Mayor Lurie, President Mandelman Move to Facilitate Office-To-Residential Conversions, Foster 24/7 Downtown

SAN FRANCISCO – Mayor Daniel Lurie and Board of Supervisors President Rafael Mandelman today introduced legislation to create a downtown revitalization financing district to support the conversion of vacant and underutilized offices and commercial buildings into much-needed housing and foster a vibrant 24/7 neighborhood downtown.

Sponsored by Mayor Lurie and co-sponsored by President Mandelman along with District 6 Supervisor Matt Dorsey, District 5 Supervisor Bilal Mahmood, District 3 Supervisor Danny Sauter, and District 2 Supervisor Stephen Sherrill, the legislation marks the first formal step in establishing the new financing district. The new legislation builds on an ordinance—sponsored by Mayor Lurie and co-sponsored by Supervisors Dorsey and Sauter—that passed overwhelmingly in February, removing barriers to these conversion projects.

Mayor Lurie has made downtown revitalization a key focus of his administration, taking bold steps to cut red tape and keep the streets safe and clean. He introduced a permanent San Francisco Police Department Hospitality Zone Task Force to keep Union Square, the Moscone Convention Center, and Yerba Buena Gardens safe 365 days a year. In February, he launched PermitSF to streamline the city’s permitting system and help new small businesses open and proposed new state legislation to support nightlife by creating more liquor licenses for new bars and restaurants downtown. And earlier this week, Mayor Lurie welcomed new retail pop-ups downtown through the Vacant to Vibrant program.

“In February, we partnered with the Board of Supervisors to help turn empty offices into homes we need, and today we are taking action again to help get those projects over the finish line,” said Mayor Lurie. “For our downtown to be vibrant, it must be a place people want to be 24/7 — that means inviting tourists back, opening new businesses, and, yes, building more homes. I want to thank President Mandelman and the entire board for turning our shared commitment to downtown into action that will help our economy take off.”

The financing district would incentivize the conversion of underutilized office space into residential units by reinvesting the increased property tax revenue generated by these projects to offset development costs. Property taxes are one of the main public-sector costs for building owners, and the increases to property tax created by these residential conversions will be eligible for reinvestment into these projects to offset development costs and improve the feasibility of these challenging projects. The district would cover core downtown office and commercial areas including the Market Street corridor from the waterfront to Civic Center, the Financial District, Union Square, and the East Cut, Rincon, and Yerba Buena neighborhoods south of Market.

Preliminary analysis of the proposed program in San Francisco has identified approximately 1,200 eligible properties within the proposed district, and further estimates indicate that approximately 50 properties—representing capacity for approximately 4,400 residential units—could be suitable candidates to participate over the lifetime of the program based on building characteristics such as age, size, condition, and current vacancy rate. A similar tax incentive in New York City led to the conversion of obsolete office space into over 12,000 units in lower Manhattan over 10 years from the late 1990s to early 2000s.

The legislation and the creation of the financing district were enabled by Assembly Bill 2488, sponsored by former Assemblymember Phil Ting and the Bay Area Council and signed into law last year.

“For San Francisco to thrive, our downtown must thrive. Establishment of the Downtown Revitalization and Economic Recovery Financing District is one element of the city’s broader strategy to unleash the potential of underused buildings, support adaptive reuse, and produce thousands of much-needed homes,” said President Mandelman. “Thanks and congratulations to former Assemblyman Ting and Mayor Lurie for moving the proposal forward; I am proud to co-sponsor this legislation.”

“By doing everything we can to incentivize commercial-to-residential conversions, we’re not just speeding needed progress on housing production—we’re updating 20th-century land use decisions to create thriving 21st-century mixed-use neighborhoods,” said Supervisor Dorsey. “Mayor Lurie and I are in lock step on downtown revitalization, and I’m grateful to partner with him and his team in implementing AB 2488 to right past wrongs of underinvestment in downtown residential projects. I’m also grateful to former Assemblymember Phil Ting for his leadership in authoring AB 2488, which will be a game changer for successful adaptive reuse endeavors.”

“Converting vacant and under-utilized office space is a complex development challenge and creative solutions like this downtown revitalization financing district are welcome initiatives to boost our downtown recovery and ensure a vibrant future for the heart of San Francisco,” said Supervisor Mahmood.

“Establishing a downtown financing district means we're one step closer to a modern downtown filled with new homes, bustling small business, and a 24/7 arts and culture scene,” said Supervisor Sauter. “By unlocking more flexibility in financing and planning, this legislation will usher in a wave of new activity to accelerate our downtown recovery.”

“We need people downtown, not just to visit or work but to live. This legislation helps bring vibrancy and life back to our city’s core by reinvesting in converting empty offices into homes,” said Supervisor Sherrill. “I’m grateful to Mayor Lurie and proud to stand alongside him in taking action to revitalize downtown. When downtown succeeds, the entire city is lifted up with it.”

The legislative package introduced today includes a resolution stating the city’s intent to implement the new program authorized by state law and an ordinance to create a Downton Revitalization Financing District Board that would be made up of members of the Board of Supervisors and members of the public appointed by the Board of Supervisors. Following approval of the legislation by the Board of Supervisors, the city would work to develop a detailed financing plan and program regulations that would be adopted by the District Board and Board of Supervisors later this year.

Once the financing district is established, eligible conversion projects would have through 2032 to enroll in the program and would be able to receive annual property tax increment disbursements for up to 30 years to offset project development costs.

"The Bay Area Council thanks Mayor Lurie for proposing this ordinance to opt into AB 2488, which will accelerate downtown San Francisco’s recovery. These office-to-housing conversions will get more homes downtown and more feet on the street,” said Jim Wunderman, President and CEO of the Bay Area Council. “Amid already rising foot traffic in downtown San Francisco, this ordinance is one of the many reasons to be optimistic about San Francisco’s future.”

“With the creation of the downtown revitalization financing district being initiated today by Mayor Lurie and Board President Mandelman, San Francisco joins the ranks of major cities around the country, from New York to Boston to Chicago, that have recognized the power of property tax relief to enable the revitalization of downtown districts through office-to-residential conversions,” said Marc Babsin, President of the Emerald Fund. “Combined with the city’s prior efforts to reduce impact fees and transfer taxes on conversions, we anticipate that the creation of this financing district will lead directly to the conversion of numerous downtown office buildings into much needed housing, which will bring energy and activation to the streets of downtown San Francisco.”

“Our office has been laser-focused on finding creative ways to unlock the development pipeline in partnership with developers who are ready to invest big in San Francisco,” said Anne Taupier, Director of Development at the Office of Economic and Workforce Development. “The post-pandemic economy calls for new and innovative strategies to support our recovery, and this new financing district for commercial-to-residential conversions is the latest in a series of steps we've taken to achieve that. We’re already seeing our efforts paying off, and we’ll continue working to do even more.”