Gottlieb Law, PLC provides this article for informational purposes only. Nothing herein creates an attorney-client relationship. Do not take action based on this article without consulting qualified legal counsel. Laws change, and only a licensed attorney can provide advice tailored to your specific situation.
Arizona’s Bold Move to Boost Housing Supply
The Grand Canyon State has taken a significant step to address its housing shortage. If you own or manage an underperforming office, retail, or mixed-use property, Arizona’s new adaptive reuse law (formerly House Bill 2297) may directly affect you.
Effective April 7, 2025, A.R.S. § 9-462.10 establishes a streamlined process for converting qualifying commercial buildings into residential units — without requiring rezoning or public hearings.
This landmark change could reshape development opportunities across Arizona. Whether you’re a developer planning adaptive reuse projects or a municipality preparing your “objective standards” under the new law, Gottlieb Law can help you navigate these evolving requirements.
A.R.S. § 9-462.10 at a Glance
Originally enacted through House Bill 2297, A.R.S. § 9-462.10 creates a simplified approval pathway for adaptive reuse and multifamily development. The statute allows certain commercial properties to be repurposed for residential use so long as they comply with objective health, safety, and building standards adopted by the local jurisdiction.
What Buildings Qualify and What Standards Apply Now
Arizona’s adaptive reuse law (A.R.S. § 9-462.10) does not grant blanket approval for all commercial properties to become housing. To qualify, a property must meet specific statutory criteria, and municipalities may apply only a narrow set of objective standards — nothing subjective or discretionary.
Here’s how the requirements break down.
Eligible Properties:
To qualify for adaptive reuse or multifamily conversion under the statute, a property must:
- Be an existing commercial, office, or mixed-use parcel.
- Consist of at least one acre but not more than twenty acres.
- Contain buildings that are economically or functionally obsolete, meaning the property is in disrepair or has at least 50% vacancy in total leasable square footage.
- Be located in a municipality with a population of 150,000 or more, since those cities are specifically required to adopt the objective standards within 90 days after April 7 2025.
Note: The term “obsolete” is defined by statute, but municipalities may still attempt to interpret its application narrowly. For example, cities like Scottsdale have indicated they may adopt more restrictive criteria — positions that could invite future legal challenges. Gottlieb Law is closely monitoring these local interpretations and can advise property owners as municipal standards are finalized.
The statute expressly excludes parcels within historic districts, near military or commercial airports, and on tribal land (A.R.S. § 9-462.10 (G))
Required Objective Standards
Under A.R.S. § 9-462.10(C), the objective standards established by municipalities shall require only the following elements for qualifying adaptive reuse or multifamily projects:
- Site plan review and approval, including review by affected utility providers.
- Verification of adequate public sewer and water service.
- Compliance with applicable building and fire codes.
- Confirmation that existing buildings are economically or functionally obsolete.
- A parcel size between 1 and 20 acres.
- A minimum 10% affordable-housing set-aside for moderate- or low-income households, maintained for at least 20 years after occupancy.
- Parking standards that may not exceed whichever is lesser — the existing multifamily or commercial requirements.
Municipalities must include these standards — and may not add any additional or discretionary requirements beyond them. Any attempt to impose subjective design criteria, public hearings, or compatibility reviews would likely violate the statute’s express limitation. Developers may, at their sole discretion, dedicate a greater share of units as affordable housing.
Eligibility Minimums, Exclusion Zones, and Demolition Rights
To ensure a balanced rollout, A.R.S. § 9-462.10(A)(1) requires municipalities to make at least 10% of existing commercial, office, or mixed-use parcels eligible for multifamily or adaptive reuse. In practice, that means cities must make at least 10% of those parcels eligible, but they can review and adjust that percentage once every ten years. Municipalities may not exclude parcels from eligibility if the average sound level is below 65 decibels. Existing buildings that exceed current setback or height limits may retain their original dimensions and are considered legally nonconforming under the statute.
Why the Adaptive Reuse Law Was Passed — and Why It Matters Now
Arizona faces a dual real-estate challenge:
- A severe housing shortage driven by population growth and constrained supply; and
- Rising commercial vacancy, especially in post-pandemic office markets.
The Legislature designed A.R.S. § 9-462.10 to address both problems by making it faster and more predictable to repurpose aging or underused commercial space for housing.
Arizona now joins a growing list of states experimenting with adaptive-reuse incentives—but unlike most, it has preempted local discretionary zoning barriers in a significant way.
Cities such as Tucson are already advancing draft code amendments to align with the statute, while others, including Scottsdale, are facing legislative and developer pressure to ensure local rules remain consistent with the state’s intent.
Whether you’re a private developer, real-estate fund, or nonprofit housing organization, it’s important to consult experienced Arizona real-estate counsel to determine whether your property qualifies and how to position projects as local standards come into force beginning April 7 2025.
Who Benefits and What to Watch
Commercial Property Owners & Developers
If you own outdated office, retail, or mixed-use space that has been difficult to lease or sell, Arizona’s adaptive reuse law (A.R.S. § 9-462.10, formerly HB 2297) may finally make conversion financially feasible.
However, qualification is not automatic. There are several technical and legal criteria that still apply:
- Confirm eligibility: Your property must meet the statute’s definitions, including being economically or functionally obsolete (typically 50% vacant or in disrepair).
- Assess infrastructure: Adequate water, sewer, and utility capacity remain mandatory prerequisites.
- Review parking and density: Cities must apply the lesser of their commercial or multifamily parking requirements, and height/density caps are governed by the statute.
- Affordable-housing set-aside: The required 10% set-aside for low- or moderate-income housing is mandatory and must be maintained for at least 20 years.
This is where Gottlieb Law’s real estate attorneys provide value by evaluating project eligibility, preparing compliance plans, and guiding developer negotiations with city staff during implementation.
Municipalities and Planning Departments
Under A.R.S. § 9-462.10(A), municipalities with populations of 150,000 or more must adopt objective standards within 90 days after the law’s effective date.
Cities that fail to act, or that attempt to impose discretionary criteria beyond the statute’s limits, could face legal challenges or state preemption.
Several cities are already drafting zoning-text and general-plan amendments. Others appear to be moving more slowly, which could expose them to claims of statutory non-compliance.
Gottlieb Law also advises municipalities on how to balance compliance with community interests while avoiding prohibited forms of subjective or arbitrary review.
Challenges & Strategic Considerations
Even with its benefits, the new law introduces practical and legal complexities. Key considerations include:
- Municipal resistance: Some cities may test the limits of the statute by imposing extra conditions (for instance, Scottsdale has been criticized for requiring a six-month vacancy period not found in the law).
- Infrastructure strain: Older water and sewer systems may constrain redevelopment even if entitlements are available.
- Structural and retrofit costs: Adaptive reuse can be capital-intensive, often revealing hidden costs such as asbestos removal or major mechanical upgrades.
- Market feasibility: Not every location suits residential use despite statutory eligibility; access, amenities, and neighborhood fit still matter.
- Legal gray areas: It remains to be seen how courts will treat cities that fail to adopt standards on time or that enact conflicting regulations.
Early legal consultation can help minimize these risks and ensure timely compliance.
Real Use Cases Emerging
Interest is already building across Arizona:
- According to the ADOH FY 2025 Low-Income Housing Tax Credit Projects Report, Arizona is actively supporting large-scale affordable housing development — underscoring how the new adaptive-reuse statute (A.R.S. § 9-462.10) enters into a policy environment where affordable units are increasingly embedded in redevelopment deals. Low Income Housing Credits (LIHTC) projects.
- Phoenix commercial property conversions are growing and the city is one of the leading markets for office space conversions.
Each case is different, but the one constant is that the legal and regulatory pathway is now clearer for qualifying commercial properties.
How Gottlieb Law Can Help Navigate the Adaptive Reuse Law
With decades of experience in Arizona real-estate and land-use law, Gottlieb Law, PLC is uniquely positioned to guide clients through this evolving legal framework:
- Developers: Entitlement, zoning, and risk-management counsel
- Property owners: Feasibility analysis and asset-value recovery strategies
- Municipal clients: Statutory-compliance and ordinance-drafting support
- Investors and lenders: Due-diligence and regulatory certainty
Whether you’re pursuing a conversion opportunity or implementing municipal standards, our attorneys can help you proceed with confidence and full legal compliance under A.R.S. § 9-462.10, effective April 7, 2025.
Ready to Convert? Talk to a Real Estate Attorney Who Gets It
Let’s Make Arizona’s Adaptive Reuse Law Work for You
The window for early action is here and it’s important to act now if you could be impacted by this new law. Whether you’re trying to convert, invest, or prepare for implementation, Gottlieb Law can help you do it the right way.
With this new law, many Arizona commercial property owners will be able to turn a vacant space into a new residential housing opportunity. Contact our experienced real estate law firm to see how we can help with your adaptive reuse project in Arizona.
Call Gottlieb Law today at 602-899-8188 or use our Contact Us page here to schedule your initial consultation.
Gottlieb Law, PLC provides this article for informational purposes only. Nothing herein creates an attorney-client relationship. Do not take action based on this article without consulting qualified legal counsel. Laws change, and only a licensed attorney can provide advice tailored to your specific situation.