California Construction News staff writer
A newly proposed Downtown Revitalization Financing District in San Francisco could spur the conversion of thousands of underused office buildings into housing, offering a long-term tax incentive for developers.
The proposed district would allow qualifying projects to receive a share of future property tax increases generated by the completed developments, helping offset the high costs of converting commercial space to residential use. The incentive is expected to make challenging adaptive reuse projects more feasible, particularly in areas where office vacancies remain high.
Initial city analysis has identified roughly 1,200 eligible buildings within the downtown core, with about 50 properties likely viable for conversion under current conditions. Those properties could yield an estimated 4,400 housing units over the life of the program. The district would cover the Market Street corridor, Financial District, Union Square, and parts of SoMa, including the East Cut and Yerba Buena neighborhoods.
The financing district is enabled by Assembly Bill 2488, state legislation passed in 2023 to support downtown recovery efforts in major California cities. Projects would have until 2032 to apply, with tax increment benefits available for up to 30 years.
The plan builds on local ordinances passed earlier this year that eased zoning restrictions and impact fees on conversions. It represents a broader shift toward incentivizing adaptive reuse as a core strategy for revitalizing San Francisco’s struggling downtown while expanding the city’s housing stock.
A similar policy in New York City during the late 1990s spurred the conversion of aging office buildings into more than 12,000 residential units in Lower Manhattan over a decade.
Following passage of the legislation, the city will develop detailed program guidelines and a financing plan, overseen by a new Downtown Revitalization Financing District Board composed of city officials and public appointees.
