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Cities Pursue Conversion Initiatives

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Fall 2023   


Cities Pursue Conversion Initiatives


      • Through tax increment financing, Chicago’s LaSalle Reimagined initiative will support the conversion of 5 historic office buildings into more than 1,600 mixed-income housing units featuring ground-floor retail and other resident and neighborhood amenities that will increase foot traffic downtown.
      • The Pittsburgh Downtown Conversion Program offers loans to developers who renovate vacant Class B and C office buildings and reserve at least 20 percent of the units for low-income households.
      • The city council of Portland, Oregon, passed two ordinances to facilitate conversions by waiving system development charges and lowering the previous seismic design standard to one accepted nationally without sacrificing life safety performance during an earthquake.

As remote work necessitated by the COVID-19 pandemic led to high vacancies in downtown office buildings, many U.S. cities are repurposing vacant office spaces into residential units to increase the affordable housing supply. Several cities have proposed new programs that offer public funding, tax incentives, and regulatory changes to facilitate office-to-residential conversions. One of the nation’s largest such efforts to date is the city of Chicago’s LaSalle Street Reimagined initiative.1 Launched in September 2022, the initiative will repurpose vacant office buildings along LaSalle Street in Chicago’s historic financial district to add more than 600 affordable housing units along with retail amenities.2 In April 2022, the city of Pittsburgh initiated the Pittsburgh Downtown Conversion Program (PDCP), offering financial assistance for projects that convert vacant office space to mixed-income housing. Portland, Oregon, adopted legislation in March 2023 to support conversions in its downtown by lowering the cost of seismic retrofits necessary for older office buildings. In addition to increasing affordable housing opportunities, these local conversion initiatives have the potential to revitalize and improve vibrancy as urban downtowns recover from the pandemic.

Adaptive Reuse in Chicago’s LaSalle Street Corridor

The area known as the Loop is Chicago’s official downtown area, bordered by Lake Michigan to the east, the Chicago River to the north and west, and Ida B. Wells Drive to the south. Within the Loop is LaSalle Street, home to Chicago’s financial district.3 Approximately 85 percent of the real estate on LaSalle Street consists of office space. Compared with other areas of the city’s downtown, the LaSalle Street corridor has a "monoculture of office use," with law firms and banks occupying most of the historic buildings, many of which date back to the early 1900s.4 In 2006, the city designated LaSalle Street as the LaSalle/Central tax increment financing (TIF) district to make resources available to rehabilitate historic buildings that already were experiencing high vacancies because of economic change. The TIF district designation also was intended to spur retail development and improve public spaces and streets.5 From 2000 to 2022, occupancy rates in the corridor declined 22 percent — the largest decline experienced among comparable downtown streets. In August 2022, the city commissioned a market analysis that determined that 26 percent of office space in the LaSalle Street corridor — the equivalent of roughly 5 million square feet — was vacant, more than any other part of the central business district.6 The COVID-19 pandemic and its accompanying increase in remote work has exacerbated these high vacancy rates. Several businesses in the corridor, including Bank of America, moved to more modern buildings in other areas of Chicago’s downtown.7

Audience seated in multiple rows listening to a presentation in a large room with a framed glass roof.
In September 2022, Chicago officials launched the LaSalle Reimagined initiative and issued an invitation for proposals for office-to-residential conversion projects. Courtesy of City of Chicago

LaSalle Street’s revitalization process began with several community engagement activities to determine shared goals. During the height of the COVID-19 pandemic, the city spent 6 months conducting virtual workshops with several stakeholders, including community leaders, public officials, business owners, developers, and tourism officials, to develop recovery strategies.8 The 2021 Central City Recovery Roadmap emerged from these discussions, which, in addition to recommending streamlined regulatory and financial assistance for adaptive reuse projects, also suggests adding livability features that repurpose the ground floors of historic buildings to house entertainment venues, grocery stores, restaurants, and retail. The roadmap recommends making downtown attractive to new residents by pairing artists with property managers for art installations; enabling grocery stores to expand onto sidewalks for special events; and encouraging more resident-focused activities to activate the downtown, such as farmers markets, pop-up shops, festivals, and other family-friendly events. The roadmap subcommittees identified 90 action items, with one focused on the future and market potential for historic buildings on LaSalle Street, Michigan Avenue, and State Street.9 In January 2022, Urban Land Institute Chicago launched a technical assistance panel (TAP) whose members toured LaSalle Street and conducted interviews with approximately 70 stakeholders, including business and property owners, residents, and city officials. TAP members suggested that LaSalle Street would eventually witness renewal with or without city intervention because competitive investors would acquire and renovate buildings. Investors not needing city funding can bypass city council approval because flexible downtown zoning laws allow upper-floor office-to-residential conversions, noted Cynthia Roubik, assistant commissioner for the Chicago Department of Planning and Development (DPD). However, city intervention through financial incentives such as TIF funding can direct these revitalization efforts, achieving more public benefits than what the private market alone can accomplish.10

According to a 2022 study by the Chicago Loop Alliance, a local community advocacy group, 90 percent of Loop households earning a median income of $75,000 or less are housing cost burdened, paying more than 30 percent of their income for housing. In 2022, fewer than 1 percent of all units in the Loop (239 units) were designated as affordable, and only 23 affordable units were under construction.11 Within the LaSalle Street corridor itself, however, no affordable housing units exist, and none were planned for development before 2023. Roubik noted that residential construction in downtown Chicago has been very strong even in the midst of the pandemic. Between 2000 and 2022, the number of leased multifamily units in the LaSalle Street corridor increased by 113 percent. But this growth focused inequitably on luxury rental units and condos, Roubik explained. The city’s approach to expanding these upward growth trends aims to make access to housing and amenities more equitable for all households. In summer 2022, the city met individually with property owners and community groups active in the corridor to gather support for conversions and mixed-use development.12 These public engagement and data collection efforts laid the groundwork for the LaSalle Reimagined initiative and helped the city determine the feasibility of office-to-residential conversions.

LaSalle Reimagined Initiative

In September 2022, the Office of the Mayor, DPD, Department of Housing (DOH), Chicago Department of Transportation (CDOT), and Department of Cultural Affairs and Special Events (DCASE) launched the LaSalle Reimagined initiative and issued an invitation for proposals (IFP) to developers interested in converting millions of square feet in office space to residential units using TIF subsidies and other funds. The initiative aims to transform LaSalle Street from "an office-oriented monoculture to a dynamic, mixed-use environment that leverages the corridor’s historic properties and public spaces."13 In addition to being in the LaSalle/Central TIF district, the initiative requires conversion projects to designate at least 30 percent of the total units as affordable for households earning up to 60 percent of the area median income (AMI). Proposals must also include plans to add retail amenities that promote a mixed-use environment.14 DPD looks favorably on proposals that include minority-owned and women-owned businesses either as part of the construction team or as property owners. DPD does not limit the selection to developers with a proven track record, but the department is also willing to accept proposals from emerging developers who show strong potential for success. The city is committed to partnering early with developers and businesses to "reposition downtown in a way that is more inclusive" and provide "housing options for all the workers in the city," Roubik stated.15

Rendering of a tall multistory building lit up in the evening.
Of the five projects in the LaSalle Reimagined initiative, 105 West Adams Street will offer the largest percentage of affordable units, in addition to a grocery store and coffeeshop. Courtesy of City of Chicago

A total of nine developers responded to the IFP; the city selected three of the proposals in March 2023 but allowed additional developers meeting the eligibility requirements to submit applications. The initial application round helped DPD gauge developer interest. "We didn’t know what was possible, so it was a little bit of a leap of faith. When we received so many great projects, we were very excited," said Roubik. In April and May 2023, the city received and accepted two more applications for a total of five projects.16

One of the approved projects is the conversion of 208 South LaSalle Street, which previously housed the Continental and Commercial National Bank, to The LaSalle Residences. The building, which dates to 1914, was added to the National Register of Historic Places in February 2007 and designated a Chicago Landmark in December 2007. A total of 222,500 square feet will be repurposed for 280 studio, one-bedroom, and two-bedroom units, of which 84 will be affordable.17 In 2020, Bank of America vacated 900,000 square feet across 20 floors of the 1934 Field Building at 135 South LaSalle Street. This project will convert 750,000 square feet to 430 studio, one-bedroom, and two-bedroom units, of which 129 units will be affordable. The Harris Bank Building, located at 111 West Monroe Street, is a 1910 high-rise landmark that will become The Monroe Residences and Hotel. The 610,000 square feet of converted office space will include 105 affordable units out of 349 studio, one-bedroom, and two-bedroom units on the top floors with a hotel below. The renovation will include a lightwell to brighten the space. Unlike the other projects, which have straightforward construction plans, the addition of the lightwell to 111 West Monroe will make this conversion project among the most challenging of the LaSalle Reimagined projects because it involves carving out the floorplate, noted Roubik. All the projects will add ground-floor retail such as grocery stores and restaurants.18

For the conversion of 105 West Adams Street, project developers Celadon Partners and the Blackwood Group aim to create 247 apartments in the historic 1927 high rise, with 185 units (75%) designated as affordable. The project will also include other amenities, such as a fitness center, rooftop decks, a community room, and a grocery store and coffee shop. Celadon Partners is the only affordable housing developer participating in the initiative, and out of the five proposals, its project will offer the largest percentage of affordable housing. In addition, Blackwood Group is a certified Minority-Owned Business Enterprise, furthering DPD’s goals for including a diverse construction workforce. The project will cater to students and downtown employees who earn between 40 and 80 percent of AMI. The developers of 30 North LaSalle Street, a historic 44-story building originally constructed in 1974, will create 349 total units, of which 105 will be affordable.19 The development costs for all five proposed residential projects total approximately $889 million, with an estimated total TIF request of more than $260 million.20 In addition to the residences, the budget for each project covers the necessary building improvements to exterior walls and interior systems to bring them up to code.21

A woman showing an interior space to other people.
In June 2023, the Chicago Department of Planning and Development showed local business owners through vacant ground-floor retail spaces on LaSalle Street to spur interest in future business opportunities that can revitalize the neighborhood. Courtesy of City of Chicago

Once completed, the projects will add 1,655 housing units with 608 units affordable to low- to moderate-income households and downtown workers, representing the largest announced office-to-residential conversion venture in the nation as of May 2023. As Roubik noted, 37 percent of the converted units will be affordable, exceeding the city’s 30 percent affordability goal for the initiative. These conversion projects will also lower the upper-floor vacancy of commercial buildings by approximately 50 percent. Public support for the LaSalle Reimagined initiative has exceeded the city’s expectations, said Roubik. "We’re not forcing anybody to do this, and that’s why we were so pleased by the results that we received."22

Layered Financing

DPD’s biggest challenge is examining the layers of financing for each project, said Roubik.23 TIF funding helps developers recoup revenue lost from renting a portion of the units at affordable rates.24 Without TIF financing, some developers would not add affordable units, and some "would also not even do the proposal at all," Roubik explained. Developers consider TIF a reliable funding source because the district receives a substantial amount of annual tax revenue. At the end of 2021, the LaSalle/Central TIF district had a balance of approximately $197 million collected from local property taxes and other proceeds. In addition to TIF, the projects will combine historic tax credits, low-income housing tax credits, and tax-exempt bonds. Some projects plan to use the Class L tax incentive granted by the Cook County Assessor’s Office, which reduces the property tax rate for designated landmarks or buildings within a Chicago Landmark District. In addition to review by DPD and DOH, all five projects undergo underwriting to assess each developer’s financial health and vet their track record for repaying loans. Next, the applications will be presented to the Community Development Commission and city council for approval, a process anticipated to occur in fall 2023. The projects will invest approximately $1 billion in the corridor.25 The 3 initial projects will create more than 1,600 temporary construction jobs and more than 600 permanent jobs in hospitality, retail, and food services. The Monroe Residences and Hotel will contribute approximately $5.9 million in state and municipal tax revenue to downtown.26

Creating a Complete Neighborhood

Peter Strazzabosco, deputy commissioner of DPD, emphasized that the area must also be "an actual neighborhood with all the amenities that these new residents would expect to have."27 An August 2021 "Lunch on LaSalle" event sponsored by the Building Owners and Managers Association of Chicago (BOMA) in partnership with the city and the Chicago Loop Alliance featured food trucks and live music, which attracted residents and visitors to the corridor.28 Roubik noted that BOMA and the Chicago Loop Alliance have attended all of the DPD events and are strong supporters of the LaSalle Reimagined initiative. On weeknights in summer 2022, the Chicago Loop Alliance hosted "Activate LaSalle," which featured local musicians and artists in a festival-like atmosphere. DCASE is also examining future cultural initiatives such as a pop-up public art program in vacant storefronts, a lighting design competition, seasonal festivals, and an architecture engagement program. To encourage business development, DPD led a tour for more than 100 potential retailers in June 2023 that visited vacant ground-floor storefronts on LaSalle Street. DPD also held a networking event that paired property owners with businesses. DPD also has partnered with CDOT to transform the current imposing streetscape into a more inviting space. In early fall 2023, DPD and CDOT will begin a visioning process followed by a streetscape redesign. The new streetscape installation will coincide with the office-to-residential conversion projects slated for completion between 2025 and 2026.29

Pittsburgh Launches a Conversion Program

Much like the office monoculture of LaSalle Street, most of the buildings in downtown Pittsburgh originally were constructed for office, warehousing, retail, or other commercial uses. Pittsburgh’s central business district (CBD) or downtown, commonly referred to as the Golden Triangle, is bordered by the Allegheny River to the north and the Monongahela River to the south and east. The onset of the COVID-19 pandemic significantly reduced demand for office space across downtown Pittsburgh as more people began to work remotely. Compared with prepandemic activity levels, pedestrian traffic downtown has decreased by one-third, and downtown employment has decreased by half. Thomas Link, chief development officer at the Urban Redevelopment Authority of Pittsburgh (URA), indicated that these shifts are the result of an overall downward trend in office demand and occupancy rates.30 During the first quarter of 2019, the downtown office occupancy rate was 87.1 percent, but by the height of the pandemic, in December 2020, the downtown office occupancy rate had dropped to 8 percent. At the end of 2021, downtown Pittsburgh had approximately 11 million square feet of vacant office space across 154 buildings. Although the downtown office occupancy rate has shown signs of rebounding, as of June 2023, it was 23 percent, still significantly below prepandemic levels. In addition, the downtown residential occupancy rate declined modestly because of the pandemic. From the first quarter of 2019 to the fourth quarter of 2020, the downtown residential occupancy rate fell from 94.2 percent to 81.6 percent. By the first quarter of 2023, however, the area had rebounded to an occupancy rate of 91.5 percent.31 One explanation for the rebound comes from a 2022 resident survey led by the Pittsburgh Downtown Partnership (PDP), a nonprofit community development organization, that found that 57 percent of respondents preferred to live downtown for walkability, proximity to employment, and access to urban amenities such as entertainment venues, transit, and restaurants. PDP suggests that doubling the Golden Triangle’s residential population from roughly 7,000 to 14,000 residents could benefit local businesses and bring more foot traffic to the area.32 Many downtown workers, however, are unable to live near their employment because of the lack of affordable housing units.33 The Golden Triangle has 290 affordable housing units, roughly one-third the number of available affordable units in Lowerhill and Uptown, two adjacent neighborhoods in the greater downtown area. Approximately 41 percent of Golden Triangle residents earn less than $75,000 per year.34 According to 2021 American Community Survey 5-year estimates, 25.6 percent of Golden Triangle residents are housing cost burdened, paying more than 30 percent of their income in rent.35

Aerial view of the city of Pittsburgh.
Pittsburgh will support the conversion of vacant office buildings into residential units in the Golden Triangle through developer loans administered by the Urban Redevelopment Authority of Pittsburgh.

The Pittsburgh Downtown Conversion Program (PDCP) emerged from discussions among URA and several stakeholders, including the city, mayor’s office, Allegheny County, state of Pennsylvania, and PDP to jumpstart the economic recovery of downtown through financial support for converting vacant, aging Class B and C office buildings into residential units. Launched in April 2022, PDCP will help address the "pandemic’s lasting economic impact on Downtown Pittsburgh’s office market and the need for new workforce and affordable housing units by supporting the conversion of fallow office buildings into housing," said Link.36 The program supports developers through loans for office-to-residential conversion projects that reserve 20 percent of their units for low-income households. "Replacing to the best extent possible lost office workers with residents will support the economic vitality of downtown Pittsburgh. More downtown residents mean more shoppers and patrons for small businesses and cultural assets, livelier parks, and more inviting streets," said Link.37

Eligibility Requirements

To initiate the PDCP, the city partnered with URA, the state, and Allegheny County.38 URA administers and manages PDCP and issues subordinate loans to eligible developers. It serves as the "fiscal conduit of city, state, and local dollars invested through the PDCP, by underwriting PDCP applications, entering agreements, and servicing PDCP investments," said Link. In October 2022, URA’s board approved the PDCP guidelines and issued a request for proposals in January 2023. Eligible projects must be in the CBD and reserve at least 20 percent of units for households earning no more than 80 percent of AMI, with affordability preserved for a minimum of 40 years after occupancy. The long-term affordability requirement will be ensured by a Declaration and Agreement of Restrictive Covenants issued during the loan closing and kept on file in the Office of the Recorder of Deeds of Allegheny County.39 The program also emphasizes projects that prioritize leasing to downtown employees earning no more than 60 percent of AMI. In addition, the program provides tenants with source of income discrimination protection by prohibiting any project that receives program financing from denying housing to tenants holding housing choice vouchers.40 Developers interested in PDCP can submit an application, along with the $500 application fee, to URA through its Ion Wave Technologies Platform.41

URA requires all PDCP projects to adhere to fair housing and accessibility standards. All projects must include visitable features such as zero-step entryways and wide doorways and halls to allow wheelchair access.42 Project developers must submit an Affirmative Fair Housing Marketing Plan to URA that outlines their outreach efforts to eligible residents in target groups.43 Each project proposal must also include a Minority and Women Business Enterprise Narrative (MWBE Narrative) in collaboration with URA’s MWBE Program Office. For projects that cost more than $250,000, URA requires developers to ensure that at least 18 percent and 7 percent of the project workforce is composed of minority-owned businesses and women-owned businesses, respectively. The MWBE Narrative should highlight targeted outreach efforts to MWBE groups and the developer’s history of meeting MWBE metrics with other projects. Developers should also explain project areas that they can subcontract to MWBE firms.44

Financing Development

Link explained that although the city has a track record of conversions, many are solely market-rate projects, and URA believes that "it is important to bring a mix of affordability to downtown housing." Affordable units tend to face financing gaps because they require the same construction expenses as market-rate units do. Although the city’s Local Economic Revitalization Tax Act offers tax abatements to incentivize affordable housing development, foster job creation, and revitalize distressed areas, PDCP will contribute additional funding for projects facing financing gaps that tax abatement programs cannot close, Link stated.45 PDCP’s total budget is $9 million, which includes American Rescue Plan Act (ARPA) Coronavirus State and Local Fiscal Recovery Funds (SLFRF).46 Of the $9 million in ARPA SLFRF, $3 million comes from the state and $2.1 million comes from the city. URA invested a total of $900,000, and Allegheny County invested $3 million.47 URA will distribute PDCP development loans for eligible projects based on a review of applications and will award the most funding to projects that create deeply affordable units. The maximum funding per project is $3 million at the 50 percent of AMI level, $2 million at the 60 percent of AMI level, and $1 million at the 80 percent of AMI level, or the PDCP loan will cover 40 percent of total development costs, whichever is less. Developers must pay closing costs equivalent to 2 percent of the PDCP loan. Developers can use program funds for construction and soft costs such as architectural and structural engineering changes related to the conversion but not for developer fees, financing fees, and pre-development costs. Acquisition costs are considered only on a case-by-case basis.48 URA staff will examine developers’ financial background during the underwriting process to determine their eligibility for the program. Developers must be up to date on all city, state, and federal taxes and cannot be delinquent on any previously issued URA loans.49 Before closing on the URA PDCP loan, the developer must already own the property, which must be vacant before construction begins. URA disburses the PDCP loans as a reimbursement once it has inspected the completed work, and it bases the disbursement schedule on project deliverables or a percentage of construction work completed. Developers must submit quarterly reports that include invoices, receipts, checks, contracts, project status updates, and other records to inform URA of their progress. After completing the project, developers must submit annual reports to URA that include rent ledgers, tenant length of occupancy, security deposits, and lease end dates to ensure that they adhere to the loan repayment schedule and affordability requirements.50

Partial view of a triangular multistory building in front of another taller building.
The Triangle Building is the first project selected for a PDCP loan to convert the property into 15 residential units above a ground-floor grocery store and café.

The U.S. Department of the Treasury requires recipients to spend ARPA SLFRF by December 31, 2026.51 URA anticipates that PDCP will disburse all ARPA funds well before the 2026 deadline, and the city is exploring other resources to sustain the program once the initial funding ends. One potential funding source is the state’s additional ARPA funding reserves.52 URA favors projects that finance development costs using funding from additional sources, including private debt and equity and federal tax credits such as historic tax credits, new markets tax credits, and low-income housing tax credits. Following a cash flow analysis of the developer’s operating income, URA will establish a yearly or amortizing monthly repayment schedule for PDCP loans. The loan term is based on the term of the first mortgage or set at 40 years from the project completion date, whichever is longer.53

Supporting Downtown Vitality

In May 2023, URA issued its first PDCP loan totaling $300,000 to convert the Triangle Building at 926 Liberty Avenue. The property, which was originally constructed in 1866, will be renovated to include 15 residential units along with a ground floor café and small grocery store. Three units will be affordable to residents earning incomes at or below 50 percent of AMI, and the remaining will be available at market rents.54 The second project slated for conversion, The Pittsburgher, is located at 428 Forbes Avenue and will add a mix of 130 market-rate and affordable units. Link indicated that developers have a strong interest in the program and are "eager to participate." As of June 2023, URA is working with many other prospective PDCP developers, and other potential projects may emerge from these discussions. URA hopes that PDCP’s success will spur additional investment in downtown office-to-residential conversion projects.55 PDP’s goal is to convert approximately 4 million square feet of office space in the Golden Triangle into residential units, but reaching this milestone will require considerably more investment.56 As Link stated, "We are grateful for the initial funding. As we dig deeper into the need, we expect to find a level of demand for the PDCP that current funding levels cannot fully address." Link noted that the initial $9 million in funding could increase downtown’s population by several hundred residents.57

PDCP aims to foster a vibrant downtown that is accessible to local workers, especially lower-income workers.58 PDP has spearheaded several events to enliven the downtown area, such as weekly markets and public art installations that draw visitors, residents, and employees to enjoy cultural events downtown. Downtown Pittsburgh’s Market Square, the site of several community events, is accessible by public transit and within walking distance of adjacent neighborhoods. PDP hosts a farmers’ market in Market Square that runs from May through October each year and features local produce and goods from area farmers and businesses as well as local musicians that provide entertainment. A vibrant night market draws residents from 5:00 pm to 10:00 pm from June through October. On evenings and weekends, residents can attend free yoga classes in Market Square from May to October.59 These efforts have helped pedestrian traffic in the Golden Triangle rebound to prepandemic levels, with approximately 60,000 people visiting Market Square every week.60 In 2013, PDP developed the Downtown Activation and Public Art initiative, which commissions local artists to enhance the vibrancy of downtown through visual and interactive pieces. The artwork has helped revitalize areas in the Cultural District through sculpture, murals, nature, and art that transforms bike racks and water fountains.61 As more residents relocate downtown, continuing these efforts to boost neighborhood vitality will be critical.

In June 2023, Pittsburgh’s city council approved a $40,000 cap on zoning review fees for large developments to keep costs manageable for local developers.62 Link said that "this change in zoning would make the ‘minor’ interior conversions that are part of the PDCP much simpler to undertake. In concert with available PDCP funding, these changes should make affordable housing development via office conversion a more viable option for developers." URA is hopeful that PDCP will serve as a model for other urban downtowns nationwide to show that investing in office-to-residential conversions is necessary for pandemic recovery. The conversion projects have reduced office vacancies in downtown Pittsburgh, which can help enhance the market for the remaining available commercial office space. "In other words, we hope to see a ‘right-sizing’ of the supply of office space that reflects post-pandemic demand," said Link.63

Portland Passes Ordinances To Facilitate Conversions

Like other U.S. cities, Portland, Oregon, is recovering from the COVID-19 pandemic, which spurred a significant decline in office space occupancy in its downtown. As of June 2023, the office vacancy rate in downtown Portland was approximately 25 percent. Since 2015, the city has also faced a housing emergency; experts indicate that Portland is experiencing an affordable housing shortage of approximately 20,000 units, which is contributing to the city’s weak recovery from the pandemic.64 A 2023 study led by the University of Toronto’s School of Cities and the University of California Berkeley examined downtown activity using mobile phone locational data across 63 large cities of at least 350,000 people in the United States and Canada. From December 2022 to February 2023, the researchers found that Portland had the third-worst level of downtown activity, ranking 61st — a significant drop from the March 2020 to May 2020 period, when Portland ranked 14th in downtown activity. From December 2022 to February 2023, activity in Portland had reached only 40 percent of its 2019 prepandemic level.65 These trends have led the city to enact strategies to bring people and investment back to downtown.

For 7 months in 2022 and early 2023, the city examined the feasibility of repurposing vacant office buildings to produce affordable housing units. Portland Mayor Ted Wheeler’s office consulted with local stakeholders including neighborhood associations, property owners, multifamily housing developers, construction firms, architects, and engineers to consider the feasibility of office-to-residential conversions and the incentives needed to spur such projects. The mayor’s office also gathered perspectives on office-to-residential conversions from staff at Prosper Portland — the city’s economic and urban development agency — and ECONorthwest, an independent research firm studying urban planning issues in Portland.66 These discussions considered many factors, especially Portland’s location near the Cascadia Subduction Zone, a fault line in the Pacific Ocean with the potential to produce a 9.0+ magnitude earthquake in Oregon.67 Several of Portland’s underused or vacant office buildings were constructed before 1994 and do not meet the current standard for residential building codes for earthquakes. Older Class B and C office buildings are the types considered for office-to-residential conversions because they are in less demand for office use and tend to lack employee amenities. However, they are at high risk for collapse during earthquakes because of their unreinforced masonry construction. These buildings would need expensive seismic retrofits to be suitable for residential use.68

Since the 1990s, Portland has expanded seismic building codes to increase safety. In 1994, the city began requiring upgrades to older buildings when, for example, a change of occupancy shifts more than one-third of a building’s floor area from office use to residential use. Chapter 24.85 of the City of Portland Building Code ranks building occupancies into six "relative hazard classifications," with 1 being the lowest hazard level and 6 being the highest. "Converting from an office use to a residential use represents a change in relative hazard classification from 3 to 4," said Doug Morgan, plan review manager in the city of Portland’s Bureau of Development Services (BDS).69 The higher hazard classification requires seismic improvements because of changes in the floor area and occupant load.70 The costs to bring an older building up to the current seismic code can range from $50 to $125 per square foot.71 The city recognized that without financial incentives, downtown office buildings would remain vacant and likely would not be converted.72

Making Seismic Retrofits Feasible

In March 2023, Portland’s city council unanimously passed two ordinances to streamline office-to-residential conversions.73 Effective March 15, 2023, Ordinance 191202 exempts from system development charges (SDCs) eligible projects that convert office space to residential use and undertake seismic retrofits to make buildings safer in an earthquake. SDCs, which are one-time fees developers pay to the city for a proposed new use of a property, offset city costs associated with disruptions to storm drains, sewer systems, parks, water systems, and transportation that result from project development.74 Many developers avoid conversion projects because the projected SDCs often exceed tens of thousands of dollars.75

To take advantage of the SDC exemption, developers must submit permit applications for their conversion projects to BDS by July 1, 2027. The 2027 deadline is intended to encourage developers to speed up project development within a 4-year period. The total exemption cannot exceed the costs required to complete the seismic improvements or $3 million, whichever is less. Under this ordinance, property owners must agree to maintain the building’s residential use for at least 10 years. Although the ordinance itself does not impose affordability requirements, developers must comply with the city’s Inclusionary Housing program guidelines, which require any proposed residential development with 20 or more units in the central city to designate 10 percent of units as affordable at 60 percent of the median family income (MFI) or 20 percent of units affordable at 80 percent of the MFI.76 The city ranks neighborhoods based on several variables including access to education, jobs, transportation, and amenities such as parks, medical care, grocery stores, and recreation. The resulting "opportunity map" ranks neighborhoods on a scale of 1 to 5, with a high-opportunity area having a score of 5. The high-opportunity neighborhoods with a score of 5 are concentrated in the downtown core, "offering a mix of desirable services and opportunities where the city generally aims to increase access," said Christina Ghan, policy director with City Commissioner Carmen Rubio.77 Conversions using the SDC exemption must be located in a high-opportunity area with a score of 5.

Low-angle aerial view of city of Portland with Mount Hood in the far background.
Portland has adopted a nationally accepted seismic design standard that will maintain life safety performance during an earthquake and lower the cost of retrofits for developers.

A second ordinance (Ordinance 191203), also effective March 15, 2023, lowers the seismic design standards for office-to-residential conversion projects. Before this ordinance, a change of occupancy to residential fell under the American Society of Civil Engineers (ASCE) 41 Basic Performance Objective Equivalent to New Building Standards, which required retrofits to the existing building to achieve performance equivalent to the standard of new construction.78 With this ordinance, however, buildings can now follow the ASCE 41 Basic Performance Objective for Existing Buildings seismic improvement standard assigned to existing buildings. The lower standard will reduce the cost of retrofits for developers. Although the ordinance lowers the seismic standard for conversion projects, BDS indicates that this reduction will still maintain "life safety performance" and ensure that the converted buildings will be sturdy enough to ensure that people can exit safely. This standard is accepted nationally and matches the residential building requirements in other earthquake-prone cities such as San Francisco.79

Financial assistance to make these retrofits possible could have larger spillover effects. Morgan suggested that "the conversion of vacant or underutilized office space to residential use has [the] potential to contribute to the revitalization of the central business district while also contributing to housing needs of the region."80

Development Process

BDS will oversee the conversion application process and offer clients technical assistance throughout the preliminary design and permitting phase until construction is complete. As of June 2023, BDS had not yet received an application for an office-to-residential conversion project, but the bureau’s staff members are working closely with interested developers by "providing internal avenues for subject-matter experts to provide more specific feedback related to permit requirements and potential fees to convert these buildings," said David Kuhnhausen, permitting services manager in BDS.81 Developers interested in conducting an office-to-residential conversion project in Portland can contact the customer success team at BDS, which will request further information about the project’s location, scope, anticipated number of residential units, and number of floors to be converted. The bureau will then match the developer with a BDS staff member who will guide them throughout the preliminary planning phases and assemble a project team composed of staff from several city review bureaus, including development services, environmental services, fire and rescue, housing, transportation, urban forestry, and water.82 BDS understands "the complexity associated with this scope of work," said Kuhnhausen, and the single point of contact at BDS will "foster increased collaboration and idea-sharing... with customers." The single point of contact is available throughout the renovation process to answer questions.83 Before developing architectural plans, the developer must conduct a site visit with their point of contact, an architect or designer, and the project team to share the vision for the property and identify possible challenges with the site. For in-depth feedback, BDS staff members recommend that developers schedule an "early assistance" meeting with the project team to ensure a thorough permit application and discuss project fees and any city-required upgrades to the building.84

Early Progress

As of June 2023, several developers have contacted BDS to express interest in converting three buildings and schedule an early assistance meeting. There is "potential for other interested customers to do so as well," noted Kuhnhausen, but many developers are weighing the costs and benefits of conducting conversion projects.85 One possible conversion project is located at 2121 Southwest Fourth Avenue in Portland’s Innovation Quadrant near the CBD, with many restaurants and amenities within walking distance. The current building owner is examining the costs of seismic retrofits and has expressed interest in converting 2 or 3 floors of the 6-floor building to live-work residential units, which could add about 24 to 36 new studio, one-bedroom, and two-bedroom units.86 Although this and other projects are still in the feasibility study stage, the city expects that once it receives and processes applications, the actual SDC exemption per project will be much less than the $3 million cap. In addition, the city expects fewer than 20 buildings to be financially and structurally ready to proceed with conversions and make use of the exemption before the 2027 deadline. The two ordinances are laying the groundwork for office-to-residential conversions to proceed, but several stakeholders emphasize that more affordable housing strategies will be needed to significantly reduce Portland’s housing shortage.87

Multistory buildings along both sides of a busy street.
Portland will waive system development charges for conversion projects located in high-opportunity areas that are close to employment, transit, education, and other amenities.

The city hopes that the two ordinances will foster new investment in vacant office buildings and spur downtown revitalization and activation of public spaces. In June and July 2021, Portland’s city council allocated $7.4 million in ARPA SLFRF to support several pandemic recovery efforts, with $165,000 allocated to business revitalization and activation from 2020 to 2022.88 In addition, the Portland Events and Film Office (EFO) at Prosper Portland collaborates with several public, private, and nonprofit partners to sponsor events downtown. In April 2023, EFO awarded approximately $550,000 to event producers, 76 percent of whom identify as black, indigenous, or people of color, who will bring cultural events and activities downtown and boost the local economy.89 Downtown activation paired with office-to-residential conversion projects will create a complete neighborhood with amenities for new residents to explore.


Offering public financing and incentives for office-to-residential conversion projects can be a useful strategy for cities looking for ways to increase affordable housing supply and revitalize downtown areas that have witnessed a rise in office vacancy rates because of the COVID-19 pandemic. Chicago, Pittsburgh, and Portland have all adopted different approaches to facilitating conversions. The LaSalle Reimagined initiative in Chicago is using a TIF strategy to support developers undertaking downtown conversion projects. In addition to increasing affordable housing, the initiative will have a broader impact on neighborhood revitalization through projects that will incorporate hotels, ground-floor retail, and streetscape improvements to bring more people downtown. In Pittsburgh, URA is using local, state, and ARPA SLFRF funds to offer loans for conversion projects. Although PDCP has a smaller budget than does Chicago’s initiative, URA hopes that the success of its conversion projects with the initial funds will spur more public investment in the future and, as Link noted, serve as proof that "this type of program and investment is necessary for postpandemic recovery." URA anticipates that the program will eventually increase downtown Pittsburgh’s vibrancy and tax revenue.90 Recognizing that the city’s existing building code and seismic retrofit requirements hindered conversion projects, Portland acted to make seismic retrofits less costly while ensuring that the converted buildings maintain a life-safety standard. All three cities have also enacted programs to activate downtown streets and increase foot traffic through ground-floor amenities, sidewalk events, and markets. The conversion initiatives in these cities are too new to gauge their success, and the projects are still pending, but they have the potential to help low- and moderate-income households access housing near employment centers and spur the vitality of downtown areas through mixed-use developments.

    1. City of Chicago. 2023a. "City of Chicago Announces Two Additional Office-to-Residential Conversion Projects Along LaSalle Street Corridor."
    2. City of Chicago. "LaSalle Street Reimagined" ( Accessed 17 May 2023.
    3. Chicago Loop Alliance. "What is the Loop?" ( Accessed 9 May 2023; Urban Land Institute. 2022. "LaSalle Street: Building a Thriving Future, Chicago, IL," 6.
    4. AECOM. 2022. "LaSalle Street Corridor Business Support Study," 8; 22.
    5. City of Chicago. "LaSalle/Central TIF" ( Accessed 10 May 2023.
    6. AECOM, 32; Peter Grant. 2022. "Chicago to Convert Famous Business District Office Buildings to Apartments," Wall Street Journal, 4 October.
    7. Urban Land Institute, 6.
    8. Joint interview with Cynthia Roubik and Peter Strazzabosco, 12 June 2023.
    9. City of Chicago. 2021. "Central City Recovery Roadmap: Our Central City is Back for All Chicagoans," 12; 21; 24–5.
    10. Joint interview with Cynthia Roubik and Peter Strazzabosco; Urban Land Institute, 8, 10–1.
    11. Chicago Loop Alliance. 2022. "Loop Residential Impact Study," 39.
    12. AECOM, 38; City of Chicago. 2022. "We Will Chicago: A Framework Plan for the City's Future," 7, 9; Joint interview with Cynthia Roubik and Peter Strazzabosco.
    13. City of Chicago. 2023b. "City Selects Three LaSalle Street Adaptive Re-Use Proposals for Financial Support," 28 March press release.
    14. Ibid; "LaSalle Street Reimagined"; Chicago Department of Planning and Development. 2022. "La Salle Street Invitation for Proposals Pre-Bid Conference," YouTube video, Accessed 27 July 2023.
    15. Joint interview with Cynthia Roubik and Peter Strazzabosco.
    16. Ibid; City of Chicago 2023a; City of Chicago 2023b.
    17. City of Chicago. 2023c. "The LaSalle Residences"; City of Chicago. "LaSalle Reimagined IFP Response Summaries" ( Accessed 10 May 2023.
    18. City of Chicago. 2023d. "The Field Building 135 South LaSalle"; Preservation Chicago. "POTENTIAL WIN: Three Historic LaSalle Street Skyscrapers Selected For Adaptive Reuse" ( Accessed 10 May 2023; Hines. "Harris Bank Building" ( Accessed 21 July 2023; "LaSalle Reimagined IFP Response Summaries"; Joint interview with Cynthia Roubik and Peter Strazzabosco; Preservation Chicago.
    19. Melody Mercado. 2023. "City Funding Could Help Bring More Affordable Housing To LaSalle Street," Block Club Chicago, 9 May; City of Chicago. 2023. "The Clark Adams Renewal," 2–3; Lukas Kugler. 2023. "City announces two more LaSalle Reimagined winners: 30 N. LaSalle and 105 W. Adams will get city funding," Urbanize Chicago.
    20. "LaSalle Reimagined IFP Response Summaries"; Mercado.
    21. Joint interview with Cynthia Roubik and Peter Strazzabosco.
    22. Ibid; City of Chicago 2023a; Kugler.
    23. Joint interview with Cynthia Roubik and Peter Strazzabosco.
    24. Alby Gallun. 2023. "Converting Chicago Office to Mixed Use on LaSalle Street," Urban Land Magazine, 24 April.
    25. Joint interview with Cynthia Roubik and Peter Strazzabosco; City of Chicago. "Property Tax Incentives" ( Accessed 15 June 2023; City of Chicago 2023b; City of Chicago 2023c; City of Chicago 2023d; City of Chicago. 2023e. "The Monroe Residences & Hotel"; State of Illinois. 2021. "Annual Tax Increment Finance Report," 6.
    26. City of Chicago 2023c; City of Chicago 2023d; City of Chicago 2023e.
    27. Joint interview with Cynthia Roubik and Peter Strazzabosco.
    28. Urban Land Institute, 16.
    29. Joint interview with Cynthia Roubik and Peter Strazzabosco; City of Chicago. "LaSalle Street Initiative Aims to Revitalize, Repurpose Financial District Buildings" ( Accessed 10 May 2023.
    30. Email correspondence from Thomas Link and Quianna Wasler, 29 June 2023; Pittsburgh Downtown Partnership. 2022. "State of Downtown," 2; Urban Redevelopment Authority of Pittsburgh. n.d. "Pittsburgh Downtown Conversion Program Guidelines," 1.
    31. Pittsburgh Downtown Partnership. 2019. "State of Downtown Pittsburgh," 6, 7; Pittsburgh Downtown Partnership. "Downtown Activity Dashboard" ( Accessed 23 June 2023; Urban Redevelopment Authority of Pittsburgh n.d., 1.
    32. Pittsburgh Downtown Partnership 2022, 1–2; Pittsburgh Downtown Partnership. "About the Pittsburgh Downtown Partnership" ( Accessed 22 June 2023.
    33. Urban Redevelopment Authority of Pittsburgh. 2023. "Request for Proposals (RFP): Pittsburgh Downtown Conversion Program (PDCP)," 2.
    34. Pittsburgh Downtown Partnership 2022, 1; "Downtown Activity Dashboard."
    35. U.S. Census Bureau. "Owner/Renter (Householder) Characteristics," 2021 American Community Survey 5-Year Estimates ( Accessed 22 June 2023.
    36. Email correspondence from Thomas Link and Quianna Wasler; Pittsburgh Downtown Partnership 2022, 3; 6.
    37. Email correspondence from Thomas Link and Quianna Wasler.
    38. City of Pittsburgh. 2022. "City of Pittsburgh Announces Legislation to Launch Pilot Program on Downtown Conversion."
    39. Email correspondence from Thomas Link and Quianna Wasler; Pittsburgh Downtown Partnership 2022, 6; Urban Redevelopment Authority of Pittsburgh 2023, 2–3; 7.
    40. Urban Redevelopment Authority of Pittsburgh n.d., 1; 3.
    41. Urban Redevelopment Authority. "Pittsburgh Downtown Conversion Program" ( Accessed 20 June 2023; Urban Redevelopment Authority of Pittsburgh n.d., 3.
    42. Urban Redevelopment Authority of Pittsburgh 2023, 8; U.S. Department of Housing and Urban Development. 2017. "Communities Support Seniors With Aging-Friendly Policies," Evidence Matters, Summer issue.
    43. Urban Redevelopment Authority of Pittsburgh 2023; U.S. Department of Housing and Urban Development. 2020. "Affirmative Fair Housing Marketing Plan (AFHMP) — Multifamily Housing."
    44. Urban Redevelopment Authority of Pittsburgh 2023, 11–12; Urban Redevelopment Authority of Pittsburgh. 2020. "URA Minority and Women Business Enterprise Narrative Requirements"; Urban Redevelopment Authority of Pittsburgh. "Minority and Women-Owned Business Enterprise (MWBE) Policy" ( Accessed 21 June 2023.
    45. Email correspondence from Thomas Link, 7 July 2023; City of Pittsburgh. "Real Estate Tax Forms" ( Accessed 10 July 2023.
    46. Julia Felton. 2022. "Pittsburgh looks to convert unused office space into residential units," TribLive, 14 July.
    47. Email correspondence from Thomas Link and Quianna Wasler.
    48. Urban Redevelopment Authority of Pittsburgh n.d., 2; 3; Urban Redevelopment Authority of Pittsburgh 2023, 8.
    49. "Pittsburgh Downtown Conversion Program"; Danielle McLean. 2023. "Pittsburgh office-to-residential conversion fund begins to accept bids," Smart Cities Dive, 8 February.
    50. Urban Redevelopment Authority of Pittsburgh 2023, 3; 7–8; 12.
    51. U.S. Department of the Treasury. 2022. "Coronavirus State and Local Fiscal Recovery Funds," 11.
    52. Jillian Forstadt. 2023. "Program converting downtown office space into affordable apartments launches Tuesday," 90.5 WESA, 27 January.
    53. Urban Redevelopment Authority of Pittsburgh n.d., 5; Urban Redevelopment Authority of Pittsburgh 2023, 6.
    54. Urban Redevelopment Authority of Pittsburgh. 2023. "URA Pittsburgh," Twitter post, 11 May. Accessed 29 June 2023; Urban Redevelopment Authority of Pittsburgh. 2023. "URA Board Agenda," 6–7.
    55. Email correspondence from Thomas Link and Quianna Wasler.
    56. Tim Schooley. 2023. "Lubert-Adler exec at ULI panel: 'Pittsburgh doesn't make it easy today for adaptive reuse,'" Pittsburgh Business Times, 23 May.
    57. Email correspondence from Thomas Link and Quianna Wasler.
    58. Urban Redevelopment Authority of Pittsburgh n.d., 1.
    59. Pittsburgh Downtown Partnership. "Programs & Activities" ( Accessed 22 June 2023; Pittsburgh Downtown Partnership. "Market Square Farmers Market" ( Accessed 22 June 2023; Pittsburgh Downtown Partnership. "Night Markets" ( Accessed 22 June 2023; Pittsburgh Downtown Partnership. "Yoga in the Square" ( Accessed 22 June 2023.
    60. Richard A. Hooper. 2023. "Golden Triangle Ambassador Program Launches, Providing Enhanced Hospitality and Public Assistance on City Streets."
    61. Pittsburgh Downtown Partnership. "Downtown Activation + Public Art" ( Accessed 22 June 2023; Pittsburgh Cultural Trust. "Public Art" ( and "Public Art Bike Racks" ( Accessed 22 June 2023; Pittsburgh Cultural Trust. "Water Cube" ( Accessed 23 June 2023.
    62. Julia Felton. 2023. "Zoning fees capped at $40K for large development projects in Pittsburgh," TribLive, 13 June.
    63. Email correspondence from Thomas Link and Quianna Wasler.
    64. City of Portland. 2023a. "191202: Emergency Ordinance"; Email correspondence from Doug Morgan, 26 June 2023.
    65. Karen Chapple, Hannah Moore, Michael Leong, Daniel Huang, Amir Forouhar, Laura Schmahmann, Joy Wang, and Jeff Allen. 2023. "The Death of Downtown? Pandemic Recovery Trajectories across 62 North American Cities," 1–2; University of Toronto and University of California Berkeley. "Death of Downtown? Pandemic Recovery Trajectories across 63 North American Cities" ( Accessed 27 June 2023.
    66. City of Portland 2023a; City of Portland. 2023b. "191203: Emergency Ordinance"; Prosper Portland. "About Us" ( Accessed 27 June 2023; City of Portland. 2023. "March 15, 2023 Council Agenda," YouTube video, 15 March; ECONorthwest. "Our Firm" ( Accessed 22 July 2023.
    67. State of Oregon. "Cascadia Subduction Zone" ( Accessed 16 May 2023; Connor Radnovich. 2023. "Many Portland Office Spaces Are Empty. Why Aren't They Being Converted to Housing?" Portland Monthly, 25 January.
    68. City of Portland 2023a; Radnovich
    69. Email correspondence from Doug Morgan; Email correspondence from Amit Kumar, 26 June 2023.
    70. City of Portland. n.d. "Chapter 24.85 – Seismic Design Requirements for Existing Buildings," 5.
    71. Radnovich.
    72. City of Portland 2023a.
    73. City of Portland. 2023. "Portland City Council adopts two ordinances to assist in office-to-residential conversions"; KATU Staff. 2023. "Portland City Council approves ordinances to easier convert empty offices housing," KATU Portland, 15 March.
    74. City of Portland 2023a; Email correspondence from Doug Morgan.
    75. Alex Zielinski. 2023. "Portland City Council approves incentives to help convert office buildings into apartments," OPB, 15 March.
    76. Email correspondence from Doug Morgan; Zielinski; City of Portland. "Inclusionary Housing" ( Accessed 27 June 2023; City of Portland. "Option 1: Build On-Site at 80% MFI" ( Accessed 29 June 2023; City of Portland. "Option 2: Build On-Site at 60% MFI" ( Accessed 29 June 2023.
    77. Email correspondence from Doug Morgan; Email correspondence from Christina Ghan, 26 June 2023; City of Portland. "Opportunity Mapping" ( Accessed 27 June 2023; City of Portland. "Opportunity Mapping" ( Accessed 27 June 2023.
    78. City of Portland n.d., 2; "March 15, 2023 Council Agenda."
    79. Email correspondence from Amit Kumar; Email correspondence from Doug Morgan; Zielinski; City of Portland 2023b.
    80. Email correspondence from Doug Morgan.
    81. Email correspondence from David Kuhnhausen, 26 June 2023; Email correspondence from Ken Ray, 26 June 2023.
    82. City of Portland. "Converting office space to residential units" ( Accessed 27 June 2023.
    83. Email correspondence from David Kuhnhausen.
    84. "Converting office space to residential units"; Email correspondence from David Kuhnhausen.
    85. Email correspondence from David Kuhnhausen; Email correspondence from Doug Morgan.
    86. Jonathan Bach. 2023. "Portland developer may undertake first office-to-housing conversion with new incentives," Portland Business Journal, 21 March; Colliers. n.d. "2121 Southwest Fourth," 1–2.
    87. City of Portland 2023a; Zielinski.
    88. City of Portland 2023a; City of Portland 2023b; Prosper Portland. "Prosper Portland's Economic Recovery Investments Funded by the American Rescue Plan" ( Accessed 27 June 2023; City of Portland. "Business Revitalization and Activation" ( Accessed 27 June 2023.
    89. Prosper Portland. "Data Directions: Vibrant Central City" ( Accessed 27 June 2023.
    90. Email correspondence from Thomas Link and Quianna Wasler.


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