Picture this: walking down Market Street past towering office buildings where the lights stay off long after 5 PM, their windows dark like hollow eyes staring down at a city desperate for places to live. Now imagine those same buildings buzzing with residents cooking dinner, kids doing homework, and all the messy, wonderful life that makes a neighborhood actually feel alive.
That's the vision behind Mayor Daniel Lurie's latest legislative push—a sweeping effort to transform San Francisco's glut of empty office towers into much-needed homes. And surprisingly, it's actually working.
When Lurie signed legislation to boost conversions of empty office buildings into downtown housing, it wasn't just another policy announcement. With office vacancy rates hovering around 36.7% and a mandate to build 82,000 housing units by 2031, this represents San Francisco's biggest bet yet on solving two crises with one creative solution.
The Political Magic Trick
What's remarkable isn't just the policy itself—it's how Lurie got it done. In a city where getting supervisors to agree on lunch can be a challenge, this legislation sailed through with rare unanimous support from the Board of Supervisors. According to the mayor's office, the collaboration marked "a new era of cooperation at City Hall."
The secret sauce? Lurie didn't try to reinvent the wheel—he just removed the bureaucratic rocks that kept it from rolling. The first piece of legislation, signed in February, simply eliminated the financial barriers that made conversions impossible. We're talking about inclusionary housing fees and development impact fees that, according to The San Francisco Examiner, add $70,000 to $90,000 per unit to construction costs.
"Transforming vacant offices into housing will help drive our recovery downtown while creating new homes for San Franciscans," Lurie declared, with the kind of optimism that would make a seasoned San Francisco cynic roll their eyes—except this time, there's actual evidence it might work.
The Money Magic
But Lurie didn't stop there. The newer legislation, crafted with Board President Rafael Mandelman, creates something called a downtown revitalization financing district—which sounds incredibly boring until you realize it's actually pretty clever. Developers can receive annual property tax increment distributions for 30 years to offset development costs. Translation: future tax revenue helps pay for today's construction, and everyone wins when empty buildings become taxpaying homes.
The Real Deal reports that eligible projects have until the end of 2032 to opt into the financing district—giving developers a clear timeline and city officials a way to measure success.
The Proof Is in the (Converted) Pudding
While policy wonks debate the finer points, developer Richard Hannum is busy proving the concept works. His conversion of the historic Humboldt Bank Building at 785 Market Street into 124 residential units reads like a minor miracle in a city where development projects often take longer than geological epochs.
Hannum, who's been developing in San Francisco for 40 years, told The San Francisco Standard that working with the city bureaucracy on this project was "the most collegial engagement of the bureaucrats and development and architecture teams that I've ever experienced." When a developer in San Francisco calls city bureaucrats "collegial," you know something significant has shifted.
The 19-story 1908 building, which required over $70 million in investment, had the right bones for conversion: narrow floor plates, abundant windows, and eligibility for historic building tax credits. But what makes it particularly interesting is its target market—middle-income residents making 80 to 135 percent of area median income, filling a crucial gap that both luxury developments and subsidized housing typically ignore.
Meanwhile, a second project at 995 Market Street is taking a different approach entirely. According to San Francisco YIMBY, this conversion creates eight large five-bedroom units managed as a "vertical village" by something called Berlinhouse Society—because if you're going to reimagine urban living, you might as well get creative about it.
The Sobering Reality Check
Before we get too excited about this urban renewal fairy tale, let's talk numbers. City officials estimate about 32 million square feet of vacant office space citywide—equivalent to about 22 Salesforce towers. That's a staggering amount of empty space in a city where people sleep in cars because they can't find affordable housing.
The scale of the office crisis is genuinely unprecedented. CoStar reports that an estimated 147,303 fewer office workers visit downtown San Francisco than before the pandemic. That's like an entire city worth of people who used to grab lunch, shop, and keep the economic ecosystem humming—and they're just not coming back.
This dramatic shift has left building owners scrambling. Many can't generate enough rental income to service their debt, putting billions of dollars in office-backed loans at risk. It's a financial house of cards that makes office-to-residential conversion less of a nice idea and more of an economic imperative.
Learning from Other Cities' Successes and Failures
San Francisco isn't operating in a vacuum here. National data from RentCafe shows office-to-apartment conversions are exploding nationwide, with a record 71,000 units expected in 2025. New York leads with 8,310 units, followed by Washington, D.C. with 6,533 units.
Chicago has been particularly aggressive through its LaSalle Street Reimagined initiative, which Engineering News-Record reports is deploying $250 million in tax increment financing to repurpose five downtown office buildings. New York's experience in the 1990s created over 12,000 housing units from obsolete office space—proving the concept works at scale.
But San Francisco faces some unique challenges. As SFist notes, the city lacks the abundance of large, pre-World War II office towers that East Coast cities have—buildings that are much easier to convert than modern towers with deep floor plates designed for electric lighting.
The Developer's Dilemma
Marc Babsin has been through this rodeo before. The president of Emerald Fund successfully converted an insurance office at 100 Van Ness into housing back in 2015, so he knows both the potential and the pitfalls. He called the new legislation "a vital piece of the puzzle" for unfreezing the construction pipeline.
Babsin estimates that an office building with the "right characteristics" could be converted to housing for 30% less than the cost of ground-up construction—a significant savings in a city where construction costs are legendarily high. But there's a catch: construction costs have increased roughly 70% since his 2015 project, while rents have remained relatively flat.
"Today the conversation with lenders is short," Babsin explained. "But with this slate of reforms, I believe investors are going to see that these projects are more financeable. We've reduced the infeasibility gap."
The union perspective adds another layer of support. Jay Bradshaw, Executive Officer of the Nor Cal Carpenters Union, told the mayor's office that the legislation "will spur construction of desperately needed housing built by union workers and kickstart an economic stimulus that will positively impact all of San Francisco." When you've got both developers and unions singing from the same songbook, you know the political dynamics are aligned.
The Technical Reality
Not every office building can become a great place to live, despite what optimistic politicians might suggest. Architecture firm Gensler, which has analyzed more than 1,300 potential conversion projects nationwide, estimates that only about 34 percent of office buildings are actually convertible.
The sweet spot tends to be Class B and Class C buildings from the 1960s and 1970s, which have smaller, more adaptable floor plates and are cheaper to acquire than newer buildings. These older towers often feature the narrow floor plates and abundant windows that make residential living actually pleasant—as opposed to living in what feels like a converted cubicle farm.
The Political and Financial Gamble
Here's where things get interesting from a policy perspective. By waiving inclusionary housing requirements and development impact fees specifically for conversion projects, San Francisco is making a big bet: that increasing overall housing supply matters more than ensuring each project includes affordable units.
It's a calculated risk that reflects ongoing debates about the most effective strategies for addressing San Francisco's housing crisis. Some housing advocates worry about giving developers a free pass on affordable housing contributions. But supporters argue that converting empty office buildings into any kind of housing—even market-rate housing—helps address the fundamental supply shortage that drives up costs for everyone.
The Humboldt Bank project illustrates this approach in practice. While it doesn't include traditional below-market-rate units, it targets middle-income residents in a price range that's often overlooked by both luxury developments and subsidized affordable housing. It's not a perfect solution, but it's a pragmatic one.
The Community Impact Question
What happens when you suddenly add thousands of residents to a downtown area that's been struggling economically? Hoodline San Francisco reports that approximately 1,200 properties qualify for the conversion program, with projections suggesting 50 could feasibly be converted, potentially adding around 4,400 new housing units.
That's a significant injection of residents into neighborhoods that have been primarily business districts. The hope is that more people living downtown means more customers for restaurants, shops, and services—creating the kind of 24/7 vibrancy that makes neighborhoods feel alive. The risk is that the infrastructure and services needed to support residential communities might not keep pace with the conversions.
The Verdict: Cautiously Optimistic
So will Mayor Lurie's office conversion strategy actually make a dent in San Francisco's housing crisis? The honest answer is: it's too early to tell, but the early signs are encouraging.
With only one major project completed and a handful more in the pipeline, we're still in the pilot program phase. The true test will be whether developers actually move forward with those 50 feasible conversion projects the city has identified, or whether financing challenges and regulatory hurdles continue to keep most buildings empty.
What's clear is that San Francisco is finally willing to experiment with significant policy changes rather than just wringing its hands about the housing crisis. The combination of fee waivers, tax increment financing, and streamlined approvals represents the kind of comprehensive approach that actually has a chance of working at scale.
And in a city that's become famous for talking about problems more than solving them, that alone feels like progress worth celebrating. Whether it leads to the thriving, mixed-use downtown that planners envision—well, ask me again in a few years when we can see which of those dark office windows have started glowing with the warm light of people actually living there.
