New housing is seen as a way to bring downtown San Francisco back to life. The California Legislature today approved AB 2488 by Assemblymember Phil Ting (D- San Francisco), which uses tax incentives to encourage the conversion of the area’s empty office and retail spaces into residences.
“My bill can tackle two pressing issues at the same time: a local economy that needs a jumpstart and our housing shortage. Adapting under-utilized commercial properties for residential redevelopment opens the door to vibrant, walkable, mixed-use communities. This will transform downtown San Francisco,” said Ting.
AB 2488 would allow the City and County of San Francisco to establish a downtown revitalization and economic recovery financing district. To make office and retail conversions more appealing, developers would qualify to have a portion of their property tax returned to them annually for thirty years. This incentive is needed because transforming commercial spaces to homes can be expensive, as buildings have to be retrofitted to current residential safety codes; and that’s on top of already high construction costs.
“Asm. Ting’s bill provides a critical tool to San Francisco’s downtown revitalization efforts through its creation of much needed incentives that will enable the conversion of obsolete office buildings into housing. Downtown housing will activate the quiet streets and support the cafes and restaurants that are in need of customers,” said Marc Babsin, President of Emerald Fund, a real estate developing firm that successfully converted an obsolete 400-foot office tower into 418 homes in San Francisco in 2015.
The COVID-19 pandemic can be largely blamed for diminished foot traffic in downtown because it forced many employees to work from home to prevent the spread of the virus. Today, the practice has evolved to a hybrid model where many workers are in the office for only two-three days a week. This, in turn, reduced transit ridership rates and consumer spending, forcing business that catered to workers to shut down and companies to downsize. In the second quarter of 2024, the City had a record-high 37% office vacancy rate, one of the highest in the state. The retail vacancy rate also reached a record high in the same period, hitting nearly 8%.
The office and retail conversions could create as many as 14,000 additional homes, and good-paying construction jobs will open up as a result of these projects. When complete, bringing more people back to downtown will boost demand for restaurants, nightlife, and other businesses.
"There are few challenges our cities face that are more urgent than the conditions of their downtowns. AB 2488 will help San Francisco get more people downtown, breathing life back into the small businesses and transit services that depend on them. On behalf of the Bay Area Council, I want to applaud Asm. Ting for his valiant leadership on this critical issue," said Jim Wunderman, President and CEO of the Bay Area Council, an organization focused on regional economic development.
The Governor has until September 30th to act on AB 2488.