“During the pandemic, the middle of the pandemic, there was this really amazing opportunity for the city to purchase hotels at a very steep discount,” Brenda Rosen, president on the nonprofit supportive and affordable housing supplier Breaking Ground, which has pursued conversions, mentioned in an interview. “But now with the return of tourism, and people coming back to work and people traveling back into the city for conferences and other things, that opportunity is not nearly as great. I’d argue that it’s basically slipped away.”
On the marketing campaign path final September, Mayor Eric Adams referred to as resort conversions a “once-in-generation opportunity” as he pledged to flip 25,000 metropolis rooms into everlasting affordable low-income residences and supportive housing items for previously homeless folks.
But success depends on a depressed resort sector spurring house owners to promote, and that’s put Adams, who enjoys the HTC’s backing, in an odd place as he appears to be like to tourism to rouse the town’s economic system from its pandemic slumber.
Hotel occupancy in New York was 81.2 p.c over the week ending Sept. 3, in accordance to analysis agency STR. That’s up considerably from 39.1 p.c for a similar week in 2020 and 64.5 p.c final 12 months — and it’s approaching the 87.3 p.c recorded in 2019. As vacationers as soon as once more fill the town’s inns, house owners are much less determined to offload their properties — notably for sums that affordable and supportive housing builders can match.
“I don’t think the housing market is capable at this point of meeting that market requirement for ownership that’s willing to sell,” mentioned Vijay Dandapani, president of the Hotel Association of New York City commerce group.
A pandemic gambit
In August 2021, then-Gov. Andrew Cuomo signed the “Housing Our Neighbors with Dignity act,” establishing a $100 million program to assist fund resort conversions. But the hassle garnered little curiosity from builders, primarily due to zoning and constructing code necessities that made conversions logistically or financially troublesome. The state’s housing company didn’t launch a time period sheet for this system till January of this 12 months.
In June, the state Legislature eased these obstacles and added one other $100 million to this system. But nonetheless, it’s obtained only a handful of proposals from builders — 4 in New York City and one elsewhere within the state, in accordance to the state Department of Homes and Community Renewal. And these proposals characterize the earliest phases of an extended evaluation and utility course of, the company mentioned.
Hoteliers who employed union employees and wished to promote their properties for conversion have to first get the blessing of the resort employees union, which means builders are unlikely to discover success changing union hotels, even when they’re eager on promoting.
Breaking Ground was on the verge of shopping for and changing Midtown’s Paramount Hotel into supportive housing when the settlement collapsed after pushback from the resort employees union, which wished to protect the resort jobs on the web site. The property has reopened as a resort, and individuals who have been employed there earlier than it shut down lately returned to work, in accordance to the union.
It’s considered one of few proposals that even acquired shut, but Adams did little publicly to increase it or lament its failure. When he laid out the 25,000-unit aim final 12 months, he mentioned he wished to concentrate on outer-borough hotels the place employees should not unionized.
The union, which argues New York has a glut of hotels, was a significant proponent of the June regulatory reforms — whereas convincing state lawmakers to restrict funding and regulatory modifications to non-union hotels. Adams and union officers have argued non-union hotels, that are extra prevalent outdoors Manhattan, exploit employees and entice crime.
“Failing and distressed hotels that pay workers low-wages and are a safety risk to their neighborhoods should be converted into affordable housing,” Rich Maroko, president of the union, mentioned in an announcement. “But hotels that provide high-quality jobs and support the tourism industry should be preserved. We now have a smart, thoughtful program that can accomplish all of these goals.”
But outer-borough hotels have a tendency to be smaller than their Manhattan counterparts, a proven fact that complicates supportive housing conversions when financing usually is determined by a quantity of items, in accordance to builders and housing advocates which have evaluated potential offers. Other far-flung hotels may be ripe for financing however too distant from public transportation, a less-than-ideal state of affairs for a brand new supportive housing mission. Some have discovered the state program’s necessities — which dictate, for instance, that every unit should embrace a kitchen or kitchenette with a full fridge and cooking vary — have made using it too pricey.
“I absolutely wish there was more progress and hope there is more progress soon,” mentioned Samuel Stein, a housing researcher on the Community Service Society, who was concerned within the push to set up the state program. “I know that they needed some of the regulatory relief that we secured from the state this year but now we have it and it’s time to do the thing and fulfill the promise.”
Reservations
Even with the exclusion of many unionized Manhattan hotels, the conversion program can not thrive with out cannibalizing the town’s resort inventory, others say.
“I do think that eventually, we’re going to have the need again for those hotel rooms. And hotel rooms not only attract visitors, which generates economic activity, but hotels tend to employ people who, in many cases, are otherwise difficult to employ,” mentioned Seth Pinsky, former head of the town’s Economic Development Corporation beneath Mayor Mike Bloomberg. “And so, to lose those jobs because we’re trying to satisfy a need for new housing units, when instead we could be preserving those hotel rooms and building new housing, that’s the part of the conversation that I find concerning.”
Reducing the town’s resort capability is of explicit concern after zoning modifications enacted final 12 months that require resort builders to receive a particular allow by the town’s prolonged land use evaluation process, Pinsky mentioned. That coverage — extensively seen as a approach to guarantee future hotels use union labor, since any proposal would require approval by the HTC-aligned City Council — was pushed by the union and backed by Adams when he was Brooklyn borough president.
“That’s another reason why I think we need to be circumspect about a policy that pushes for the widespread conversion of hotel space, because unlike other uses, when the market turns, and if it turns out that we need more hotel space, it’s going to be much harder to produce,” Pinsky added.
The resort conversion standstill comes as the town grapples with a historic housing crunch and bursting-at-the-seams homeless shelters. Average month-to-month rents in Manhattan topped $5,000 for the primary time ever in June. The metropolis’s shelter inhabitants has exploded in current months, thanks to the post-pandemic resumption of evictions and the arrival of asylum seekers despatched by Texas Gov. Greg Abbott.
The metropolis is as soon as once more utilizing hotels as homeless shelters — additional limiting the pool of hotels that may very well be turned into everlasting housing.
“Now those hotel owners have another use and therefore aren’t in a position where they need to sell immediately, they have revenue coming in from the city,” Stein famous. On the opposite hand, he mentioned, “That was the condition that sparked many groups to want to see a [Housing our Neighbors with Dignity Act] program in the first place. … If the city is using hotels more as long-term shelter, then that might increase the pressure from people living in them.”
Some proponents say the urgency of New York’s homeless disaster means the town ought to nonetheless pursue resort conversions, even when they’re a extra pricey proposition than initially thought.
“As expensive as they might look today, the alternative will be increasingly expensive,” mentioned Eric Rosenbaum, president and CEO of the homeless providers supplier Project Renewal, referring to continued and elevated use of shelters. He additionally famous, “Even if these hotel deals got more expensive, they would still be better deals than ground up development.”
A metropolis housing division spokesperson mentioned a number of websites are in early pre-development and could also be transformed, referring to proposals from builders the company is at present evaluating.
“New York City needs more affordable and supportive housing and we’re glad to have helped get this legislation done to make hotel conversions a feasible option for growing the city’s housing supply. Our doors are open to any opportunity to convert a hotel site that may be better utilized as affordable or supportive housing.”