Commercial-to-Residential Conversions

The option to work remotely in the U.S. during the COVID-19 pandemic resulted in a decrease in office space occupancy, with spillover effects on the economies of many downtown areas. As cities and employers continue to struggle to attract office workers to business districts, many communities are considering the potential for commercial-to-residential conversions for these older office structures. Large-scale conversion of commercial space to residences is a complex and costly undertaking, but innovations are bringing these costs down, and some municipalities, such as Washington, D.C., are adopting policies that aim to reduce the barriers to their implementation.

If supported by government policies and comprehensive planning, the conversion of underused office buildings could be a powerful tool in addressing the housing shortage, especially the demand for affordable housing. To facilitate this transition, several U.S. mayors are considering loosening zoning and regulatory barriers to expedite office-to-residential conversions. Other potential solutions include fee waivers, tax incentives, and federal initiatives. In October 2023, the Biden administration launched a national commercial-to-residential conversion initiative, while cities such as Denver, Chicago, and New York City have introduced programs to revitalize downtowns through adaptive reuse.

In addition to office buildings, other types of land uses offer redevelopment opportunities. In 2023, hotels made up the largest share of commercial-to-residential conversions, creating more than 4,500 new units. Strip malls, which often include large amounts of empty land for parking, are also seeing increasing vacancy rates, triggering housing conversion projects in states including California, Illinois, and Michigan. While some projects repurpose existing buildings as housing, others develop new housing on strip mall property next to stores. Unused churches, which are often situated in prime locations, can also offer desirable housing options. The church buildings themselves may be converted to housing or commercial spaces, or empty land on the property may be developed for housing. As the housing crisis accelerates, planners should consider how commercial-to-residential conversions of all kinds can play a role in creating more livable spaces.