Lawmaker slams office-to-housing program
WASHINGTON — The federal government quietly announced it would begin giving loans for conversions of vacant commercial space near public transit into housing last October, but developers who have applied have yet to receive any, and a California lawmaker wants to know why.
Rep. Robert Garcia, D-Long Beach, said that after hearing from people who had struggled to navigate the loan process, he wrote Transportation Secretary Pete Buttigieg Friday expressing his support for the program and his concerns about difficulties accessing it.
“To really support cities like San Francisco, like Long Beach, like Los Angeles, the federal government has a responsibility to make a major housing investment, just like we did the infrastructure plan,” Garcia told the Chronicle. “The days of the federal government not being involved in major housing issues is over. It’s reached a national crisis; the states have not been able to solve this challenge on their own.”
City downtowns have hollowed out after the surge in work-fromhome policies during the COVID-19 pandemic, but San Francisco has recovered more slowly than other cities. The cost of building and renovating in San Francisco have convinced some developers that these types of conversions are not financially feasible.
More than 2,700 housing units could theoretically be built in downtown San Francisco by converting 12 office buildings to residential use, according to a 2023 study by architecture firm Gensler. Several buildings, including 785 Market St. and the Warfield Building at Sixth and Market streets, are early in the conversion process. The developer of the Warfield project, however, is facing foreclosure on the building, making its future uncertain.
The Board of Supervisors approved legislation in June 2023 to relax zoning restrictions and simplify the process and requirements for converting existing commercial buildings. San Francisco voters approved a ballot measure March 5 to exempt office-to-housing conversion projects from the city’s real estate transfer tax the first time they’re sold to new owners. The city controller, however, found that the measure wouldn’t be enough to kick-start conversions and could make the city’s financial deficit worse.
The federal programs would allow developers to access lowcost financing for conversions and housing projects located within half a mile of intercity or commuter rail. The programs being used are designed to provide loans for transit-oriented development projects, but the Transportation Department’s October guidance is the first time they’re explicitly being opened up for housing. One of the programs can provide up to $28 billion total in loans for these conversion projects (an additional $7 billion is reserved for freight rail projects) and the other provides loans of at least $10 million to each project.
Commercial-to-residential conversions “represent a tremendous investment in our nation’s economic centers, mass transportation ridership, and climate goals,” Garcia wrote in the letter. He also asked how the Transportation Department was easing the process for projects to receive loans.
So far, no loans for conversions have closed, and the timeline to receive one is lengthier than those typically used in real estate deals. Applicants have also been concerned about the required environmental reviews, they told Garcia’s office. Environmental reviews aren’t typically needed for conversions of existing buildings but are a requirement in the underlying law for these programs.
“This is one opportunity and one loan program that needs to be supercharged. But it can’t be the only, and it’s certainly not a silver bullet to solve the issue,” Garcia said.