Analysts and planners warn office‑to‑residential conversions face high costs and regulatory barriers; committee asks for prioritized incentives

Supervisor Asha Safai convened a broad hearing on repurposing commercial real estate for residential use, bringing the Budget & Legislative Analyst (BLA), SPUR, Gensler, Urban Land Institute and development consultants to present technical and policy findings.

BLA analysts summarized key metrics: downtown vacancy increased from ~5.6% in 2019 to about 24.1% in 2022, representing roughly 20.7 million square feet of vacant office space in the greater downtown market. Their report found conversion is technically possible for a subset of class B and C buildings but is costly and rarely pencils without incentives: only a small fraction of existing commercial stock has typologies and floor plates suited for economically feasible conversion.

SPUR, Gensler and ULI presented a typology and feasibility study noting San Francisco has a higher share of conversion‑suitable buildings than average but that most projects would still not be financially feasible under current rents and construction costs. Sample analyses in the presentation showed a set of 10 strong candidate properties could yield about 4,196 housing units if converted, but broader conversion would require layered policy changes including property tax abatements, reduced inclusionary or impact fees, streamlined ministerial approvals and building‑code alternatives.

Supervisors asked how conversion could prioritize affordable or middle‑income housing. Presenters said tailoring incentives and layering subsidies or JPA financing could create middle‑income pathways but would require explicit policy trade‑offs around inclusionary requirements, rent control, and the types of incentives offered. The committee requested a prioritized list of the most impactful policy levers and further analysis on affordable outcomes and financial assumptions; members continued the item to allow staff and presenters to return with that follow‑up work.