Vacant office buildings in cities across the country are getting new life as housing developments—helping fill a critical shortage while giving underutilized properties renewed purpose.

In New York City alone, the pipeline of completed, ongoing and potential office-to-residential conversion projects reported between 2020 and March 2025 could produce as many as 17,400 net new residential units, according to the city comptroller’s office.

Conversion projects face challenges, from navigating zoning changes to the cost of turning space designed for cubicles into comfortable apartments. But in many cities, they’ve never experienced more support.

Tim Karp, head of Historic Tax Credit equity at J.P. Morgan, shares factors to consider when evaluating office-to-residential opportunities and financing tools that can fill a project’s capital stack. 

What’s driving office-to-residential conversion demand?

An increase in hybrid work has changed employers’ office needs. While the office asset class is bouncing back in some major cities, companies want top-tier, amenity-rich buildings to draw employees back to the office. That leaves older Class B and C properties facing a choice: upgrade or adapt.

“Building owners are coming to grips with the fact that some of these older properties aren’t going to be great office assets going forward,” Karp said. “We’ve seen a significant uptick in the amount of office-to-multifamily conversions.”

Cities and states, meanwhile, see surplus office space as an opportunity to accelerate housing development and are taking an active role to drive these projects forward.

Some are redeveloping government-owned properties into affordable housing. California announced plans to convert three state office buildings in Sacramento, while Atlanta purchased a downtown office tower with plans to turn it into the city’s tallest residential building.

Others are removing conversion hurdles—streamlining zoning and permitting processes or offering financial incentives such as property tax abatement or tax increment financing subsidies.

Five factors for successful office-to-residential transformation

To assess whether an office property is a strong candidate for residential conversion, consider these factors:

1. Building bones and condition

Cost and feasibility can vary dramatically depending on an office building’s physical characteristics—particularly floorplate depth. A sprawling footprint often requires drilling light wells for interior rooms lacking windows.

Building condition matters, too. But even a well-maintained office property may need work to comply with residential building codes, such as meeting requirements designed to ensure safe evacuation in emergencies and—particularly on the West Coast—reduce seismic hazards. 

2. Neighborhood context

An office building with restaurants, retail and entertainment within walking distance is a stronger candidate than one in an isolated office park. “You need to make sure there’s sufficient economic and other cultural activities to attract folks,” Karp said. “Many office buildings are well-located, making them conducive to conversions.”

3. Amenity opportunities

Office buildings often lack amenities residents expect, such as gyms or dog runs, but they also have underutilized space ready for creative reuse. “Mechanical systems for buildings built in the 1920s and ‘30s took up a lot more room than what’s needed today, so we’re seeing people put gyms in excess mechanical space,” Karp said. 

Offices also tend to have more parking than residential buildings require, which can generate revenue or be put to new use. If the office building has retail space, consider finding a tenant that’s attractive to residents, such as a coffee shop or mail/shipping facility.

4. Zoning and permitting

Office-to-residential conversions may require rezoning, but many cities are working to make the process easier.

“Most cities that recognize the role adaptive reuse can play in reducing the housing shortage are creating streamlined approval processes,” Karp said.

To find out what your city is doing, check in with the planning department or economic development group, which may be advocating for changes that facilitate conversions.

5. Local supply and demand

Understand whether there’s sufficient housing demand in your market to support the rents your project requires. “While there’s a nationwide shortage of affordable rental units, when it comes to market-rate and luxury apartments, we’re at an interesting point in the cycle where some markets are oversupplied and others are undersupplied,” Karp said. 

Tools for financing office-to-residential conversion

Converting offices to apartments isn’t cheap, but there are several financing tools to help fill a capital stack. 

“Often, projects will use a tax credit of some kind, paired with tax increment financing or a property tax abatement,” Karp said. “These tools reduce the cost to build and/or operate conversions, making them more feasible.” 

Historic Tax Credit

The Historic Tax Credit (HTC) program can provide an income tax credit to developers who turn eligible historic office buildings into housing.

Many developers assume properties must already be landmarked to qualify for HTC, but that’s not the case, Karp said. There’s an application process to establish a building’s historical significance and eligibility for the credit.

HTC requires preserving historic elements and rehabilitating to program standards, but that isn’t an impediment to redevelopment.

“The idea is to preserve what’s historic while adapting it for 21^st-century use,” Karp said. “Working with a historic consultant early in the predevelopment process can help you understand what’s original from the period of significance, what’s not and what that means for your project.”

Low-Income Housing Tax Credit

Office-to-residential conversions that include a significant share of affordable housing may qualify for the Low-Income Housing Tax Credit (LIHTC) program. Conversion projects using LIHTC frequently combine the tax credit with other incentives.

State and local incentives

“Cities that have recognized the opportunity in office-to-residential conversions are being proactive about coming up with incentives to help spur activity,” Karp said.

Programs vary by city, but examples include:

• New York offers a tax exemption for office-to-residential conversions with income restrictions on at least 25% of the newly created apartments.
• Boston provides a tax abatement of up to 75% for conversion projects where 17% of units are affordable to households earning up to 60% of the area median income (AMI).
• Chicago approved $260 million in tax increment financing for five downtown office-to-residential projects as of October 2025, with 30% of units designated as affordable to residents earning, on average, 60% AMI. Additional projects—both with and without city financial assistance—are planned.

A versatile strategy for creating housing

Office-to-residential conversion can give properties new life as luxury or affordable housing in communities nationwide: 

• LiveWell Apartments: The 253-unit apartment complex in downtown Pittsburgh was originally a department store that opened in 1904, designed by famed architect Daniel Burnham. It served as GNC’s global headquarters from 1996 to 2021 before being converted to apartments with 14-foot ceilings, oversize windows and a rooftop deck with city and river views. A $12 million HTC equity investment from J.P. Morgan supported the project, which also received a property tax abatement.
• Casa Canal: A vacant office property in San Rafael, Calif., is being converted to a 41-unit permanent supportive housing project for people who have experienced homelessness. Residents will have access to on-site support services as well as case managers, a courtyard and community room. J.P. Morgan provided a $28.8 million construction loan for the project, which also received financial support from California’s Project Homekey.

The bottom line: As cities continue to address housing shortages and office vacancies, conversion projects offer a practical path forward. With the right property characteristics, supportive policy environment and strategic financing, office-to-residential conversions can deliver housing solutions while revitalizing underutilized buildings.