Only One Group Applied To New York's $100M Hotel Conversion Fund
An ambitious, $100M program to fund the conversion of struggling hotels into badly needed affordable housing has failed to draw interest.
The program, codified into law by former New York Gov. Andrew Cuomo in August, set aside $100M in the state budget and provided New York’s Division of Housing and Community Renewal the ability to approve nonprofits' purchase and conversion of city hotels in distress.
But the program has received just one applicant, Politico reports, which only came through last week. Housing Commissioner RuthAnne Visnauskas told a state Senate budget hearing that legislators won't add more funds to it because of the lack of interest.
“[The program] was hampered by a lack of regulatory relief that would come along with it,” Brenda Rosen, the president and CEO of nonprofit developer Breaking Ground, told Politico. The company has successfully converted hotels into affordable housing. “We’re in this massive crisis right now, and we really have to turn over every stone and look at what opportunities there are for people.”
The real estate industry expressed skepticism when the law was proposed that it would draw enough interest to make a dent in the housing crisis.
"This is a good first step," Kramer Levin Land Use partner Elise Wagner said in a statement last summer. "There is still a need for legislation that would enable the conversion of distressed hotel and commercial properties into mixed-income housing developments by private developers."
Under the rules of the program, at least 50% of the units in a conversion would be for homeless people and the rest set aside for people making up to 80% of the area's median income. Early attempts to relax zoning rules that would have allowed hotels in manufacturing zones were removed from the legislation, as was the relaxation of certain building code requirements. Former Mayor Bill de Blasio opposed those measures, per Politico.
Some sources said that requirements for a kitchen with a full-sized refrigerator, cooktop and sink were making it cost-prohibitive. The sponsor of the bill, Sen. Michael Gianaris, said it would take time to “scale” the program.
The city's hotel market remains challenged: Owners have been selling off properties at extreme discounts, and 9,000 new rooms are expected to come online this year, making it harder to raise room rates back close to pre-pandemic levels.
Meanwhile, there are some 48,000 people sleeping in shelters every night in New York City, per the Coalition for the Homeless. During the pandemic, the city was housing homeless people in empty hotels, but ended the program last June.
The need for housing across all incomes remains dire in New York City; the Real Estate Board of New York estimates the city needs 560,000 new units by 2030 to keep up with its predicted population and job growth.