Understanding office-to-residential conversion

This Brookings Institution article by Cara Eckholm, Tracy Hadden Loh, Jonathan Meyers, and Steven Paynter explains what drives office-to-residential (O2R) conversion and what governments can do to make it feasible. It synthesizes evidence from six U.S. city case studies and frames conversions as a response to two linked pressures: persistently lower office utilization after COVID-19 and the most severe U.S. housing crisis of the postwar era.

The authors describe a structural shift away from the five-day office week that has left many office districts underperforming, challenging city fiscal models built around taxing activity “in, through, and around” office buildings. At the same time, unmet housing demand has created an “important mandate” to reuse underused offices for homes, especially in higher-demand markets. Despite the apparent opportunity, the paper notes that large-city conversion pipelines have been slow, in part because market uncertainty depresses confidence in the underlying value of office buildings for owners, tenants, and financing partners.

Beyond market uncertainty, O2R activity is constrained by zoning and permitting systems that still reflect a separation of office and housing uses. The article also highlights a shortage of accurate, publicly accessible data on office vacancies and what constitutes a “healthy” vacancy rate. Office-market information can be proprietary, inconsistent across providers, and shaped by differing incentives among landlords, brokers, and tenants, making it difficult for leaders and the public to separate “myths” from reality and evaluate tradeoffs among goals (office distress, fiscal conditions, or housing supply).

The framework is grounded in six case studies—Houston, Los Angeles, Pittsburgh, St. Louis, Stamford (Connecticut), and Winston-Salem (North Carolina). Research (June 2024 to October 2024) combined 68 qualitative interviews (public-sector leaders, property owners, developers, lenders, and community organizations), quantitative market analysis using CoStar data, and building-level feasibility analysis using Gensler’s conversion algorithm to estimate how closely buildings match an “idealized” residential form and to quantify feasibility gaps.

The authors identify recurring motivations for conversions: diversifying downtown corridors beyond office hours; preserving and reusing historic office cores (often supported by historic tax credits); adding density where infrastructure already exists; broadening local tax bases; reducing embodied carbon by reusing existing buildings; and meeting affordability needs. One cited example is Chicago’s LaSalle Reimagined initiative, aiming to add 1,600 mixed-income units downtown. Another example points to Lower Manhattan conversions in the mid-1990s that were associated with a four-fold increase in property values and tax revenues, illustrating fiscal impacts when demand and investment align.

The paper distinguishes two main levers: (1) process tools (zoning, permitting, code interpretation) that affect speed and cost, and (2) public spending to reduce conversion costs (tax credits, subsidies, low-cost financing) or increase end value (public-space and amenity investment). It frames decisions around the “feasibility gap,” the difference between production cost and market value (rent or sales). The authors also connect conversion policy to fair-housing goals, noting that many downtowns are major job clusters and that affordable units near those opportunities can support inclusive access—while cautioning that O2R is not automatically the most efficient route and should be judged against explicit policy goals.

Federal influence is described as primarily channeled through historic tax credits and housing-demand subsidies such as vouchers and the Low-Income Housing Tax Credit (LIHTC). The article reports that the federal historic tax credit program has cost $44.3 billion since 1977 and leveraged $235 billion in private investment, and it was used in the majority of the O2R conversions studied. A White House guide listing 21 potentially relevant programs is noted, but uptake beyond historic credits and LIHTC was limited; the authors suggest HUD and other federal actors could better direct resources to accelerate conversions, including through project-based vouchers.