Adaptive Reuse

What Is Adaptive Reuse?

Adaptive reuse is the conversion of a building designed for one purpose into a different use. In housing, it means turning nonresidential buildings into homes. Offices, schools, hotels, factories, and warehouses have all been turned into apartments. Instead of tearing a building down, developers keep its structure and redesign the interior.

The approach drew wide attention after the COVID-19 pandemic left many downtown offices underused. The White House Council of Economic Advisers reported that U.S. office vacancies hit a 30-year high of 18.2% in 2023. But adaptive reuse is much older than that. The CEA noted that after the September 11, 2001, attacks, developers in Lower Manhattan converted 20 million square feet of office space to housing, aided by zoning changes and tax incentives.

How Adaptive Reuse Works

Not every building converts easily. Homes need windows that open, kitchens and bathrooms in every unit, and enough plumbing, heating, cooling, and elevator capacity. Modern offices with large, deep floor plates leave much of the interior far from any window. Past conversions have favored older, pre-war office buildings with smaller floors.

Financing is another hurdle. A conversion has to pay for buying the building and for reworking its windows, plumbing, heating and cooling, and elevators. The CEA reported that developers say conversions can cost up to 20% less than demolishing a building and starting over. Affordable conversions typically combine several sources into one capital stack:

• Low-income housing tax credit equity
• The federal historic tax credit for certified historic buildings
• State and local loans, grants, or tax abatements
• Community Development Block Grant funds, which a 2023 federal guidebook says can support acquiring and rehabilitating commercial buildings for housing

Local zoning is a third hurdle. Rules written for commercial districts may not allow housing, or may impose parking and density limits that make a conversion impractical.

Example

The Archer School Apartments in Charleston, South Carolina, opened in 2024 in a school built in 1934 that officially closed in 1980. According to a HUD case study, the 89-unit senior development restored the original school and added two new buildings. Units serve households earning up to 30%, 60%, or 80% of area median income. More than half of its roughly $42 million in financing came from federal and state low-income housing tax credit equity.

Why It Matters for Workforce Housing

The CEA noted that office buildings with high vacancy rates tend to be older and located downtown, so conversions can place homes close to where people work. A conversion is not automatically affordable. Whether it serves workforce households depends on how it is financed and regulated.