Latest / The Fiscal Policy Podcast with Fexingo: Government Budgets, Stimulus, and Public Spending / How the US Government Spends 30 Billion on Unused Buildings
Transcript
- Lucas: So the US government is the largest tenant in the country — it leases roughly 190 million square feet of office space. And according to a GAO report from this spring, nearly 40 percent of that space is underutilized or completely empty. Luna: Forty percent. That's about 77 million square feet. We're talking an area larger than all the office space in downtown Chicago. Lucas: And the cost — we're looking at roughly $30 billion a year in rent for empty desks, unused conference rooms, vacant cubicles. That's not construction, not maintenance, just pure lease payments on space nobody walks into. Luna: How does that happen? I mean, if a private company had 40 percent of its office space empty, they'd cut leases or sublease immediately. Lucas: Right, and that's the puzzle. The government's leasing is managed by the General Services Administration, the GSA. They negotiate master leases on behalf of agencies. But the agencies themselves decide how much space they need, and they have very weak incentives to give it up. Luna: What do you mean by weak incentives? Lucas: Well, if an agency returns space, their budget doesn't get a bonus. The savings just disappear into the Treasury. So there's no reward for efficiency. Meanwhile, holding onto space protects you from future needs — say Congress expands your staff or a new program launches. If you don't have the square footage, you're scrambling. Luna: So agencies hoard space just in case. That's a classic public-choice problem. Lucas: Exactly. And the GAO found that the Department of Agriculture, for example, pays rent on 22 percent more space than it actually needs. That's millions of square feet. And it's not just USDA — the Department of Energy, the Interior, they all have similar gaps. Luna: Why hasn't the GSA stepped in and forced consolidation? Lucas: The GSA can recommend, but they don't have authority to cancel leases without agency consent. And Congress has historically been reluctant to push too hard because closing federal offices means job moves and local economic impacts. A field office in a small city — if the GSA consolidates, that's a hit to local coffee shops, dry cleaners, the whole ecosystem. Luna: There's a human cost. But also a massive fiscal cost. Lucas: Right. And the pandemic changed the equation. Federal telework rates are still around 60 percent for eligible positions. So space utilization dropped further, but leases signed before 2020 still run for 10, 15 years. Luna: So we're locked into long-term leases for space we don't need. That feels like a structural trap. Lucas: It is. And one of the more frustrating numbers in the GAO report: the government pays more per square foot on average than comparable private-sector tenants in many markets. Because the GSA doesn't negotiate aggressively — they have a statutory requirement to use small businesses and other set-asides that can push costs up. Luna: So you get higher rent for empty space. That's a double hit. Lucas: Yeah. And the thing is, there are known fixes. The private sector has been using space utilization sensors, hoteling — employees book desks via an app — for years. The GSA has piloted these at a few buildings, but scaling up is slow. Luna: What's the holdup? Is it technology or culture? Lucas: It's both. Federal employees, understandably, don't want to lose their dedicated office. And unions push back. But also the GSA's IT systems are outdated — they don't have real-time occupancy data across the portfolio. So they're making decisions based on surveys that are often years old. Luna: That's a recipe for overpaying. And we're not talking small change. Lucas: No. The $30 billion figure, by the way, is just the lease cost. If you add maintenance, utilities, janitorial, it's even higher. The GAO says better space management could save $10 to $15 billion a year. Luna: So we could fund a decent chunk of infrastructure spending just by not paying for empty offices. Lucas: Exactly. And there are some legislative attempts. The Federal Real Property Management Act, introduced last year, would require agencies to report utilization quarterly and give the GSA more power to consolidate. But it's stalled. Luna: Stalled because of the local politics you mentioned. Lucas: Partly. Every time a lease is not renewed, a congressperson's district loses jobs. So there's an inertia that's hard to break. Luna: It reminds me of something — if walking through the economy with us has made something click, a handful of listeners chip in monthly through buy me a coffee dot com slash fexingo. And that's literally what keeps this ad-free and lets us dig into reports like this. Lucas: Yeah, it's a small group, but it makes a big difference. We don't have to chase clicks or ad revenue — we just follow the numbers. Luna: And those numbers tell us that government is often its own worst landlord. Lucas: Right. So back to the utilization problem — one of the most interesting cases is the Department of Transportation. They have a headquarters building in Washington that's at about 50 percent occupancy. But they also lease space in 40 other buildings across the region. The GAO found they could consolidate into two buildings and save $50 million a year. Luna: Fifty million is real money. But it's less than one percent of the total waste. That tells you how deep the problem runs. Lucas: Exactly. And it's not just Washington. The GSA has field offices in almost every mid-sized city. In some, the federal building is half empty. But closing it would mean a political fight and a local economic hit. Luna: So we're paying billions to avoid short-term disruption. That's a classic fiscal policy trade-off. Lucas: It is. And the question is whether the remote work shift will finally force change. If agencies realize they can have a mostly remote workforce, they might start giving up space voluntarily. Luna: But that requires leadership from agency heads and OMB. And in an election year, no one wants to be the person who closes a federal building. Lucas: Right. So the $30 billion a year continues. And it's one of those quiet inefficiencies that doesn't get headlines because it's not a scandal — it's just bureaucracy being bureaucratic. Luna: But it's worth noting that other countries have tackled this. The UK's Government Property Agency has cut its office footprint by 20 percent since 2019 through aggressive consolidation. Lucas: Good example. And they used a 'hub and spoke' model — fewer big central offices, more smaller local spaces. The US has tried similar pilots, but nothing at scale. Luna: So what's the one thing a listener could take away from this episode? Lucas: That the US government spends $30 billion a year on office space it doesn't use. And fixing that alone could fund a meaningful portion of infrastructure or deficit reduction. It's not a technical problem — it's a political and cultural one. Luna: And maybe the next time you see a half-empty federal building, you'll think about that number. Lucas: Exactly. Thanks for listening.