District of Columbia Set to Adopt Regulations to Implement New Tax Abatement Program to Incentivize Office-to-Residential Conversions

2 min

The District of Columbia published draft regulations to implement a new tax abatement program passed by the D.C. Council in 2023 to encourage office-to-residential conversions in the downtown area, including portions of Dupont Circle, West End, Foggy Bottom, Penn Quarter, Chinatown, and East End.

The program provides a 20-year tax abatement—beginning upon issuance of the certificate of occupancy—as an incentive for property owners to convert all or a portion of their property to residential uses. The conversions must result in the creation of at least 10 housing units, including affordable units designed and administered in accordance with the Inclusionary Zoning program throughout the duration of the abatement. Specifically, 10 percent of the housing units must be affordable to families earning 60 percent of the median family income, or 18 percent of the housing units must be affordable to families earning 80 percent of the median family income.

In addition to the above, property owners must agree to contract with a Certified Business Enterprise for at least 35 percent of the contract dollar volume of construction and operations and execute a First Source Agreement (which prioritizes employment of District residents) for operation of the development project. However, properties approved for a tax abatement are exempt from the First Source Agreement requirement for the construction and development phases and are exempt from the requirements of the Tenant Opportunity to Purchase Act (which requires that tenants be given the opportunity to purchase property up for sale) for the first sale within 10 years from issuance of the certificate of occupancy.

DC will review tax abatement applications on a first-come, first-served basis and determine the amount of the award based on the development project’s financial feasibility and need. Successful applicants will receive an eligibility and reservation letter confirming the award and setting forth conditions that may include deadlines for achieving entitlement and construction milestones.

The new regulations can be found at Chapter 66 of Subtitle B (Planning and Development) of Title 10 (Planning and Development) of the District of Columbia Municipal Regulations (DCMR). Further questions should be directed to Zachary Williams and Venable’s land use and zoning team, which is working on some of the most significant conversion projects in DC.