Proposed bill would fasttrack California’s downtown offices into homes

As California downtowns empty out employees in the era of remote work, a state lawmaker has launched a bill to streamline the conversion of offices into homes, while adding funds to jumpstart redevelopment.

Assemblyman Matt Haney, D-San Francisco, has proposed legislation to bar local officials from blocking an office-to-residential project if they don’t exceed basic height and density limits and 10 percent of the units are affordable, the San Jose Mercury News reported.

Such projects would also be exempt from the state’s strict environment review process.

Haney’s bill, known as the Office to Housing Conversion Act, could make use of $400 million in grants Gov. Gavin Newsom has outlined in his recent budget proposal specifically for such projects. The funds would go to downtown redevelopments. 

In current form, the bill would prevent local governments from blocking or delaying office-to-housing projects through special permitting processes, design and planning reviews, or appeals.

It would require conversions be allowed in all areas regardless of local zoning laws, while requiring planning departments to respond to conversion applications within 90 days of submission.

The bill would limit development fees on conversion projects, while requiring that all conversion projects dedicate 10 percent of housing units for low- or middle-income residents.

While state lawmakers have passed a slew of recent high-profile housing bills — including two last year focused on redeveloping strip malls — cities and counties may lobby Sacramento to push back on Haney’s proposal to strip nearly all local control over conversion projects.

Nonetheless, Haney is confident of his bill’s chances.

“My colleagues know there’s tremendous urgency to get this done and that we can’t wait for each individual locality to figure this out,” he said. “The state as a whole has a huge interest in getting housing built for our struggling downtowns.”

Office vacancy in Haney’s home town of San Francisco is nearly 28 percent, according to CBRE, which has put the city on a national watchlist for “the most empty downtown in America.” The city has also lost nearly 150,000 daily office workers since the start of the pandemic during a shift to remote work.

Downtowns from Los Angeles to Oakland have been hammered by the diminishing office market. Some property owners are already eyeing offices to homes.

Owners of the nine-story St. James Plaza building at 152 North 3rd Street in Downtown San Francisco are considering redeveloping the property for housing, said Alex Stettinski, chief executive of the San Jose Downtown Association. San Jose State University, meanwhile, is eyeing the nearby Alfred E. Alquist State Office Building at 100 Paseo de San Antonio for up to 1,200 homes for faculty and staff.

Stettinski said more office-to-housing conversions could help San Jose revitalize its downtown from a 9-to-5 office destination into a balanced blend of offices, housing, retail and entertainment.

In San Francisco, a recent report by architecture and planning firm Gensler identified 12 mid- and high-rise office buildings in the Financial District that could be considered for conversion into 2,700 housing units. The buildings include 575 Market Street, a 40-floor former Chevron headquarters and a 10-story building at 417 Montgomery Street.

Asked if enough people actually want to live in downtowns anymore, Haney said city centers across the Bay Area have seen apartment vacancies fall and rents increase since the pandemic. But rental prices in cities such as San Francisco and Oakland have yet to recover to pre-pandemic levels.

“Our downtowns still have a lot to offer,” he said. “We need to make sure they are safe, clean, vibrant places, and building more housing is a big part of that.”

— Dana Bartholomew