Conversion of Empty Office Spaces to Housing Could Revitalize Downtown San Francisco Under New Legislation By Asm Ting

For immediate release:

Tuesday, April 16, 2024

San Francisco's downtown could once again thrive under AB 2488 by Assemblymember Phil Ting (D-San Francisco). The legislation uses a tax incentive to attract developers who can turn vacant office buildings into much needed residential units. The conversions aim to generate economic activity with the increased foot traffic, while providing relief to the City's longstanding housing shortage.

"We can address two problems with one bill. AB 2488 empowers San Francisco to create vibrant, walkable, mixed-use communities that open the door to new economic, social and cultural opportunities. The prospect is exciting," said Ting.

The proposal gives local leaders the authority to set up a special tax district where 50-percent of the buildings are zoned for commercial use, but are at least 20-percent vacant. Developers who convert office space into housing in these areas would qualify for a portion of their property tax returned to them every year for thirty years. This financial incentive is needed because transforming commercial spaces to homes can be cost prohibitive when considering expenses, such as retrofitting to current building codes, making seismic upgrades, and the construction materials/labor needed to comply with those requirements.

"The conversion of obsolete, vacant office buildings to residential use is a proven method of activating downtown districts. Cities across the country have identified property tax increment as a key tool to enable such conversions. This bill empowers San Francisco to make use of this effective mechanism. The time to act is now to save our struggling downtown," said Marc Babsin, President of Emerald Fund, a firm that successfully converted a 400-foot obsolete office tower in San Francisco into 418 homes, back in 2015.

Even more vacant office spaces are available today. The COVID-19 pandemic normalized remote and hybrid work with many employees no longer required to be in the office five days a week. As a result, city centers have become somewhat deserted, leading many companies to downsize or give up their office space. Downtown San Francisco, for example, is at an all-time high with a 36.6% vacancy rate. Transit ridership and consumer spending consequently declined, forcing some businesses to close.

"This legislation would not only bring life to our struggling downtown, but also deliver much-needed housing. In San Francisco, 14,000 new homes in transit-rich, walkable areas could be built. With potential like that, it's important to give communities a tool to make revitalizing investments in their futures, and the Bay Area Council thanks Assemblymember Ting for bringing this bill forward," said Louis Mirante, Vice President of Public Policy - Housing, Bay Area Council.

AB 2488 is scheduled for its first hearing tomorrow, April 17, at 1:30 p.m. in the Assembly Local Government Committee. You can watch/listen to the proceedings here.