Can a New Federal Tax Credit Jump-Start Office-to-Housing Conversions?

• Cubicle to condos: A new federal tax credit could finally make turning empty downtown offices into much-needed housing more than just a talking point.

• Photo finish: Zillow’s mass photo takedown after CoStar’s lawsuit sparks a question: defensive move or overdue reckoning on who controls listing images?

• Rate shock: Canada’s mortgage clock is ticking, and with demand drying up, lenders face a looming stress test unlike anything in the U.S.

Office-to-Residential Conversion

Can a New Federal Tax Credit Jump-Start Office-to-Housing Conversions?

Downtown office towers are carrying more empty floors than ever, a direct byproduct of hybrid schedules and remote work. The strain is showing up in the numbers: nearly a quarter of U.S. workers now telecommute, and office CMBS special servicing rates have spiked above 16 percent. These figures explain why so many central business districts feel hollowed out—and why lenders and owners are scrambling for answers.

At the same time, the housing crisis is mounting. Renters across the country are spending more of their paychecks just to keep a roof overhead, and the U.S. needs millions of additional apartments to catch up with demand. In many places, affordable housing is the most scarce, with supply shortfalls measured in the millions. It’s not hard to connect the dots: too many obsolete offices, too few attainable homes.

That’s the space the Revitalizing Downtowns and Main Streets Act is trying to fill. The bill, reintroduced in March, would create a federal investment tax credit to make office-to-residential conversions financially viable. By covering up to 20–35 percent of eligible costs, the program could turn speculative projects into real housing. Whether it delivers will depend on how states implement it—but for owners holding outdated buildings, the window to rethink what’s possible may be opening.

Overheard

Zillow Pulls 47,000 Photos as CoStar Lawsuit Puts Copyright on Trial

Zillow has begun pulling thousands of images, nearly 47,000 photos, from its platform following a copyright lawsuit filed by CoStar, which accused the portal of using CoStar-owned, watermarked images to bolster its rental listings and syndicating them via partner sites. This step appears defensive: a familiar pause in activity that happens when major litigation lands, rather than a clear admission of wrongdoing.

It’s a moment that echoes the CoStar vs. CREXi battle. In that case, a federal court found CREXi had deliberately copied and cropped thousands of CoStar photos as part of a formal “copy and crop” policy executed by offshore teams—striking at the heart of platform accountability. The question now: is Zillow taking photos down because it has to or because it has long held that power and chose not to? The timing and tone suggest more than a mere reaction.

What this means for the real estate world is momentous. If Zillow is signaling that intellectual property must be proactively managed, not just grudgingly removed under threat, this could shift how MLS platforms, brokers, and aggregated listing sites handle visual assets. Copyright compliance may become a competitive advantage rather than a checkbox—especially when the scale reaches billions of dollars in potential litigation.

Short-Term Lending Structure Makes the Canadian Real Estate Market Fragile

Canadian lenders are feeling new pressure as housing demand dries up. Bidders are disappearing, deals are stalling, and banks are bracing for a slowdown. The strain comes despite a lending system that forces borrowers to regularly renew their mortgages, a feature that often delays but doesn’t erase market risk.

That system makes Canada’s housing finance much more cyclical than in the U.S. Most Canadian mortgages reset every five years or less, and nearly three-quarters will come up for renewal by 2026. This leaves borrowers exposed to sudden “payment shock” if interest rates stay high. In contrast, U.S. borrowers can lock in 30-year fixed rates, with government-backed securitization spreading risk more evenly across the system.

The difference matters for real estate stability. U.S. lenders and homeowners can ride out volatility more predictably. Canadian banks, even with relatively small commercial real estate exposure, face sharper swings tied directly to household finances. With buyers pulling back and renewals looming, Canada’s slowdown looks less like a temporary pause and more like a stress test for the country’s entire lending model.

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Propmodo Daily is written and edited by Franco Faraudo with contributions from readers like you and the Propmodo team.

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