Crain’s New York Business: Debate over converting empty office buildings, hotels continues
By BRIAN PASCUS
February 18, 2022 12:49 PM
Contrasting visions are emerging from Albany and City Hall on how to best convert hotels and empty office spaces into affordable housing, highlighting the difficulty of the undertaking.
As New York City’s housing crisis intensifies, some industry experts are imploring Gov. Kathy Hochul to focus only on converting old hotels rather than also considering old commercial properties.
“This administration has to be looking at opportunities that can put people in leases and apartments within two years, and hotel conversions are one of the only ways it can happen on that timeline,” said Eric Rosenbaum, chief executive of Project Renewal, a nonprofit specializing in supportive housing. “A commercial building will be costly and time-consuming.”
In August, state Sen. Michael Gianaris’ Housing Our Neighbors With Dignity Act established a state fund to facilitate the purchase and conversion of distressed hotels and commercial properties into affordable housing operated by nonprofits.
Gianaris, the deputy majority leader, initially hoped more than $2.2 billion in federal American Rescue Plan Act funds would be used for for his housing bill, but his office confirmed that only $100 million has been allocated so far, and just one entity has applied to access the money.
“These projects are big and complex and take time,” Gianaris spokesman Alexander Marion said. “As the senator said, it was not designed at the outset to be a panacea. It’s there to get things up and running.”
Albany isn’t staying idle on the issue, however. Hochul’s proposal for the Fiscal Year 2023 budget, which begins in April, specifically carved out plans for Class B hotels, which are usually older and have fewer amenities. Those that are within 800 feet of a residential district could convert a certificate of occupancy to one for permanent residences, so long as the resulting units are rent-stabilized. Hochul also called for lifting regulations that would make it easier for office buildings constructed before 1980 to be converted to residential use.
But even supporters of her plan concede that changing the certificate of occupancy for many New York City buildings will be difficult unless zoning laws are amended
“There are so many certificates of occupancies in New York City, including in apartments and hotels, that were issued when they were built and are not compatible with today’s building code,” Rosenbaum said.
Hochul’s vision follows the law proposed last year by Sen. Brian Kavanagh of Manhattan and Brooklyn, who said the Senate is holding “ongoing negotiations” with the governor’s office to put something concrete into place.
“Last year we were creating a state program with state funding and doing it in the context of the budget,” Kavanagh said. “The governor is proposing it as part of a budget bill, but it might make sense to do it as a standalone piece of legislation.”
Kavanagh said that funding for the conversions could come out of a new five-year capital plan set to be approved by Albany for fiscal years 2023 and 2027 and that negotiations between the governor and Legislature will determine how much capital money will incentivize and pay for the conversions.
“There’s a billion dollars in the current five-year plan for new construction or adaptive real-world housing,” he said.
The city is making its own moves to address the issue.
Mayor Eric Adams has been voicing support for converting hotel and office space into affordable housing since the early months of his campaign. He called for the conversion of 25,000 units, many of them outside of Manhattan, and for updated zoning laws to facilitate the certificate-of-occupancy changes needed. The City Council established a task force last month to examine how to best convert office buildings to affordable housing.
But one of the foremost voices in the hotel lobby doubts the efficacy of the city and state visions for his industry. Vijay Dandapani, president and CEO of the Hotel Association of New York City, said floor plans of most older hotels don’t make for realistic conversions into permanent housing. He said he also doubted the state would want to pay the nearly $200 million cost—on the low end—to convert at least 13,000 units at the price of $15,000 per room.
He noted that 80% of New York City hotel rooms are in Manhattan, with about 20% in Times Square. Dandapani said he doesn’t believe any mayor or governor would want to turn Times Square into an affordable housing haven.
“That will kill Times Square, and that’s the center of our tourism industry,” he said. “If you put affordable housing there [the neighborhood] won’t be the magnet that it once was.”