Latest / The Fiscal Policy Podcast with Fexingo: Government Budgets, Stimulus, and Public Spending / How the Federal Government Spends 5 Billion a Year on Vacant Office Space
Transcript
- Lucas: So the federal government spends about 5 billion dollars a year on office space it literally does not use. That's not a rounding error. That's the cost of a small federal agency. Luna: Five billion on empty buildings? How do we even know that number? Lucas: The Government Accountability Office — the GAO — has been tracking this for years. Their most recent report, released in 2025, found that across 24 major agencies, the executive branch owns or leases over 23,000 buildings. The combined vacancy rate is around 25 percent. And that's been basically flat since 2020. Luna: So a quarter of the government's real estate portfolio is just sitting there. And they're still paying rent and utilities. Lucas: Exactly. And it's not just rent. You've got maintenance, security, cleaning, property taxes — all for empty floors. The GSA, which manages federal real estate, reported that operating costs for vacant space alone came to 1.7 billion in 2024. That's before you even count the lease payments. Luna: Let's talk about the big one. The Pentagon has millions of square feet of empty offices, right? Lucas: The Pentagon building itself is iconic, but it's far from full. According to the GAO, the Department of Defense has about 3 million square feet of vacant space across its headquarters and other administrative buildings. That's roughly the size of 50 Walmart Supercenters, just empty. Luna: And what's the excuse? 'We might need it later'? Lucas: That's part of it. Agencies hoard space because once you give it up, getting it back is nearly impossible. The budget process doesn't reward efficiency. If an agency returns a building and saves 10 million dollars, that money doesn't go back to the agency — it goes to the Treasury. So there's no incentive to consolidate. Luna: So it's a classic principal-agent problem. The people making the decisions don't bear the cost. Lucas: Right. And the telework shift after 2020 made it worse. The Office of Management and Budget estimated that federal employees now work from home about 40 percent of the time on average. But the real estate footprint barely shrank. Agencies kept their leases because they thought telework would be temporary. Luna: But it's not temporary. Most federal workers have been hybrid for years now. Lucas: Exactly. And yet the GSA still spends billions on long-term leases signed before the pandemic. One example: the Social Security Administration had a 20-year lease on a building in Baltimore that it stopped using in 2021. They're still paying 12 million a year on it through 2036. Luna: That's 180 million over the life of the lease for a building nobody works in. Lucas: And it's not just Social Security. The GAO found that across the government, there are over 1,800 leases that have been classified as 'underutilized' for more than three years. Combined, they cost taxpayers about 1.2 billion annually. Luna: So what's being done about it? Is there any effort to actually cut the dead weight? Lucas: There have been attempts. In 2022, the GSA launched a 'Freeze the Footprint' policy — no new leases unless you can justify it. But it's been full of loopholes. Agencies just classify space as 'mission critical' or use temporary leases that don't count. And Congress hasn't pushed back because members don't want to lose federal jobs in their districts. Luna: So it's a political problem too. Local economies get used to having those federal workers around. Lucas: Right. During the 2024 election cycle, several lawmakers from rural states successfully blocked a GSA proposal to consolidate field offices in 10 states. They argued it would hurt small towns — even though those offices were running at 20 percent occupancy. Luna: Let's zoom out. How does the U.S. compare to other countries on this? Lucas: The UK has actually been more aggressive. The British government's 'One Public Estate' program has reduced its office footprint by 25 percent since 2020. Canada did something similar — they cut 15 percent of their real estate portfolio and saved about 300 million Canadian dollars a year. The U.S. hasn't come close. Luna: So what would it take to actually fix this? A line-item veto? A new law? Lucas: The GAO has recommended a few things. One: require agencies to report actual usage data — not just square footage — so Congress can see which buildings are truly empty. Two: give agencies a portion of the savings when they give up space, so there's a real incentive. Three: set a binding target for reducing the federal footprint by a certain percentage each year. Luna: Has any of that actually been implemented? Lucas: Not really. The 2026 budget proposed a 5 percent reduction target, but it's non-binding. And the GSA's own data shows they've missed similar targets every year since 2019. Without enforcement, it's just a wish. Luna: So we're paying 5 billion for empty offices. That's about 15 dollars per American per year. Lucas: Exactly. And that's just direct costs. There's also the environmental cost — heating and cooling empty buildings adds to the government's carbon footprint. The Energy Department estimated that vacant federal buildings emit about 4 million metric tons of CO2 annually. Luna: 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 funds making this many of these. Lucas: Yeah, it's a small group that keeps the whole thing ad-free. We don't run sponsors or sell your data. So if you find yourself quoting the show at dinner, that's the only way it stays on the air. Luna: Right. So back to those empty buildings. The 2026 deadline for a federal footprint reduction is coming up in December. What happens if they miss it? Lucas: Nothing, practically. The target was set in an executive order, not a law. But the GAO has said they'll report the misses publicly, and that might create enough pressure to get something done. Though honestly, given the track record, I wouldn't bet on it. Luna: What's one fix that could actually work without an act of Congress? Lucas: The GSA could simply stop renewing leases that are more than 50 percent vacant. They have that authority under existing law. They just don't use it because of political pushback. If a future administrator made that a hard rule, you'd save billions almost overnight. Luna: So the tool is there. It's just political will that's missing. Lucas: Exactly. And that's the story with a lot of government waste. It's not that nobody knows about it. It's that the people who could fix it have incentives not to. Luna: Well, maybe a few million people hearing about this will change something. Or at least know where their tax dollars are going. Lucas: That's the hope. A well-informed electorate is the one check that actually works.