Office-to-Residential Conversions

An office-to-residential conversion turns an office building that has lost its tenants into apartments or condominiums. It is a common form of adaptive reuse, and it became a national policy topic after the COVID-19 pandemic emptied downtown offices while housing stayed scarce.

Conversions work, but only for some buildings and at a modest scale. The real estate firm CBRE reported in June 2025 that office conversions had delivered more than 28,500 homes since 2018. Those homes sit in job-rich locations, and they are a small number next to a national housing shortage measured in millions. Most converted units rent at market rates unless a tax break, subsidy or law requires otherwise.

Why Office Vacancies Rose

Remote and hybrid work cut the amount of space employers need. The White House Council of Economic Advisers (CEA) reported in October 2023 that U.S. office vacancy had reached 18.2%, a 30-year high. It cited research finding that workers were going to the office about 3.5 days a week, roughly 30% less than before the pandemic. Bureau of Labor Statistics survey data show that about one in five workers teleworked in August 2023.

The losses were not spread evenly. According to the CEA, 10% of U.S. office buildings accounted for 80% of occupancy losses, and those buildings tended to be older and located downtown.

New York City shows the split. The city Comptroller found that between late 2019 and early 2025, occupied space in top-tier buildings grew by about 11.5 million square feet while it fell by 43 million square feet in the rest of the market.

Falling demand also lowered prices, which is what makes a conversion possible. In the Comptroller’s sample of buildings being converted to rentals, sales after 2020 averaged $276 per gross square foot, 45% lower than before 2020.

What Makes a Building Convertible

A conversion has to clear three tests. The building must physically work as housing, the numbers must work for an investor, and local rules must allow it.

Physical Constraints

Offices and homes are built differently. The main obstacles are:

• Floor depth. Bedrooms and living rooms need daylight and fresh air. Modern offices often have large, deep floors that leave much of the interior far from any window. The screen used in the NBER study described below drops buildings where the distance from the windows to the building core is more than 60 feet. Other studies cited by the New York City Comptroller set the cutoff at floors of about 14,000 to 15,000 square feet.
• Windows. Many office towers have sealed glass walls. Homes need windows that open.
• Plumbing and mechanical systems. Offices group restrooms near the elevators. Apartments need a kitchen and bathroom in every unit, along with new heating and cooling, sewer capacity and elevator layouts.
• Age and shape. The CEA noted that past conversions have tended to involve prewar office buildings with smaller floors, often with courtyards, while newer offices are built with large open floors.
• Remaining tenants. A building that is half leased cannot be gutted until those leases end or are bought out.

Screens that apply these tests find that a minority of buildings pass. A 2023 National Bureau of Economic Research working paper by Arpit Gupta, Candy Martinez and Stijn Van Nieuwerburgh estimated that about 11% of U.S. office buildings are physically suitable. The authors’ November 2023 version for the Hamilton Project specifies that the figure covers office buildings in the high-density commercial districts of 105 large cities. The design firm Gensler reported in 2023 that 25% of the more than 1,300 buildings it had scored were suitable candidates. The estimates differ because the samples and criteria differ.

Financial Constraints

A suitable building still has to earn more as housing than it costs to buy and rebuild. Cost estimates vary widely:

• The CEA reported that developers say conversions can cost up to 20% less than demolishing a building and constructing a new one.
• Gensler said conversions can cost about 30% less than new construction.
• A study of downtown San Francisco, cited by Brookings in 2023, estimated $472,000 to $633,000 per unit before required seismic upgrades.
• The New York City Comptroller’s 2025 model assumed about $500 per gross square foot for conversion work, not counting the purchase price.

A project becomes feasible when the purchase price is low enough and expected rents are high enough to cover those costs. When they are not, the difference has to be filled with public money, a form of gap financing.

Regulatory Constraints

Many office districts were zoned for commerce only. The CEA noted that conversions face the same barriers as other housing, including density limits, parking requirements and rules that prescribe which uses are allowed.

Building-age rules can matter too. Until December 2024, office buildings in most of New York City’s conversion areas had to be built before 1961 to use the city’s more flexible conversion rules. A zoning amendment approved that month moved the cutoff to 1991.

What Cities and States Offer

Local and state governments use a similar set of tools to make conversions easier or more profitable.

New York’s 467-m Program

New York State enacted the 467-m property tax exemption in 2024. It ties the tax benefit directly to affordability:

• At least 25% of the apartments must be income-restricted.
• Those units must average no more than 80% of area median income (AMI), with at least 5% of all units restricted at 40% of AMI.
• The restricted units stay rent-stabilized permanently, even after the tax break ends.
• The exemption covers up to three years of construction and 25 to 35 years afterward, depending on when work starts. The percentage of tax exempted is higher in Manhattan south of 96th Street than elsewhere in the city.

The same state budget legislation lifted a long-standing cap on residential floor area for buildings built before 1968, on the condition that projects include income-restricted homes.

Federal Tools

No federal program is dedicated to office conversions. A guidebook published by the White House in October 2023 listed 21 existing federal programs across seven agencies that can be used for them. The housing programs on the list include:

• The federal historic tax credit for certified historic buildings
• FHA mortgage insurance under the Section 221(d)(4) program
• HOME and Community Development Block Grant funds, which flow through states and localities

The Low-Income Housing Tax Credit is not on the guidebook’s program list, but its case studies include conversions that used the credit alongside listed programs.

The guidebook is an archived document that describes programs as of 2023. Confirm a program’s current status with the agency that runs it.

Projects usually combine several of these in one capital stack. The guidebook describes a 1935 office building in Detroit, 150 Bagley, that was being converted into 148 apartments at a total cost of about $80.8 million. An FHA-insured mortgage supplied about $42.3 million, federal historic credits about $12 million, and city block grant funds $3 million. Thirty of the units were to be set aside for households earning up to 80% of AMI.

Historic credits are a frequent ingredient. The guidebook reported that over the previous five years the National Park Service had certified nearly 1,500 projects converting non-residential buildings to rental housing. About 30% of them included low-income units.

Congress has considered a dedicated credit. The Revitalizing Downtowns and Main Streets Act (H.R. 2410), introduced in March 2025, would offer a credit equal to 20% of qualified conversion costs, with a national limit of $12 billion. At least 20% of a building’s units would have to be rent-restricted for households at or below 80% of AMI for 30 years. The bill was referred to the House Ways and Means Committee. GovTrack listed it as introduced, with no further action, on October 1, 2026.

How Many Homes Conversions Have Produced

The two most cited national counts come from private data firms. They measure different things, so they should not be added together.

CBRE called 2024 a record year for completed conversions. It also projected that conversions and demolitions together would remove about 23.3 million square feet of office space in 2025, more than the 12.7 million square feet of new offices expected that year.

A pipeline is not the same as production. RentCafe’s count includes projects under construction, planned projects still seeking approval, and prospective projects it describes as less likely to be completed. Of the 55,339 apartments in its pipeline in January 2024, 3,709 were finished by that December.

Activity is concentrated in a few metro areas. RentCafe’s 2026 count put New York first with 16,358 apartments in the pipeline, followed by Washington, D.C. (8,479), Chicago (4,360), Los Angeles (4,340) and Dallas (3,966). CBRE found that Cleveland had the largest share of its office space planned or under conversion, at 8.4%.

New York offers the longest record. An earlier tax exemption known as 421-g supported the conversion of 13 million square feet of Lower Manhattan offices between 1995 and 2006, creating about 12,900 apartments, according to the city Comptroller. The Comptroller identified 44 completed, ongoing and potential conversions as of early 2025 that could produce about 17,400 apartments.

The Affordability Angle

Conversions add homes. Whether they add affordable homes depends on what is required of them.

Most converted units are market-rate. Without a requirement, owners charge what the location will bear, and downtown locations are expensive. Units also run small. In three New York conversions the Comptroller examined, studios made up 49%, 72% and 84% of the apartments. That is market-rate housing suited mostly to one- and two-person households.

Affordability requirements change the math. The Hamilton Project’s 2023 analysis found that requiring 20% of units to be affordable made its modeled conversion unprofitable unless a subsidy offset the lost rent. Programs such as 467-m supply that subsidy through the tax code.

The subsidy has a price. The New York City Comptroller estimated that 467-m conversions eligible in the program’s first phase could create about 14,500 apartments, 3,600 of them income-restricted, at a cost of $5.1 billion in forgone property taxes in present value. That works out to about $1.4 million per restricted unit. The office found that rent discounts on those units account for about 81% of the cost. It also noted that the program places permanently restricted homes in neighborhoods that lower-income renters could not otherwise reach.

The income targets often land in the workforce range. New York’s program averages 80% of AMI. The proposed federal credit uses the same ceiling, and so did the Detroit project above. Definitions vary, but 80% of AMI is often treated as the lower end of workforce housing. Reaching lower incomes typically takes deeper subsidy. The federal guidebook cites a 1955 office tower in Lubbock, Texas, converted in 2023 into 99 apartments, 75 of them affordable, using housing tax credits and historic credits together.

Analysts disagree about how much weight conversions deserve. Supporters note that they reuse obsolete buildings and put homes near jobs and transit. The CEA cited estimates that rehabilitated buildings can produce 50% to 75% fewer carbon emissions than new construction. Brookings researchers argued in 2023 that conversions can meet only a small part of housing need. They cited an estimate that Denver’s convertible offices could yield about 1,500 apartments, roughly 11% of the low-end estimate of what the city needed.

The Bottom Line

Office-to-residential conversions are a proven way to turn obsolete buildings into homes, and CBRE counted a record number of completed projects in 2024. They are limited by building shape, cost and local rules, and a minority of offices qualify. Conversions serve workforce and lower-income households mainly where governments pay for affordability, through tax exemptions, credits or direct subsidy.