New York City has increasingly turned to converting older office buildings into residential units as a strategy to address its severe housing shortage, according to a recent analysis of city data. In 2023 alone, the city issued permits for 74 such conversion projects, which are expected to add approximately 10,100 new homes—a figure that represents about one-third of all new housing permits granted this year.

This surge in office-to-residential conversions reflects a growing trend accelerated by shifting market demands following the COVID-19 pandemic, which led to decreased demand for traditional office space. The emergence of state tax incentives in 2024, offering a 90 percent reduction in property taxes for eligible conversion projects in Manhattan south of 96th Street, has further fueled development. Developers who began construction by the end of June benefitted from a 35-year tax abatement, provided they allocate 25 percent of the units as affordable housing. Such affordable units can cost roughly $2,430 a month for a one-bedroom apartment, less than half the average rent for similar units in Manhattan.

Since the start of 2023, New York City has permitted nearly 19,700 residential units through these conversion projects, surpassing the total permitted between 2010 and 2022. Many of these projects involve large-scale redevelopments concentrated in Manhattan. City officials have praised conversions as a relatively swift option for adding housing, especially affordable units, in areas with high real estate values.

However, the approach has faced challenges highlighted by a recent safety incident. On July 7, two steel columns buckled at the former Pfizer building on East 42nd Street during its conversion process, prompting an immediate halt in construction and the temporary closure of two blocks in Midtown Manhattan. This incident has raised questions about the structural complexities of conversions, which often require extensive interior demolition, reconstruction, and the addition of new floors to aging structures.

In response, the city has intensified oversight of ongoing conversion projects, including an enforcement sweep targeting firms involved in the Pfizer renovation. New York City Buildings Commissioner Ahmed Tigani acknowledged the incident as prompting a comprehensive review of safety and feasibility practices for such projects. He emphasized that the city intends to thoroughly assess all aspects of current protocols and make adjustments where necessary. According to Tigani, the city has long managed significant alterations to buildings, but the Pfizer event represents an opportunity for renewed scrutiny.

Despite the setback, Mayor Zolran Mamdani defended the continued use of conversion projects as a crucial component of the city’s effort to alleviate its housing crisis. The city estimates it needs to build about 700,000 new homes over the next decade to meet growing demand. Experts like Nate Bliss, founder of Latent Urban Ventures and a former housing official, noted that office-to-residential conversions have evolved from niche undertakings to a major part of New York’s multifamily housing production pipeline, delivering important affordable housing in areas that need it most.

While the Pfizer conversion remains paused pending investigation, the broader wave of office-to-residential conversions is expected to remain a key element in New York City’s housing strategy moving forward.