Refitting office space to make it liveable is actually super expensive. Commercial spaces don't have the electric, plumbing, or insulation typically required or expected by residents. It can be cheaper to gut or even tear down the building in order to add the necessary MEP and framing, which is why you see developers are still building new rather than converting old commercial spaces. The money will encourage redevelopment which is far less wasteful and combats sprawl.
That said, I agree with you that you could make the money available to buyers instead of developers, but developers are the ones paying the bribesdonating to campaigns.