Los Angeles and Houston could add thousands of low-cost housing units to their downtowns by converting vacant office buildings to “tiny apartments” with shared kitchens, bathrooms, and living rooms, according to a new report from The Pew Charitable Trusts and Gensler, a global architecture, design, and planning firm. Although some public funding would be needed to make these conversions economically viable, the required subsidies would be far less than the cost of converting office buildings to traditional apartments or constructing new apartments—even small studios.
The rents for these tiny apartments would be low: $1,000 per month in Los Angeles and $700 in Houston, according to the Pew/Gensler analysis. That’s less than half the median rent in Los Angeles ($2,072), and just above half of the median in Houston ($1,297). These rents would be affordable to residents earning around 40% of each city’s area median income—a level at which people struggle to afford unsubsidized housing.
The need for conveniently located, inexpensive housing is vast. One-fourth of all tenants in the United States currently spend more than half of their income on rent. Minimum-wage workers, students, senior citizens, new arrivals to a city, those who have no home, and those who need a short-term lease—all of these groups would be served by this type of housing.
Policymakers have sought to promote the conversion of vacant office buildings to housing ever since the COVID-19 pandemic decimated the U.S. office real estate market. But converting a modern office building to traditional apartments is both difficult and expensive, since office plumbing is typically buried in the building’s central core; traditional apartments require extending it outward, to every unit. The Pew/Gensler report examined the feasibility of a new type of design, often called “co-living” or “co-housing”: Small apartments built on the perimeter of each floor that use existing windows, with shared kitchens, bathrooms, laundry facilities, and living rooms at the center.
Every conversion could potentially add hundreds of low-cost units to each city’s housing stock. The Los Angeles building analyzed in the new report would accommodate 48 residents per floor on 18 residential floors, for a total of 864 units. In Houston, the building analyzed could have 60 units on each of 19 residential floors—1,140 units in all. Each building would have office space, a gym, and ground-floor retail as well.
Office-to-tiny-apartment conversions would address several of the country’s most intractable problems at once. The U.S. has a shortage of an estimated 4 million to 7 million homes, while 20% of all office space sits vacant. And homelessness is at an all-time high: A December 2024 report from the U.S. Department of Housing and Urban Development estimated that 770,000 Americans have no home. (High housing costs are the primary cause of homelessness.)
The initial development of these micro-apartments would require public subsidies, but far less than traditional housing that is affordable to low-income residents. Los Angeles, for example, would be able to build each tiny apartment with less than one-third the subsidy now required to build a basic studio apartment that low-income residents can afford.
Pew and Gensler published an earlier report, in October 2024, which concluded that dormitory-style conversions—where small apartments of about 120 to 190 square feet ring the perimeter of each office floor and shared kitchens, bathrooms, living rooms, and laundry are at the center—work far better than converting to conventional apartments. This layout, that report found, reduces construction costs by 25% to 35%, compared to the cost of converting to conventional apartments. Developers could also fit three times as many micro-apartments on each floor as they could fit regular apartments.
These micro-units are small—roughly the size of a modest hotel room. But about 40% of renter households in the United States consist of one person. And developers could configure converted offices to accommodate two-person households. That first Pew/Gensler report found this model to be promising in Denver, Minneapolis, and Seattle—three cities that have eliminated regulatory barriers to this type of housing and have high office vacancy rates.
The concept behind co-living is not new. Decades ago, American cities had “single-room occupancy” hotels (SROs), with shared bathrooms and very low rents. SROs primarily served low-income, medium- and long-term tenants; homelessness was rare.
Office conversions offer a modern take on that concept. Rooms come furnished, making them attractive to newcomers as well as current residents. With 24-hour security, key cards to control access to each floor, and onsite management, the micro-units would provide safe places to live. The already-low rent includes utilities and Wi-Fi. Shared living would also promote social interaction; each floor could become its own small neighborhood.
This modern take on an old concept might also prove appealing to institutions and organizations. A nearby college might rent entire floors as dorm space or for staff housing. A hospital might as well, to help traveling medical staff or lower-wage employees who would otherwise struggle to live nearby. An airline or airport might do the same. A city or nonprofit organization might rent a floor as transitional housing for residents who need supportive services. A school system might rent a floor for early-career teachers or lower-paid staff. Low-cost housing might, in turn, help businesses attract or retain employees in cities where housing costs have soared.
As the second- and fourth-largest cities in the United States (by population), Los Angeles and Houston are prime candidates for office-to-tiny-apartment conversions. The office vacancy rate in Los Angeles is 28%; in Houston’s central business district, it’s 33%. Neither city imposes regulatory barriers to conversion. Los Angeles also has one of the highest rates of homelessness in the United States.
The new report from Pew and Gensler identifies common office building types in the two cities that would be challenging to convert to conventional apartments but would work well for micro-apartments. It would cost $240,000 (including acquisition and all development costs) to develop each micro-apartment in Los Angeles, one of the most expensive cities in the country for construction (partially because of the need to make buildings earthquake-safe, which adds 33% to costs). Still, that’s less than half the cost of building a traditional studio apartment in Los Angeles ($500,000).
In Houston—which doesn’t have to prepare for earthquakes—the cost of each micro-apartment would be $134,000, the new report estimates.
Despite the relatively low construction costs, though, office-to-tiny-apartment conversions would not produce enough of a return on investment for the private sector to begin development on its own. Public subsidies would be necessary in both cities.
But office-to-tiny-apartment conversions should generate an operating profit once construction is complete, warranting some private sector investment: about $120,000 per unit in Los Angeles and $65,000 in Houston. (See “Scenario 3” for each city in the linked Gensler report.) In Los Angeles, the required subsidy would be one-third of the cost of conventional affordable studios, enabling the city to support three times as many subsidized apartments with the same public funds. (See Figure 1.)
Los Angeles has already raised substantial funding to build new subsidized housing, largely through a dedicated sales tax and bonds, partly in an effort to reduce homelessness. In November 2024, city voters passed an initiative to double that tax to 0.5%. These conversions offer a cost-effective option to deploy those funds.
In Houston, construction costs are relatively low. Still, the opportunity to add downtown housing at $134,000 per unit—near jobs and transportation, while filling vacant office space—could be appealing to policymakers.
For both cities, the greatest lure of this model is the ability to produce large numbers of low-cost housing units at a modest cost. There are other benefits: Thousands of new residents could revitalize downtowns. Residents would be living near public transportation—an environmental benefit. The number of homeless residents would decline.
Housing affordability is a defining issue for the U.S. today, ranking as a much higher concern for the public than in the past. This research on Houston and Los Angeles demonstrates that office-to-co-living conversions can help contribute to the solution.
Alex Horowitz is a project director and Tushar Kansal is a senior officer with The Pew Charitable Trusts’ housing policy initiative.