Converting vacant or underutilized commercial properties into residential or mixed-use spaces is becoming an important path for many U.S. cities to address housing shortages. As government agencies step in to streamline processes, the willingness of developers, property owners, and facility managers to participate continues to grow.

Building industry experts believe that the U.S. Department of Housing and Urban Development (HUD) research grant program for commercial-to-residential conversions is expected to accelerate the completion of such projects. Previously,several major citieshave begunseeking to promotesuch conversions. HUD's initiative could also reduce the burden on frontline operators, increase productivity, and give them more say in decision-making.

Grant Program Details and Goals

HUD released last weeka Notice of Funding Opportunity (NOFO)showing that the agency will provide up to $860,000 to compile case studies of completed conversion projects since the COVID-19 pandemic began. The program aims to identify which policy measures, subsidies, and incentives can enhance the economic viability of such conversions.

HUD stated it plans to create a resource guide for local agencies and development practitioners. Solomon Greene, Principal Deputy Assistant Secretary for Research and Development at HUD's Office of Policy Development and Research, expects the funding to provide examples of how to overcome structural and financial obstacles in conversion projects, helping property managers and facility leaders understand the specific measures municipal officials took during the pandemic to support such projects.

"It will provide practical guidance and insights for cities to reference. We hope this research will accelerate alleviating our nation's growing housing supply shortage by drawing on grassroots innovation and creative problem-solving in reusing existing buildings and assets," Greene wrote in an email to Facilities Dive.

Industry Expert Views: Accelerating Conversions and Potential Challenges

Despite zoning barriers and outdated permitting processes in states like California,zoning barriers and outdated permitting processesand strong demand for Class A facilities and new construction, the building industry is still transitioning toward adaptive reuse models, aiming to avoid demolition and full reconstruction.

William Leddy, founding principal of San Francisco's Leddy Maytum Stacy Architects, said: "Adaptive reuse will be much faster than new construction or renovation projects. These buildings can be put into service faster than new projects, which means facility managers may gain more job opportunities." Leddy also serves as vice president of climate action at AIA California, which has pushed for state building code revisions. He believes HUD's grant program could cut the turnaround time for adaptive reuse projects in half.

"If it involves new building design permits, demolishing old buildings, or even rebuilding, the total time is about six years. But if you do adaptive reuse of an existing building, the approval time could be as short as three years," he noted.

Alex Stettinski, CEO of the San Jose Downtown Association and board member of the International Downtown Association, also believes the resource guide produced by the grant program can shorten turnaround times. "If there's a catalog of cases, you can avoid mistakes and replicate successes in other projects. So, it could speed up project completion because you have case studies and guides as templates. That's provided the submitted case studies are comprehensive and useful," he said.

Education and Technical Challenges for Facility Managers

However, facility managers, even with abundant insights, may still face difficulties if they lack adequate training and education. Leddy noted that the emergence of complex building management systems in modern and renovated buildings often confuses facility managers, as they traditionally focus more on repairing, replacing, or upgrading old equipment rather than automation and energy efficiency.

"This is a great opportunity to educate facility managers about new building management technologies, helping them realize the status quo is outdated and prepare for the future of high-performance, low-carbon adaptive reuse projects," he said of the grant program. "We can't just keep the lights on; we must think more intelligently about resource reuse."

Future Research and Application Information

The research funded by HUD is also expected to lay the groundwork for future office-to-residential studies. In the funding notice, HUD requires research proposals to emphasize how the knowledge and insights generated will enhance understanding of federal, state, or local policies for commercial-to-residential conversions.

Stettinski expects fewer than 100 applicants, mostly architects, as they are typically more directly involved in the design elements of conversion projects and research supporting decisions. "I think facility managers are eager to find solutions and don't have time for research on this scale. But architects can; it's their expertise. If architects can facilitate conversions, they serve facility managers by sharing best practices and insights," Stettinski said. "Architects could use this funding to create a guide, then tell owners and facility managers: 'We've done the research, here's our approach.'"

"Additionally, partnerships may form between architects, owners, facility leaders, and cities," he added. These alliances can more clearly demonstrate how to best implement adaptive reuse projects.

Although turnaround times may shorten, Kate Collignon, a partner at HR&A Advisors, cautions that streamlining processes to reduce approval wait times could affect the economic viability of adaptive reuse models. "Even if a building is currently 30% vacant, owners must wait for other leases to expire to clear out the remaining space, so the conversion and leasing construction period could take two to three years," she said.

On the other hand, she noted owners could moderately lower rents, adjust tenant types to reflect market changes, or increase investment in office space—if the value generated after conversion is higher than the cash flow residential units might bring. "So, the economics don't currently work out," she said, referring toSan Francisco's request for proposalsto reuse underutilized commercial spaces downtown.

Both Collignon and Stettinski emphasized that direct incentives from federal, state, or local governments are needed to make conversion projects a reality.

Policy Background and Application Deadline

HUD's new NOFO builds on the Biden administration's vision to promote commercial-to-residential conversions. The White Houserecently announcedthat HUD will provide up to $10 million in grants to local governments facing high demand for affordable housing. Last month, the U.S. Environmental Protection Agency alsosaid it would launcha $27 billion greenhouse gas reduction fund to mobilize capital for commercial-to-residential conversions and energy-efficient building renovations, as part of broader efforts to achieve zero-emission goals.

The proposal deadline for the NOFO is October 12. Interested parties can apply through the U.S. government'sportal.