Boston Launches Program to Encourage Converting Underused Office Buildings into Residential Use

BOSTON (AP) — Boston is launching a new program designed to offer tax incentives to encourage the conversion of underused downtown office buildings into residential use, according to Mayor Michelle Wu.

The push mirrors office-to-housing conversion efforts in other cities trying to breathe life back into downtown business districts that emptied out during the coronavirus pandemic and may never fully recover.

The aim of the public-private partnership is to help Boston create more downtown housing units while also generating foot traffic throughout the week to help businesses that have struggled as fewer workers return to their offices full time, Wu said.

“One building could potentially create hundreds of new housing units that could include a lot of affordable units,” Wu said during an appearance Tuesday on GBH News. “If we got two or three buildings downtown with a couple hundred units each that would be a significant step.”

Wu acknowledged the costs associated with turning an office building into a residential building can be steep, but said there may be some building owners feeling enough of an economic pinch to try.

“To make the finances work — the tremendous costs to redo all the plumbing and all of that — the property value of the commercial building has to have sunk pretty low that they’re getting desperate,” she added.

Under the program, owners of commercial office buildings downtown would be offered reduced property tax rates in return for immediately converting their buildings to residential uses. The projects would also receive help from the city to streamline the approvals process.

The program will accept applications through June 2024, with projects required to start construction by October 2025. Applicants will be encouraged to maintain retail or other public uses on their ground floors.

Vacancy rates at downtown office buildings nationwide have continued to rise, from 12.2% in the fourth quarter of 2019 to 17.8% in the first quarter of 2023, according to the real estate firm CBRE.

The office vacancy across greater Boston rose to 19.1% at the start of 2023 — its highest in nearly two decades according to real estate firm Jones Lang LaSalle Inc.

Developers must overcome issues like the absence of balconies in most office buildings and the need to install hundreds of bathrooms and kitchens, along with the accompanying plumbing, in buildings often constructed with just two large bathrooms per floor.