It’s not easy to build housing in D.C. right now.
On top of high interest rates and construction costs, national lenders have called the District “a serious red flag” for its rental nonpayment problem — meaning they lack confidence that landlords can collect a return on their investment.
“Financing in Washington, D.C., right now is extremely challenged,” John Means, co-founder of development firm Rooted Communities, told The Washington Sun. “A pretty substantial portion of our affordable housing [is] at risk of failure.”
But in a rare bright spot for D.C. housing news, developers have found a rock to cling to, and one that could totally alter the makeup of the District’s downtown neighborhoods: a tax abatement program that incentivizes the conversion of vacant office space into housing.
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Mayor Muriel Bowser rolled out the program, called “Housing in Downtown,” in 2024. Two years later, the first project financed under the program has been completed: the former Air Line Pilots Association headquarters in Dupont Circle, which was converted to 157 residences. The building, known as Aviator House, is already 70% leased.
Developers say the program, which requires 10% of units to be affordable, has been instrumental in pursuing ambitious projects that may not have otherwise penciled out.
“For us, it was a huge value-unlocking tool,” said Katie Hartley, the managing director of National Real Estate Development. “We bought this building in 2000, so we owned it for 24 years as an office, and then did the conversion.”
The abatement provides millions of dollars in long-term operating cost relief, but it also does something less tangible: The city-backed projects signal confidence to investors and beat back what Means called “perceived challenges” facing the District, like rental nonpayment or the rent freeze initiative that may make it onto the 2028 ballot.
“It was a huge help,” said Austin Gabel of Duball Partners, which is converting another Dupont office building into 160 residences. “Especially when you look at the exit value of similar product that is trading hands recently.”
Another advantage to the projects, particularly as costs continue to climb, is shorter construction timelines. By right, many of these office buildings are already zoned for multifamily residential use.
“Construction started as fast as we could humanly design the work; rarely is that the case,” Gabel said. “We’d be looking at a 19-month versus 30-month schedule.”
There are plenty of challenges that come with converting a building designed for work into one for living. Windows may be fewer than you’d want in a residence, and many in office buildings don’t open. All residences need new heating and cooling systems and could need more stairwells, elevators and bathrooms, said architect Eric Colbert, whose firm designed Aviator House.
It takes a lot of creativity to get all those features — particularly ample light and air — into each unit, he said, and all those adaptations can run up costs. Means said he’s seen these projects come out both cheaper and pricier than the average new build, so his firm is choosy about what it pursues.
“Development in any form right now is extremely expensive,” he said. “We’re on the feasibility borderline for most projects.”
The abatement program’s goals are bigger than cutting developers a break. Bowser hopes the initiative will bring 15,000 D.C. residents into downtown neighborhoods like Golden Triangle and West End by 2028, in 10,000 units. Nina Albert, the deputy mayor for planning and economic development, told The Sun that the administration is on track to reach that goal.
“We’re going to convert blighted or vacant offices to vibrant residences, which keeps our downtown exciting and vibrant,” she told reporters at the opening for Aviator House last week.
Once-bustling offices in downtown D.C. bottomed out during the COVID-19 pandemic, and with the rise of remote work, they never fully recovered. The office vacancy rate in the District was 21.3% by the end of the third quarter of the 2026 fiscal year, according to Colliers. That is nearly double what it was pre-pandemic, but less than a 2024 projection that the vacancy rate would be 27% by 2027.
“Our office vacancy [rate] has stabilized, and it’s because we are taking empty offices offline and putting them to new uses,” Albert said at the opening. “What could have, without an intervention or without private investment, been a continuing increase in office vacancy, and that sucking of vibrancy, you’re now introducing new uses that allow District residents to live, work and play here in downtown and enjoy the beauty of our city.”
Bowser plans on “running through the tape” until January, Albert said, when she leaves office and a successor — presumably Democratic nominee Janeese Lewis George — takes the helm. Developers indicated that in a challenging development environment, office-to-housing conversions might be a key tool in reaching Lewis George’s ambitious goal of building 72,000 units in five years.
“The affordable housing crisis that we’re having right now, I hope, is a temporary problem that we’re continuing to work on making fixes to, so that we can stabilize that portion of the market and get it back on track,” Albert said.
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