A year ago, Governor Kathy Hochul and state lawmakers set aside $100 million to encourage real estate developers to take on vacant and underutilized New York hotels that were struggling due to a lack of guests during the pandemic and turn them into permanent housing for the homeless. and low-income residents. So far, no hotel has been converted under the program.
Albany lawmakers doubled funding to $200 million this month and Hochul signed legislation removing some regulatory hurdles to make it easier and faster for nonprofit developers to convert hotels into affordable, supportive housing. . The new program, officials said, is intended to save developers time and money to incentivize them to convert enough units to help solve the city’s housing crisis.
The question now is whether that can have an impact as the city continues to rediscover a new sense of normalcy, more tourists return and fewer hotels struggle to function. Some said they see the expansion of the program as a step in the right direction. Others said they weren’t sure if even doubling funds and cutting bureaucracy was enough to make a difference.
“I’m hoping we’ll see a whole bunch of that, but I’m hesitant to say a number,” said Ted Houghton, president of Gateway Housing, a nonprofit that advises affordable housing developers. “It will be a few hundred units or a few thousand units. I do not know. I mean, both are totally possible.
The idea of converting vacant hotels into affordable housing took hold after COVID-19 decimated the hospitality industry in the spring of 2020. The federal government restricted travel and states told residents to stay home in part of an effort to contain the coronavirus. Hotel owners were bleeding money at the same time as housing advocates sought to move the homeless out of communal shelters that were not conducive to social distancing requirements and into safer permanent accommodation.
Turning financially distressed hotels into affordable, supportive housing is seen as a way to address both issues.
“We have seen and still view hotel conversions as crucial because they are one of the few ways to rapidly increase accommodation capacity,” said Eric Rosenbaum, president and CEO of Project Renewal, a services group to the homeless which provides housing. , health and employment of the homeless.
In June 2021, the state legislature passed the Housing Our Neighbors with Dignity Act, designed to help nonprofit developers buy struggling hotels, pay for renovations, and then turn them into affordable housing. So far, there have been no takers.
The state agency that administers it has received two preliminary proposals for buildings in New York and one outside the city, but no formal request for funding has been submitted, according to a spokesperson.
Hochul and state lawmakers went a step further earlier this month and amended what is known as the state’s “multiple dwelling law” to allow certain hotels located in restricted areas to light industry to be used as permanent dwellings. Hotels can keep their pre-existing certificates of occupancy and developers can skip the lengthy land use review process, known as the Uniform Land Use Review Procedure.
As mayoral candidate, Eric Adams has proposed turning shuttered hotels into supportive and affordable housing. As mayor, he lobbied for legislation.
“This bill will do more than build apartments, it will transform lives,” Adams said when Hochul signed the bill June 7.
There are 177 hotels in light manufacturing districts that could be eligible for conversion, said Houghton, who helped draft the legislation. But the law only allows conversion of hotels within 400 feet, or about two blocks, of a residential area. And, if the hospitality workers are represented by a union, the union must approve the conversion. Other factors, including the cost of buying and renovating a hotel, as well as its condition and location, could further narrow the pool of conversion candidates.
Low-cost, ready-to-use housing
Due to the lack of vacant land for development in New York, Rosenbaum of Project Renewal said new construction projects can take five years. While it would only take about 18 months to turn a hotel into permanent low-cost accommodation, according to his estimates.
“There’s almost nothing else that offers this speed of getting affordable housing online,” Rosenbaum said.
By design, hotels are built to provide people with temporary shelter. The physical infrastructure, such as plumbing, elevators and rooms, is already in place.
“All you have to do is add a little kitchenette and you have a fully functional little studio,” Rosenbaum said.
But the cost of conversion can be prohibitive, which the new legislation aims to address.
Two recently completed hotel-housing projects, launched before the legislation was enacted, give an idea of the time and money it takes to create affordable housing in New York.
Real estate developer Fairstead has transformed the former Park 79 Hotel, a seven-story building near the Upper West Side Museum of Natural History, into affordable housing for seniors. The cost of the gut renovation came to about $60 million, said Brett Meringoff, a managing partner. It took the company a few years to transform around 110 hotel rooms into 77 studio apartments. That equates to nearly $780,000 per unit.
In Brooklyn, Breaking Ground, the city’s largest developer of supportive housing, has spent $233 million, with funding from City Hall, to transform a 29-story building once used by the Witnesses of Jehovah as hotel for staff and volunteers in 491 apartments for extremely low accommodation. low-income and low-income households, according to Matthew Costantini, spokesperson for the nonprofit. Of these, 305 apartments are reserved for former homeless people. Breaking Ground paid $178 million for the DUMBO property in 2018 and paved the way in November 2020.
Challenges Facing Developers
While tourism is slowly returning to the city, hotel occupancy is nowhere near pre-pandemic levels. Vijay Dandapani, president and CEO of the New York Hotel Association, said about 100 hotels, representing 13% to 14% of the city’s inventory, remain closed,
He supports hotel-to-accommodation conversion, but he thinks hotel owners who might have wanted to offload their properties for a bargain in 2020 might be less inclined to sell them at rock bottom prices, given that the industry expects tourism to fully recover by 2024.
“They will hold,” Dandapani said. “Many, if not all, of these owners built their hotels with the intent of being a hotel owner, not an affordable housing owner.”
He also said adding kitchens, even small kitchenettes, is no easy task. Most hotel rooms are too small to accommodate one, Dandapani said, meaning adding kitchen facilities will likely require expensive renovations that include moving walls to create extra space. .
“When you convert these hotels into affordable housing, you have to square the circle,” Dandapani said.
With more than 48,000 people staying in the city’s main shelter system and thousands of other homeless people living on the streets and in the subway, Dandapani said the city and state will have to spend a lot more $200 million to fight homelessness.
“It’s a bit of a challenge. So where will the money come from.