California’s Office to Housing Conversion Act, explained

What the Office to Housing Conversion Act is

AB 507 adds Article 11.5 to the Government Code, which it names the Office to Housing Conversion Act. The name undersells it. The law applies to any “adaptive reuse project,” defined as retrofitting and repurposing an existing building to create new residential or mixed uses, including office conversions. A shuttered department store is as eligible as an office tower.

Its core move is to take the city’s discretion out of the question of whether a conversion may happen. A qualifying project is a use by right regardless of the site’s zoning, which means the city may not require a conditional use permit, a planned unit development permit, or any other discretionary approval. Review is limited to whether the project meets objective standards: measurable rules a planner can check, not judgments about whether the project fits the neighborhood. Because the approval is ministerial, the California Environmental Quality Act does not apply.

The override covers the housing. In a mixed-use conversion, any nonresidential use must still be one the zoning allows or an existing nonconforming use carried forward, and any tourist hotel goes through the city’s usual approval process.

The Legislature declared conversions a matter of statewide concern, so the Act reaches charter cities, which includes Los Angeles, San Francisco, San Diego and San Jose. Violations are enforceable by the state Department of Housing and Community Development, which AB 507 added to the list of housing laws in Government Code section 65585 that HCD may refer to the Attorney General.

Which buildings qualify

A conversion qualifies for the by-right pathway if the project and its site meet all of these:

• Urban location. The parcel is in a city that includes part of a Census-designated urbanized area (or, if unincorporated, wholly inside one), and at least 75% of the site’s perimeter adjoins parcels already developed with urban uses. Parcels across a street count as adjoining.
• Not in an industrial zone that bars housing. This is the one zoning test that survives. Every other zone, including commercial and office zones that never allowed housing, is open.
• Not a hotel. Hotels and mixed-use buildings containing a hotel are excluded, “except if they have been discontinued for a minimum of five years from the date on which this article becomes operative,” which was July 1, 2026. The statute does not say more precisely how to count those five years.
• Mostly housing. A mixed-use conversion must put at least half its above-ground square footage into residential use.
• 20 acres or less.
• Age or historic clearance. The building is less than 50 years old, or it has been through the historic resource process described below.

There is no vacancy requirement. An office building with tenants still in it can use the pathway, which is a real difference from the federal program this site models, whose grants reach only buildings that are vacant and abandoned under a code-enforcement or receivership test.

Buildings more than 50 years old

A building more than 50 years old that is not on a historic register must first go through a check. The owner files a notice of intent, in the form of the preliminary application under Government Code section 65941.1, and the city has 90 days to decide whether the building is a historic resource. That determination counts only for AB 507; it does not list the building anywhere else.

If the building is not historic, it proceeds like any other. If it is historic, or already on a local, state or federal register, the owner signs an affidavit that the project will go forward only if it either meets the Secretary of the Interior’s Standards for Rehabilitation for its street-facing facades, courtyard facades and publicly accessible character-defining interiors such as the ground-floor lobby, or wins federal or state historic rehabilitation tax credits. Everything else, including the office floors themselves, may be changed. A registered building whose owner will not sign the affidavit can still apply, but the city may then deny or condition it on a finding, by a preponderance of the evidence, that it would significantly harm historic resources.

Affordability requirements

Rents on the affordable units are set at an affordable rent under Health and Safety Code section 50053, and the units must match the market-rate homes in bedroom and bathroom mix, finishes and appliances, spread through the building rather than grouped on one floor.

Where a city already has an inclusionary requirement, the project takes the higher share and the deeper income targeting of the two. If a local rule demands more than 15% lower income units but no very low or extremely low income units, a rental conversion must include the 8% and 5% tiers, and the local requirement is reduced by 15 points, not 13. A local rule of 20% lower income homes becomes 8% very low income, 5% extremely low income and 5% lower income. A city may not raise its requirements for a project because it qualifies for streamlining. The affordable share applies to the base project; homes added through the state density bonus, which AB 507 projects may use, do not raise it.

Labor standards

Every AB 507 conversion pays construction workers at least the prevailing wage, enforceable by the Labor Commissioner within 18 months of completion, by an underpaid worker, or by a joint labor-management committee. Larger and taller projects add more:

• 50 or more homes (section 65658.12, borrowing AB 2011’s section 65912.131), or 40 or more homes with no building over four stories (section 65658.14): contractors must take apprentices from a state-approved program and make health care payments for their workers at the level of a Covered California Platinum family plan. Under 65658.14 they also file monthly public compliance reports.
• 40 or more homes with a building over four stories (section 65658.15): prime contractors and subcontractors at every tier must use a skilled and trained workforce. This reaches a six-story, 45-home conversion well short of 85 feet.
• Buildings over 85 feet: the labor standards the state applies to SB 35 projects (Government Code section 65913.4(a)(8)) apply instead.

The Legislature’s findings justify the separate standard directly: conversions “require construction techniques that justify labor standards that differ from new housing construction.” For developers the effect is a cost floor. The streamlining saves time and entitlement risk; it does not make the construction itself any cheaper.

How approval works: the 60- and 90-day clocks

The planning director or equivalent checks the application against the city’s objective standards. If the project conflicts with one, the city must say which standard and why in writing, within 60 days of submittal for 150 homes or fewer, or 90 days for more, and within 30 days of any resubmittal. If it misses that deadline, the project is deemed consistent. Once consistent, the city must approve it within another 60 or 90 days.

The consistency test favors the applicant: a project complies if substantial evidence would let a reasonable person conclude that it does, and a city cannot find a conflict because some application material is missing when the record already shows compliance. Design review is allowed only if it is objective and does not “inhibit, chill, or preclude” the approval. Follow-on permits, from demolition and grading to building permits and final maps, must be judged against the standards in effect when the application was filed.

An approval lasts three years, or as long as construction is under way, with one possible one-year extension. It never expires for a project that has public affordable housing investment beyond tax credits and keeps at least 20% of its homes affordable at 80% of area median income. An approved AB 507 project is also a housing development project under the state Housing Accountability Act.

San Francisco has published its process: 30 days to review an application for completeness, then the 60- or 90-day eligibility review, with a fillable application on the Planning Department’s AB 507 page.

Parking, height, fees and new construction

The envelope stays. A city may not apply any development standard that would force a change to the existing building envelope, unless its building code requires it, and alterations needed to meet the building code do not disqualify a project.

One story on top. A conversion may add a single rooftop story above the local height limit, for shared amenities or equipment: a common kitchen, a gym, a lounge, mechanical or stair penthouses. A density bonus waiver cannot be used to go higher.

No new parking. None may be required for the part of the project in a building that has no onsite parking today. Existing rules for bicycle parking, EV charging and accessible spaces still apply.

Fees tied to the change of use. A conversion is exempt from every impact fee not reasonably related to the change from nonresidential to residential use, and any fee charged must be roughly proportional to the difference in impact between the old use and the new one.

Building next door. A project may add new residential or mixed-use buildings on surface parking or undeveloped land on the same or an adjacent parcel. That new construction does not get the conversion’s own terms; it must satisfy one of the state’s other streamlining laws, SB 35, AB 2011 or the Middle Class Housing Act, including their labor standards, and it is not covered by the fee exemption.

The tax-increment incentive

The second half of AB 507 is money, of a kind. Starting in fiscal 2026–27, a city or county may establish an adaptive reuse investment incentive program by ordinance or resolution. Under one, when the governing body approves a written request by a majority of its entire membership, the local agency pays the project owner the property tax it receives on the increase in the building’s assessed value above what it was when the owner first asked, for up to 30 consecutive fiscal years, starting the first year after the certificate of occupancy. Other cities and special districts sharing the tax base may contribute their share. The payments must go to subsidizing the affordable homes the Act requires.

This extends statewide an incentive that AB 2488 (2024) had offered only in San Francisco. It costs the state nothing, and it only exists where a local government decides to create it. A 2026 bill to amend it, AB 2079, was last acted on in committee in March 2026.

What AB 507 cannot fix

The law removes the city's ability to say no. It does nothing about the building's ability to say no.

Most office buildings that never become housing fail on geometry, not zoning. Apartments need bedrooms with windows; modern office floors are deep, with a windowless core that can be 40 or 50 feet from the nearest facade. Building codes, not zoning codes, require that light and air, and AB 507 is explicit that building code requirements still apply. A floor plate too deep to daylight is as unconvertible on July 1, 2026 as it was the day before.

Downtown San Jose, the one California study area on this site, shows the split. Of the 82 commercial buildings screened there, 74 sit in the city’s downtown commercial zones, which already allow housing, so AB 507’s zoning override changes little for them. What separates them is the floor plate and the money: 24 are deep enough that conversion would need a carved light well, and 52 do not pencil at default assumptions. AB 507 can take fees and months off the second number. It does nothing for the first.

AB 507 and the federal RESIDE Act

California’s law and the federal RESIDE Act aim at the same buildings from opposite ends. AB 507 is a permitting law: it clears the approval path but brings no state money. RESIDE, Section 210 of the 21st Century ROAD to Housing Act, is a HUD grant pilot for fiscal 2027 through 2031 that pays for conversions but leaves permitting to local law, and reaches only buildings that are vacant and abandoned. As of September 2026 Congress had appropriated nothing for it.

The two can stack. A San Jose conversion could be approved by right under AB 507, take the city’s own downtown conversion fee waivers, and, if RESIDE is funded and the building meets its test, apply through the city for a federal grant. The affordability terms differ: AB 507 rentals set aside 13% to 15% of homes at lower incomes (ownership projects may instead offer 30% at moderate income), while RESIDE housing must be attainable up to 120% of area median income with most units affordable at 60%. A project using both would have to satisfy the stricter of each.

How it became law

1. February 17, 2023: Assemblymember Matt Haney introduces AB 1532, an earlier Office to Housing Conversion Act. It dies in committee on January 31, 2024.
2. February 10, 2025: Haney introduces AB 507.
3. September 10–11, 2025: The Senate passes it 30–9, and the Assembly gives it final approval 70–4.
4. October 10, 2025: Governor Gavin Newsom signs it as Chapter 493, Statutes of 2025.
5. July 1, 2026: The Act becomes operative, and cities and counties may start adopting tax-increment incentive programs for fiscal 2026–27.

The final votes were bipartisan and lopsided: 30–9 in the Senate and 70–4 in the Assembly. The 2023 version had asked for only 10% affordable homes; the enacted law trades a larger affordable share and firmer labor standards for a pathway that covers every building type, not just offices.

Questions

Sources

1. California Legislature, “AB-507 Adaptive reuse: streamlining: incentives (chaptered text)”
2. California Legislature, “AB-507 votes”
3. Assembly Committee on Local Government, “AB 507 bill analysis, April 30, 2025”
4. San Francisco Planning, “Office to Housing Conversion Act (AB 507)”
5. Office of the Governor, “Governor Newsom signs legislation to accelerate housing and affordability”
6. Terner Center for Housing Innovation, “California Housing Supply and Land Use Legislative Round-Up 2025”
7. California Legislature, “Government Code section 65913.4”
8. California Legislature, “AB-1532 Office conversion projects (2023), history”
9. U.S. Government Publishing Office, “Public Law 119-101, Section 210”

More California law: California’s new housing laws and Ro Khanna

Buildings this applies to: Downtown San Jose

Federal law: The ROAD to Housing Act explained · Environmental review changes · CDBG and HOME changes · Opportunity Zones · The Innovation Fund · The Build Now Act · Manufactured housing and the chassis rule · How RESIDE grants should be sized