Are Struggling Hotels the Next Affordable Communities?

• Checking in: As America’s housing crisis deepens, vacant hotels and other underused properties are being transformed into affordable homes.

• Code crash: Rightmove’s £18 million AI push sent shares tumbling 28% as weak growth and housing headwinds revealed cracks beneath its digital ambitions.

• Electric electorate: The rising cost of electricity has led to victories in the recent election for a number of candidates who pushed policies aimed at making energy more affordable.

• Smart building trends webinar: Smart buildings are evolving as AI and connected systems redefine how properties think, adapt, and perform. Sign up

Multifamily

Are Struggling Hotels the Next Affordable Communities?

America’s housing shortage has collided with another market in decline: budget hotels. As travel patterns shift and aging roadside properties sit half-empty, a new wave of developers is seeing potential where others see blight. Across the country, old motels and low-end hotels are being transformed into apartments—faster and often cheaper than ground-up construction.

Developer Richard Rubin has been at the center of this movement. His first U.S. hotel conversion launched in 2018, leading to hundreds of new housing units created from obsolete properties. Rubin believes the model can help close the affordability gap—but only if developers approach it with financial discipline, realistic budgets, and livable design that turns transient rooms into true homes.

Now, through his firm Babylon AR, Rubin is expanding the adaptive reuse playbook beyond hotels to include nursing homes, senior living centers, and medical offices. As more cities confront both vacant buildings and mounting housing demand, these conversions may point to a practical, scalable path forward—one that reimagines the country’s surplus of spaces as the foundation for its next generation of affordable housing.

Overheard

Digital Dreams Versus Real Estate Realities at Rightmove

Rightmove’s recent announcement that it would ramp up AI spending by roughly £18 million in 2026-28, intended to bring ‘digital home valuations’, “Style with AI” features and smarter search tags, triggered a steep drop in its shares that saw the company's valuation drop as much as 28%. But behind the AI veneer lies a tougher truth: the company expects revenue growth of just 8-10% in 2026-28, below its guidance. Also concerning is that the timeline for its targets for strategic growth in rentals, new homes, overseas, and commercial listings have been pushed out.

The backdrop to these signals is a soft UK housing market thanks to stagnating buyer confidence, elevated interest rates, tax-hike worries, and flat to marginal house-price gains. At the same time, Rightmove is facing not only its traditional competitor, OnTheMarket, but also an emerging threat from AI-powered search tools such as ChatGPT which could reduce traffic to its portal.

What this suggests is that elevated AI ambitions, while forward-looking, can’t mask underlying cracks in business momentum. For investors, it’s a warning that digital transformation is no instant fix. In Rightmove’s case, the gamble is on medium-term payoff achieved by sacrificing near-term margin strength for a platform shift. If housing demand remains weak and alternative platforms erode its dominance, the payoff may take longer (and be riskier) than anticipated.

Power Bills and Politics Collide at the Ballot Box

Democrats scored victories in New Jersey, Virginia, and Georgia this week in part, by focusing on a potent issue: the rising cost of electricity. In each race, affordability took center stage as voters reacted to surging utility bills across the country. Both the New Jersey and Virginia governors-elect campaigned on freezing or reducing energy costs, directly linking their platforms to residents’ financial strain. These states share the PJM Interconnection grid, the nation’s largest, where power prices have spiked for two consecutive years. The surge has been driven in part by an explosion in electricity demand from data centers — particularly in Northern Virginia, home to the country’s densest cluster of AI infrastructure. In Georgia, voters flipped the state’s utility regulatory commission to Democratic control for the first time in 25 years, signaling growing public frustration over energy affordability.

The political ripple effects are already hitting the energy and utility sectors. Southern Company, Georgia’s largest utility owner, saw its stock downgraded after Tuesday’s election, as investors grew wary of a newly Democrat-controlled regulatory board. Analysts warn that more “consumer-first” oversight may mean tighter scrutiny of rate increases and less flexibility for utilities to pass on infrastructure costs to customers. With Michigan, Ohio, New Jersey, and Pennsylvania — all part of the PJM grid — heading into tight congressional races next year, electricity affordability is poised to become a national campaign flashpoint. Roughly one in four residents in those states already struggle to pay utility bills, and both parties are bracing for energy costs to rival inflation and housing as a defining economic issue of 2026.

For commercial real estate owners and occupiers, the implications are profound. Rising power costs threaten to reshape leasing economics, operating expenses, and tenant expectations across much of the country. Data center operators are likely to face growing political and regulatory pushback, while landlords of energy-intensive assets such as offices and industrial buildings could see higher pass-through costs and mounting pressure to invest in efficiency and on-site generation. Meanwhile, the politicization of grid pricing means CRE stakeholders can no longer treat utility rates as a fixed input; energy costs have become both a financial and reputational variable. As cities and states weigh affordability against electrification goals, property owners who can control or offset consumption will hold a competitive advantage in a market where “energy transparency” is quickly becoming as important as rent per square foot.

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Propmodo Daily is written and edited by Franco Faraudo with contributions from readers like you and the Propmodo team.

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