Using a fairly new rule that allows for Newport Beach hotels to convert rooms into private residences, a Fashion Island-adjacent hotel in the affluent city will be gaining a new 22-story tower full of Ritz-Carlton-branded residences.

The tower will replace an older building at the site of the VEA Newport Beach, a 532-room Marriott hotel at Newport Center and Santa Barbara drives, the Orange County Register reported. The resort sits on about 10 acres across the street from the massive mall.

The VEA hotel has been under renovation for the past six months. The older building could be razed by the end of this year.

The hotel is losing 159 rooms but will still have 373 rooms once the new tower is built. The tower will contain 159 residences, replacing the rooms in the older building one for one.

According to the Register, this project is the first to put into action a 2021 Newport Beach City Council decision allowing hotels to turn rooms into permanent residences. The council approved the measure to hit two points: add critically needed housing units, and aid the hotel industry, which was hit hard by the pandemic, the Register said.

“We looked at the hotel industry and how it suffered during Covid,” Newport Beach Community Development Director Seimone Jurjis told the Register. “We decided if a hotel wants to convert 30% of its rooms, we’ll allow that.”

Orange County’s housing market, like many others during the last year or so, has become increasingly expensive. Earlier this year, the average rent in Orange County reached $2,476, an 18.2% jump over the first quarter of 2021. In March, the median home price in Orange County hit $1M, the Los Angeles Times reported.

According to the community development director, Marriott management felt it did not need all 532 rooms to meet the needs of its guests.

To be permitted to do the conversion, developers have to pay the city $100K for each new residence and $65K of that is set aside for the purchase and construction of affordable housing in Newport Beach, the Register said.