On Tuesday, the San Jose City Council voted unanimously to expand a housing incentive program to include office-to-residential conversion projects with at least 20 new homes. The move aims to address persistent downtown office vacancies and increase housing supply by offering financial incentives for qualifying developments.
The expansion matters as San Jose continues to face a housing crisis, while its downtown office vacancy rate remains above 20 percent—significantly higher than before the pandemic. City officials say converting underused offices into homes could help alleviate both issues.
“Expanding this program to include office to residential conversions is a common sense way to address the ongoing challenges that have been cited about high vacancy rates throughout downtown, while encouraging the conversion of empty buildings into desperately needed housing,” District 3 Councilmember Anthony Tordillos said during Tuesday’s meeting, according to San José Spotlight.
The expanded program introduces phased incentives. In the first phase—lasting up to two years or until it reaches projects totaling 500 homes—qualifying developments can avoid 100 percent of the city’s construction tax and half of its park fees. A second phase covering another 1,000 homes will offer less generous waivers. Projects meeting certain labor standards may qualify for further reductions.
Despite these efforts, no office-to-housing conversion project has yet been completed in San Jose. Local real estate experts cite the complexity and cost of retrofitting offices as major barriers. “You need to redo your whole structural system (…) It’s literally cheaper to tear the building down and build it brand new than to retrofit. So that’s why you don’t see it a lot,” developer Erik Hayden, co-founder of Urban Catalyst, told San José Spotlight.
Some observers remain cautiously optimistic. Bob Staedler, principal with Silicon Valley Synergy, said: “I understand the healthy skepticism, but like everything else, once you see a couple get done, I think you’ll see an avalanche come after that (…) I think the city just provided enough flexibility for them to be able to make the projects pencil.” Ali Sapirman from Housing Action Coalition added: “I don’t think this is going to be the solution that solves everything (…) But it will be an important part.”
