Why Cities Need More Than Office Conversions to Fix Their Housing Shortage
“The U.S. is short millions of homes, and office vacancy rates are at record highs,” Alex Horowitz, project director of the Housing Policy Initiative at The Pew Charitable Trusts, told Stateline. “It makes all the sense in the world to convert underused commercial space into housing, but the cost per square foot is just too high.”
Part of the problem is that office buildings simply weren’t designed for people to live in. They don’t have the plumbing or “electrical guts,” as the Washington Post put it, that homes require. Their layouts — especially deep floor plates — create obstacles when it comes to access to natural light. “Deep floor plates make residential conversions difficult because people tend to like windows and don’t like long, skinny apartments that stretch from the door to the windows,” said Nathan Hawryluk, a Strong Towns member who serves on Calgary’s Planning Commission.
(Image source: The Washington Post.)
Office buildings built after 1960 are generally considered the most difficult candidates for conversion.
These design challenges drive up costs by a lot. According to Stateline, converting an office building into housing costs an average of $685 per square foot — more than the cost of buying a completed multifamily property ($600 per square foot) or even constructing a new one from the ground up ($588 per square foot).
But design isn’t the only hurdle. A tangle of regulations — minimum unit sizes, parking mandates and natural light requirements — pushes costs even higher. So even when there’s plenty of square footage available for development, the number of viable housing units can be surprisingly low.
You might want to read: "How Minimum Lot Size Requirements Maximize the Housing Crisis" by Ben Abramson.
That’s why many cities have begun chipping away at these regulatory hurdles, loosening the reins to expedite conversions. San Francisco has rolled back certain planning and building code requirements and waived real estate transfer taxes for downtown conversions approved before 2030. Denver launched an adaptive reuse pilot program aimed at streamlining approvals and cutting through bureaucratic delays. Minneapolis removed public hearing requirements, scaled back traffic study mandates, and exempted converted buildings from affordability rules that, while well-meaning, often make projects financially unworkable. These cities aren’t just tweaking policy — they’re recognizing that if they want more housing, they need to stop standing in the way.
Yet, they’re not seeing the revolution they had hoped for.
It’s true that office-to-housing conversions gained momentum between 2016 and 2024, producing more than 22,000 apartments nationwide. But the overall pace remains painfully slow — even with relaxed regulations. According to the Washington Post, even though 18% of office space nationwide sits vacant, only a small fraction — just 1.4% — is slated for conversion. In 2023, 23% of Salt Lake City's office space sat empty, yet plans were in place to repurpose only 0.7% of it for housing. The ratio was similar for Philadelphia and hardly better in places like Atlanta and Los Angeles. And as Stateline pointed out, this progress still represents less than half a percent of the total U.S. apartment inventory.
What’s more troubling is the cost. “This is one of the most expensive ways to address the housing crisis,” says Edward Erfurt, Strong Towns’ chief technical advisor. The challenges tied to converting office buildings highlight the need for cities to adopt a more incremental approach. It’s not that Erfurt is opposed to repurposing vacant downtown office buildings. He believes that conversions should be just one piece of a larger, more varied response to tackling a housing shortage. They are not the silver bullet many had assumed, especially given how costly they can be.
401 Market Street in Philadelphia is just one of many office buildings with low occupancy and high risks. When Wells Fargo’s lease expired in October, occupancy plunged from 100% to 28%.
Some cities pushing office conversions still make it nearly impossible — or outright illegal — for the middle-class homeowner to build a backyard cottage or expand their garage into a small apartment for an aging relative. Others roll out generous incentives for large corporate developers while burdening small, local builders with rigid regulatory frameworks that stifle infill development. The same cities that fixate on costly downtown conversions may still require minimum lot sizes, ban duplexes and triplexes, or make it prohibitively expensive to renovate a vacant storefront into housing — all of which would allow for more organic, incremental growth.
Incremental growth isn’t slow growth. It allows many small-scale projects to happen simultaneously, rather than waiting years for a few large, high-risk developments to materialize. And there’s a clear demand for it.
When California eased restrictions on accessory dwelling units (ADUs), the response was immediate. Permits jumped from 1,269 in 2016 to 14,702 in 2019 — an elevenfold increase in just three years. Los Angeles led the charge, with ADUs accounting for 22% of all planned new housing in the city in 2021. Unlike office conversions, ADUs are quicker to build, turning permits into homes much faster. This kind of incremental approach is how real housing capacity grows — by empowering people to build where it makes sense.
You might want to read: "Unleash the Swarm" by Daniel Herriges.
Historically, cities grew this way: one house, one storefront, one apartment building at a time. When many people are empowered to build, development happens organically and efficiently, without relying on one big, speculative project that may never come to fruition. Cities should absolutely explore creative ways to reuse office buildings — but the real low-hanging fruit lies elsewhere.
Cities across North America are recognizing the value of incremental development and making smart decisions to enable it. Click here to view a map of these cities — and for step-by-step walkthrough of how your city can do the same.
Want to go even deeper? Sign up for the spring session of the Accelerator to get coaching from Strong Towns experts. Discuss approaches with other professionals and develop a plan to make your community housing ready.
Asia (pronounced “ah-sha”) Mieleszko serves as a Staff Writer for Strong Towns. A dilettante urbanist since adolescence, she's excited to convert a lifetime of ad-hoc volunteerism into a career. Her unconventional background includes directing a Ukrainian folk choir, pioneering synaesthetic performances, photographing festivals, designing websites, teaching, and ghostwriting. She can be found wherever Wi-Fi is reliable, typically along Amtrak's Northeast Corridor.