Vacant commercial spaces hold the answer to affordable housing

In the past 20 years, California cities and counties have adopted adaptive reuse ordinances that promoted conversion of vacant and underutilized commercial and industrial buildings to residential uses. Adaptive reuse has numerous advantages, such as reducing overall construction costs, preserving historic structures, promoting sustainability by eliminating demolition impacts, and in many cases, supporting faster approval, permitting and construction times.

There are notable examples of residential conversions of historic buildings, such as in the Los Angeles Arts and Fashion Districts; however, the early ordinances had limited effect due to the restrictions in location, building code compliance and compatibility of building type to residential use. The 1999 Los Angeles adaptive reuse ordinance created 12,000 new residential units but was limited to buildings constructed prior to 1974 that were in commercial or R5 zones in specific downtown areas. The 2003 amendments expanded the areas to Chinatown, Hollywood, Koreatown and South Los Angeles.

Now, adaptive reuse is poised to be a key tool in addressing the state's housing crisis due to the significant availability of underutilized office and retail structures, and the state legislature's intent to drastically expand areas of residential development. In the COVID aftermath, office vacancy rates in Los Angeles are around 25% due to leasing reductions by media, tech and other companies, and continued hybrid work trends. In 2025, approximately 44 million square feet of office space in Los Angeles was vacant. The significant growth of online shopping has also devastated brick-and-mortar retail spaces and shopping malls. This has contributed to blight, vandalism and crime. The state legislature now envisions this growing number of vacant commercial buildings as a potential source of faster, lower cost new housing and cities are getting on board.

In the past five years, the California legislature adopted bills that required cities and counties to allow residential development in commercial zones that typically allow office, retail and parking use. AB 2011, the Affordable Housing and High Road Jobs Act of 2022, created a "by-right" ministerial streamlined approval for (1) 100% affordable housing projects and (2) mixed-income projects located on "commercial corridors" that contained a specified percentage of affordable housing units and met specific labor standards. SB 6, the Middle-Class Housing Act 2022, provided an alternative streamlined discretionary review for projects that do not meet all the AB 2011 standards, which applies to adaptive reuse projects, according to a 2025 interpretation by the California Department of Housing and Community Development (HCD).

In 2023, the state legislature adopted bills requiring local governments to permit the by-right adaptive reuse of existing buildings to create new low- and very-low-income housing (AB 1490) and funding an HCD working group that identified challenges to and opportunities for adaptive reuse residential projects (AB 529). The September 2024 HCD report provided the basis for necessary revisions to planning standards and building codes. AB 2243 then amended AB 2011 and SB 6, effective Jan. 1, 2025, to specifically support conversions, by removing a residential density limit, limiting common open space requirements, and restricting any development impact fee. AB 2243 also included regional malls by increasing the maximum lot area to 100 acres. 

Now, AB 507, effective July 1, 2026, expands the ministerial, CEQA-exempt, process to mixed-use conversion projects that have at least 50% residential use, as well as mixed-affordability conversion projects that meet specific affordable housing requirements. The law provides a detailed process for considering and protecting the historic status of a property over 50 years old and permits additional units on undeveloped areas on the same parcel as the existing building. AB 507 requires compliance with specific prevailing wage and labor standards, depending on the size and character of the project and authorizes local adaptive reuse investment incentive programs.

After five years, in Feb. 2026, the Los Angeles City Council also adopted their new Citywide Adaptive Reuse Ordinance (Ord. 188793). The city's AECOM feasibility report determined that an inclusionary affordability requirement would render most conversions economically infeasible, and in response, the ordinance provided incentives to encourage voluntary provision of affordable units. The ordinance provides by-right adaptive reuse procedures for buildings older than 15 years, creates alternative review processes, and expands the allowable zones to all commercial, residential and parking zones. The ordinance also provides an expanded discretionary conditional use permit review process for projects involving buildings less than 15 years old, buildings in an industrial zone, projects that include hotel use, or projects in the Coastal Zone, among others. The ordinance also includes specific provisions to encourage additional density and ease of conversion, such as permitting intermediate floors, allowing for rooftop amenities, removing minimum unit sizes, allowing greater flexibility to reconfigure parking in compliance with AB 2097 and parking reductions, and permitting new interior light wells to optimize interior spaces.

Other cities, such as San Francisco (Ord. 159-23), Sacramento (Ord. 2024-0051) and San Diego (Info Bulletin 406) have encouraged adaptive reuse in compliance with state law to promote housing development. Hopefully, the cities and counties will encourage broad interpretation of their new ordinances and policies to promote conversion of existing structures in a thoughtful, cost-effective and timely manner.