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San Francisco is making it easier to turn empty offices into homes

San Francisco's approach to tackling its housing shortage and downtown decline is taking a new turn. With the approval of Proposition C in the recent election, the city is paving the way for empty office spaces to be repurposed into homes. This move is not just about addressing housing needs but also about revitalizing the downtown area.

Mayor London Breed, a proponent of the proposition, sees it as a step towards fulfilling the state's requirement of creating thousands of new homes while breathing life into the downtown scene. The measure offers tax incentives for developers to convert up to 5 million square feet of commercial space by 2030.

The timing of this initiative coincides with a shift in the tech sector, a significant player in San Francisco's economy. Since the onset of the pandemic, many tech companies have downsized their physical presence, opting for remote work options. This has left a substantial amount of commercial real estate vacant, with the commercial vacancy rate reaching a record high of 36% as of last December.

Mayor Breed envisions this move as a transition from a traditional 9-to-5 business hub to a vibrant mixed-use neighborhood bustling round the clock. The recent announcement of Macy's closure of its flagship Union Square store adds to the evolving retail landscape, prompting the city to explore innovative solutions for these spaces.

San Francisco's potential for office-to-housing conversions stands out due to the unique characteristics of its downtown buildings, such as their size, layout, and proximity to public transit. According to a report by the San Francisco Bay Area Planning and Urban Research Association, nearly 40% of downtown buildings are deemed suitable for conversion, a significantly higher proportion compared to other North American cities.

However, challenges abound in making these conversions a reality. Strict planning and building codes, coupled with high construction costs, pose significant obstacles. Some analysts are skeptical about the feasibility of such projects, citing data that suggests only 13% of office spaces are viable for conversion to multifamily housing.

Moreover, there are concerns about the potential impact on the local economy. A report by the offices of the San Francisco controller and economic-analysis unit warns that increased office-to-residential conversions could lead to job losses and a decline in the city's GDP. The study forecasts that converting every 100,000 square feet of office space could result in the elimination of 155 jobs and a $49 million reduction in GDP over a 20-year period.

Despite these challenges, a few office-to-housing conversions have already been realized, with more in the pipeline. For instance, a building in the Tenderloin district has been transformed into 56 apartment units, while plans for the conversion of the historic Warfield Building have been approved.

As San Francisco continues to grapple with its housing crisis and economic shifts, the success of these conversions could serve as a model for other cities facing similar challenges.

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