The Root Cause of California’s High Housing Costs

For decades, California has been grappling with soaring housing costs. The limited residential development over the years has contributed to this crisis. As a solution to address the housing shortage, there is increasing interest in converting commercial properties into residential ones. The state legislature has introduced several bills aimed at easing restrictions on land conversions, but it is important to assess the potential impact of such conversions.

Commercial Land Conversions: A Partial Solution

While converting commercial properties to residential ones may help increase housing supply to some extent, it is unlikely to be a panacea. Current policies have only resulted in a small increase in housing units. From 2014 to 2019, approximately 380 homes were built on commercial land in four major metro areas across California. Among these areas, the Los Angeles region stands out with significant conversions contributing to 13.8% of its overall housing growth. Similarly, the San Francisco Bay Area witnessed the construction of around 9,300 homes on commercial land, accounting for 8.5% of its housing growth. It is worth noting that conversions are more common in areas near city centers and with older buildings.

Economic Trends Shaping the Viability of Commercial Conversions

The rise of e-commerce and the increasing prevalence of remote work have altered the landscape of commercial properties. As traditional brick-and-mortar businesses face challenges, some commercial properties have become promising candidates for conversion to residential units. The evolving trends in the economy have opened up opportunities to repurpose underutilized and vacant commercial spaces, potentially easing the housing crisis.

The Need for Statewide Standards

To ensure a streamlined and effective process for land conversions, statewide standards are being considered by California’s legislature. Establishing consistent guidelines and regulations can help eliminate discrepancies among different jurisdictions and create a more cohesive approach to commercial-to-residential conversions. However, it is essential to acknowledge that commercial conversions alone cannot fully meet the state’s housing goals. The number of conversions that can take place is limited, especially in areas where local codes explicitly allow them. Therefore, local jurisdictions must also play a role in reforming commercial zoning regulations to permit more residential development. A comprehensive strategy that includes densification and support for affordable housing is crucial to address California’s housing crisis holistically.


California’s housing crisis requires multifaceted solutions. While converting commercial properties to residential ones can contribute to increasing housing supply, it is not a one-size-fits-all solution. By implementing statewide standards, reforming commercial zoning regulations, and adopting a comprehensive approach that includes densification and affordable housing support, California can take significant strides towards meeting its housing goals. Note: The information presented in this blog is derived from a video transcript and does not reflect the views or opinions of the author.