San Jose is sweetening the deal for developers willing to turn sleepy downtown office towers into housing, with the City Council voting to expand a key incentive program it cover commercial-to-residential conversions. The move links deep tax and fee breaks to labor standards in a bid to make tricky office retrofits pencil out and to pump more weekday life back onto downtown streets.
What City Hall Just Approved
The council rebranded the Downtown Residential High‑Rise Incentive Program and expanded it to include office conversion projects that create at least 20 new homes. In the first phase, qualifying projects can skip 100% of the Building and Structure Construction Tax and related commercial-residential taxes for up to 500 units, provided developers pull building permits by December 31 and complete first inspections within 12 months. A second phase offers smaller waivers for the next 1,000 units. The program also trims parkland in‑lieu fees and lowers inclusionary in‑lieu charges for eligible conversions, with additional reductions available for projects that meet specified labor standards, according to the City of San José staff memo.
Pipeline And The Price Tag
City staff say the upside could be substantial. As the memo puts it, “the current vacant office inventory has the potential to produce approximately 1,500+ new residential units.” The document also highlights four downtown properties whose owners have already signaled interest in converting: the Bank of Italy, CityView Plaza, the Security Building, and the PG&E tower. Together, those sites could yield about 611 homes and represent roughly $16.94 million in potential tax and fee waivers. The same City of San José staff memo spells out the eligibility rules and timing for both phases of the program.
Conversions Already Taking Shape
One prominent example is already under construction. Mercury News reports that developer Westbank has gutted the historic Bank of Italy tower and is renovating it, with plans for roughly 115 apartments once the work wraps up. City planners and consultants say that the project, along with larger concepts such as CityView Plaza, represents the type of conversion city leaders hope can serve as a playbook for future efforts.
Why These Conversions Are Still Rare
Developers caution that office-to-housing projects can be technically complicated and brutally expensive. “It’s literally cheaper to tear the building down and build it brand new than to retrofit,” developer Erik Hayden told San José Spotlight, adding that older buildings with narrow floor plates tend to be the most workable. Many newer curtain-wall towers, by contrast, need extensive structural upgrades, entirely new plumbing and mechanical systems, and careful strategies to ensure sufficient daylight in units. The city’s cost study echoed that reality, finding that financial feasibility depends heavily on the specifics of each building.
Deadlines, Data And The Next Steps
Supporters of the expansion argue that the tight timelines and generous early waivers are exactly what is needed to push a select group of projects across the finish line and prove the concept. Skeptics worry about the amount of foregone revenue and question how many conversions will actually proceed. City staff have tied permit deadlines to each phase of the program and plan to track how many projects apply for and secure waivers as they wind through permitting and inspections.
How Locals Are Responding
Housing advocates are welcoming the expansion, with some caveats. They describe it as a smart tool to have in the kit, but not a cure-all for San Jose’s housing shortage. “I don’t think this is going to be the solution that solves everything,” Ali Sapirman of the Housing Action Coalition told San José Spotlight. “But it will be an important part,” she said. City officials say they will revisit how well the program is working once more projects move forward, and real results start to come in.
