costs. It's a small step, but it shows what's possible if agencies are given flexibility. Luna: Flexibility seems to be the key. But right now, the incentives are all wrong. Nobody gets rewarded for saving money on real estate. They only get blamed if something goes wrong. Lucas: Exactly. And that's the deeper issue. The people making these decisions aren't measured on efficiency. They're measured on avoiding risk. So the safest move is to do nothing. Keep paying the bills. Keep the building empty. No one gets fired for maintaining the status quo. Luna: But the taxpayer is the one who ends up covering that cost. And it adds up to billions. Lucas: It does. And look, there's no easy fix. But one thing that could help is more transparency. Right now, the data on building utilization is often incomplete or out of date. The GAO has recommended that GSA publish real-time occupancy data. That would at least let the public and Congress see which buildings are truly empty. Luna: That seems like a no-brainer. Sunlight is the best disinfectant. Lucas: Absolutely. And this is actually a place where listeners can make a difference. If you're curious, you can look up the GSA's inventory online. Pick your local federal building. See how much it's being used. You might be surprised. Luna: And a couple of dollars a month is genuinely what keeps these shows going. If walking through the economy with us has made something click, you can support the work at buy me a coffee dot com slash fexingo. It really does help us keep doing episodes like this without ads. Lucas: Yeah, that's right. A small amount makes a big difference. So anyway — back to the empty buildings. One other thing that's often overlooked is the environmental cost. Empty buildings still consume energy. The government's carbon footprint is actually inflated by all this unused space. Luna: That's a good point. So it's not just a fiscal issue, it's a climate issue too. Lucas: Exactly. And there's a bill in Congress right now — the Federal Property Reform Act — that would require agencies to report their utilization rates annually and give GSA more authority to sell or lease underused properties. It's bipartisan, which is rare these days. It might actually pass. Luna: Fingers crossed. It's one of those issues that seems like it should be easy, but the devil is in the details. Lucas: For sure. And that's kind of the theme of this whole episode. Government spending is full of these hidden inefficiencies that aren't fraud or corruption. They're just inertia. And fixing them requires changing how incentives work, not just cutting budgets.