Since the COVID-19 pandemic cratered the city’s commercial real estate boom, San Francisco’s downtown office buildings have emptied out, and its nearby stores and restaurants closed. Five years later, more than a third of San Francisco offices remain empty, a higher proportion than in New York, Los Angeles, Austin, Texas, and Seattle, Washington.
In response, city officials have floated incentive after incentive to transform some of that empty office space into residential housing. Last year, voters approved Proposition C, a ballot measure sponsored by then-Mayor London Breed that waived transfer taxes on office-to-housing conversions.
In March 2025, the Board of Supervisors eliminated affordable housing fees for those conversions.
And on Wednesday, supervisors on the Budget and Finance Committee advanced a proposal that would return property taxes to developers in a zone that runs down Market Street from the waterfront to Civic Center, including the Financial District, SoMa and Union Square.
That extra incentive is necessary, say its backers, because developers still aren’t biting. Despite the incentives already in place, there is just one office-to-residential conversion in San Francisco’s pipeline. Another potential project was scrapped because financing didn’t come together.
“We have, and must, respond to the emergency at the moment, which is the lack of activity downtown,” said District 3 Supervisor Danny Sauter, who represents the Financial District, at the Wednesday budget meeting. As politician after politician has said, Downtown can no longer afford to be a 9-to-5 financial area. It must be a full-fledged neighborhood.
That, however, is easier said than done.
“Yes, you need to find a reuse for old office buildings,” Bill Fulton, a fellow at the Terner Center for Housing Innovation at the University of California, Berkeley, said about San Francisco’s attempts. “Yes, you need residents.” But, Fulton added, “converting office to residential isn’t as easy as it looks.”
First, there’s the layout. Lots of office buildings are large, square towers. It’s hard to turn those floor plans into light-filled apartments, where every unit has access to a window. Retrofitters risk ending up with lots of wasted floor space at the center of the building.
Then, there’s the actual construction. Office buildings often concentrate plumbing in one area: Communal bathrooms instead of individual bathrooms for every unit. Reworking that plumbing into individual units is a heavy lift.
“You basically are gutting everything down to a shell, and then rebuilding everything to residential, instead of the existing structure,” said Mark Hogan, an architect and principal at OpenScope Studio, a San Francisco-based architecture practice.
Office-to-residential conversions “often cost as much or more as demolition and new construction,” according to a 2023 report from San Francisco’s Budget and Legislative Analyst.
The property-tax-free zone proposed by city supervisors this week is modeled after one in New York’s lower Manhattan that created more than 12,000 units between 1990 and 2020, according to an analysis from the Citizens Budget Commission, a nonprofit civic organization based in New York. The move is generally considered to have revitalized lower Manhattan.
San Francisco’s zone would give projects through 2032 to enroll in the program, and will have property taxes returned for up to 30 years.
San Francisco has offered tax breaks before to try to revive parts of downtown. After the 2008 financial crisis, the city wrestled with familiar problems: 10 percent unemployment, dingy streets and homelessness.
The mid-Market area, in particular, was struggling. As filmmaker Dan Goldes pointed out in the documentary “Five Blocks,” the area has been the focus of some type of redevelopment effort every decade since the 1960s. By 2011, half of its offices and nearly a third of its retail shops had emptied out, according to the San Francisco Bay Area Planning and Urban Research Association.
In an attempt to bring businesses and workers to mid-Market, Supervisors gave a payroll tax break to some tech companies. But the move, known as the “Twitter tax break,” because it was put in place after Twitter threatened to leave town, had mixed results.
Some 10,000 new jobs came to the area. So did about 4,000 new housing units. But the city lost out on an estimated $70 million worth of revenue, according to the city’s chief economist, and benefits were hard to quantify. Storefronts along mid-Market continued to struggle, and once Elon Musk took over Twitter in 2022, he gutted the workforce. Then, he moved the company to Texas anyway.
Today, Mid-Market is not thriving. Once again, it is included in the new proposed special district.
Even if the special district is created, one thing that could hold back office-to-housing conversions is whether owners really want to opt in. Office buildings have historically been lucrative for owners in San Francisco, according to the Budget and Legislative Analyst report. Some owners may prefer to wait out the downturn in office building prices, and not give up their buildings, even though the city is making it easier to convert them.
What it will take? Considering how SFHs are hot, condos, not: Demand?
Another good point, the condo market is in the crapper and these are almost exclusively going to be condos at the top of market rate. This does NOTHING GOOD for the low-mid housing market that is affected by the housing crunch. It’s just a complete sellout to developers and the ultra-wealthy nouveau-crypto-riche. Lurie fell in line with the Billionaires’ demands in a 180 from his pre-election promises. Typical all over again.
I’m so frustrated that we’re still not even starting conversations about the city purchasing these distressed properties at a discount, and just building public housing. We could pass on the savings of eliminating profit and equity/land value from the cost of rent and actually create positive downward pressure on the cost of living in our city. And as the above notes, conversions are often more expensive and less desirable than just pulling the building down and building something new.
Instead we need to look for ways to create new transfers from our city budget to private developers? Why should we prioritize their enrichment over the whole city. Sure, our incentives are sometimes aligned, but in most cases my goals as a citizen are not aligned with the goals of private real estate development. I want the goals of my city (thriving, affordable neighborhoods) to not be at odds with a primary goal of equity and revenue growth.
Turning empty office buildings into housing actually could be a game-changer for San Francisco if the city gets it right. There are real ways to make it work. Start by focusing on buildings that make sense to convert, ones that already get good light and don’t need a total overhaul. Help developers with low-interest loans and make the permit process faster and less of a headache. That alone could get more projects moving.
Owners also need a reason to act now instead of just waiting for the office market to bounce back. Set clear deadlines to get the perks and maybe add a tax for buildings that sit empty for too long. And if the goal is to turn downtown into a real neighborhood, people need more than just apartments. They need grocery stores, schools, and clean, safe streets. If the city can pull all that together, downtown could finally become a place where people actually want to live, not just work. The potential is there, it just needs a solid push.
Not if you understand the process, how long it takes, how much it costs, and how high the asking prices will be. Once you have a grasp of that, you understand this is just window dressing PR to appease a PR-philic YIMBY voting bloc. If there were some way that even 10% of these went to low income SF workers, it might help that much, but they literally stripped that tiny requirement out to appease Big Developer profits. When office demand is back in 5-10 years, (prognostication mine) this will be seen as the charade it actually is, and everyone will know who benefited from it. It’s not aimed at helping the lower classes whatsoever. “Game changer” lol.
It is not a bad idea,but the problem I’m seeing with the housing is…it’s made with very cheap low grade material that is a danger to our health(cancer) We are going see a generation of children that are growing up in these buildings probably with cancer, asthma, allergies etc…later on in their lives. I’m hearing complaints from others(myself) of the dangers of breathing in chemicals from the cheap materials the contractors are using to build these apartments complexs with, in these places,they use the cheap sand/cement(it’s cheaper than plaster) on the walls instead of plaster,and that’s going to either, I believe cause some type of cancer because we’re constantly breathing in the dust that comes from that cheap crap,(that we can’t see,but jus look at ur socks) along with allergies.etc, I’m going on 3 yrs here and I now have severe allergies that I never had before,I wake up with sand everywhere,it’s on everything! The ventilation system is MUCH WORSE our vents are connected to our neighbors apartments,some have fans right next to vents and whenever they use there fans it’s going to blow whatever smell is in that room, whether it’s cigarettes (suppose to be smoke free,but not enforced😤😡),weed,poop smell, pesticides smells etc. you will get some pretty gross smells,believe me that will make you sick,water pressure is bad, in some of these buildings, water pipes have broke,ours has,elevators breaking down,a few more problems that’s why I’m looking to God willing move elsewhere, even if that means losing my Apartment section 8 (it’s only for those apartments,if you get it,only some get it, not everybody).they keep raising rents every year, it’s just risky to live here, how is this going to benefit for our children’s health in the future,when some will be sick,unable to work! I’m grateful for roof over my head,but not at the cost of losing my life to secondhand smoke especially because I’m on a CPAP device. Neighborhood has gone to the druggies addicts,thieves ,drug dealers! I’m hoping to get into “Senior Housing”(in the avenues j,hopefully the building won’t be so cheaply hmade as the one I’m living in here in the mission. I’m not trying to say that you shouldn’t move in,that’s up to you to decide,but read our lease,it’s saying that there is cancer causing material in our apartments,so I’m not making this stuff up,read your lease real good and understand what your signing,consider your children’s future health Dad,Mom okay? that’s all! I’m writing this because I care…Blessings!🙏🏽🌷
A strictly commercial business area is vital to the long term success of downtown. These conversions are pipe dreams of the pro low income housing advocates. We know any housing has to include low income with it. How is bringing low or no income people into the financial district going to help revitalize downtown? The retail sector has been destroyed in large part by homelessness. Lower square footage commercial rates are bringing tenants slowly back downtown. That is the future and the past
When I suggested a while back that the next step was for San Francisco to pay developers to build housing, people scoffed.
I’d imagine that before Lurie’s through, we’ll see San Francisco step in and guarantee construction loans and subsidize “cost plus.”
it can’t be for low income housing because it will cost to much to redevelop. This city has things backwards. There is already vacant homes and building, what happen to that planned tax of them? Yeah, thats what I thought.
Correct.