How Commercial-to-Residential Property Conversions Help the Housing Crisis

Many housing markets throughout America share a common complaint: a lack of affordable rental properties. As is the case with supply and demand, a scarce supply makes for less competition between apartment complexes, which means fewer options for renters and higher rental costs.

Once anecdotal, it’s now not at all uncommon to find, for example, young adults moving back into their parents’ homes after completing college. The main contributing factor isn’t anything in the “Failure to Launch” realm. Rather, it’s a reflection of today’s soaring cost of rent. The phenomenon is found in big cities and in their neighboring bedroom communities alike.

According to market research, the U.S. housing deficit (in units) grew to 4.7 million in spite of new home construction. According to their data, more than eight million families shared their homes with people unrelated to them, with millennials leading the way on that trend.

The National Low Income Housing Coalition (NLIHC) says “the U.S. has a shortage of 7.1 million rental homes affordable and available to renters with extremely low incomes.” Those incomes are defined as at or below either the federal poverty guideline or 30% of their area median income (AMI), whichever is greater. The organization also believes “No state has an adequate supply of affordable rental housing for the lowest-income renters.” State-by-state numbers can be found on their website, https://nlihc.org.

A greater number of available apartments and multifamily rental units is the solution. In their Apartment Wire newsletter, the National Multifamily Housing Council (NMHC) says increasing housing supply is the answer.

“The best thing we can do to ease the burden of housing costs is to boost the supply of quality housing,” the organization stated. While newly constructed apartment complexes are desirable, there’s another way to help ease the pressure on the apartment market.

Empty Office Buildings Are Becoming the Unexpected Solution

Converting commercial buildings to multifamily rentals is an idea whose time has come. The COVID-19 pandemic saw a swell of work-from-home activity, perhaps forever changing the on-site, in-person work experience.

In spite of the more recent “Return to Office (RTO)” edicts from many companies, the complexion and space of the workforce has changed. In many markets, office buildings have become shockingly obsolete, remaining vacant or largely vacant even years post-pandemic. Companies have downsized or gone fully remote.

The result is a perhaps unprecedented number of commercial buildings that are no longer functioning at their highest and best use—a tenet of commercial real estate (CRE). Converting office or commercial space to multifamily residential living is no small task but holds great promise.

Hotels, Warehouses, and Malls: What Can Be Converted?

It’s not limited to office buildings, though that property type is commonly converted. Hotels, warehouses, and retail properties—including, in some markets, vacant malls—may potentially be repurposed. Developers who tackle repurposing these structures have a unique set of concerns wholly different from typical scratch-built projects. Zoning specifics come into play. There are financial and environmental concerns. Leadership and cooperation of local officials matters, too.

“Behind the Façade: The Feasibility of Converting Commercial Real Estate to Multifamily,” is an interesting, informative study published by the Urban Land Institute’s Terwilliger Center for Housing and the NMHC Research Foundation.

The 2023 report showcases many successful commercial-to-residential conversions nationwide. The organization shares “the ability to convert obsolete structures could go far in adding to our housing stock and, at the same time, add value to communities through such revitalization.”

It’s impressive to see a vacant Class A office space transformed into luxury multifamily units or a former hotel converted to hundreds of apartments, and even a 1913 warehouse revived to become 228 loft apartments, as was the case for Union Terminal Warehouse (UTW) in Jacksonville, Florida. Read more about that here:https://www.apartmenthomeliving.com/renter-university/past-meets-present-union-terminal-warehouse-now-home-to-228-new-apartments

The potential to positively impact rental markets is welcome news to weary, wannabe renters who are seeking affordable apartments in their city. Conveniently, these conversions are happening in geographically desirable locations, not surprising considering the prior use of the CRE.

A Green Angle: Why Adaptive Reuse Is Good for the Environment

There’s also an eco-friendly aspect to these adaptive reuse projects. Ryan Akin, Development Manager and Partner at Columbia Ventures, shares their Union Terminal Warehouse project as an example.

“They say the most sustainable building is one that already exists,” says Akin. He explains that a concrete structure like the 330,000-square foot circa 1913 former warehouse has “so much embedded carbon. Imagine demolishing that entire structure and then rebuilding it all, all the energy consumption that it takes to not only produce the concrete but build it all.”

Like the Union Terminal Warehouse project, salvaging and updating are energy-saving moves for many CRE conversions.

Federal Support and Tax Incentives Fueling the Trend

The federal government agrees that these property conversions can help solve the affordable housing crisis. In 2023, the Biden administration published a guidebook of federal resources available for commercial-to-residential conversions.

Under the auspices of the U.S. Department of Housing and Urban Development (HUD), incentives included $10 billion in Community Development Block Grant (CDBG) funding. The stated goal was to improve both housing supply and affordability, including stimulating CRE property conversions to residential/multifamily use.

Biden also supported the sale and residential repurposing of surplus federal buildings. The Good Neighbor Program, administered by the General Services Administration (GSA), facilitated these transactions.

In March 2025, a bipartisan bill, the Revitalizing Downtown and Main Street Act, was introduced. This proposed legislation offers federal tax credits for projects converting existing, vacant and/or underutilized CRE properties into new residential housing. Tax credits would range from 20% to 30%, depending on the project type. Passage of the bill is still pending.

The Trump administration supports housing growth through its pledge to cut back on environmental and other regulations that stifle construction. The current administration is also continuing the GSA’s sale of non-essential federal properties for purposes of converting to residential use.

The Numbers Are Growing — and So Is the Opportunity for Renters

Chicago-based CRE consulting firm Realogic has extensively researched and tracked commercial-to-residential conversion projects nationwide.

Renters may rejoice that, according to Realogic, the number of these projects is on the rise. Office-to-residential conversions, tracked as individual units, increased from just over 12,000 in 2021, to nearly 71,000 by early 2025. Numbers are approximate.

The firm also named the major metropolitan areas where this converted multifamily growth is happening. Here’s how they ranked unit activity roughly one year ago, in February 2025.

Some development companies have added new divisions specifically to manage these types of projects. Select cities have likewise made these conversions a priority. For example, in 2023, the City of Boston, Massachusetts, launched its “Office to Residential Conversion Program.” The goal was to increase much-needed housing in the downtown area—including affordable rentals—while bringing “new life to vacant Class B and C office space negatively impacted by the pandemic.”

The program has enjoyed success. To date, 27 buildings representing 1.25 million square feet have been converted to 1,517 units, including 284 affordable units. The city plans to continue the program in 2026, with approximately five projects currently under construction. Completion of more than 300 new units is expected by year-end.

With federal tax incentives, industry and government support along with the market’s desire to repurpose commercial properties back to profitability, renters can look forward to more options as these commercial real estate property conversions continue to change the multifamily landscape for the better.