Curbed: Can Eric Adams Really Turn 25,000 Hotel Rooms Into Affordable Housing?
By KEVIN T. DUGAN
October 15, 2021
Last month, Eric Adams, the presumptive 110th mayor of New York City, stood in front of a boarded-up hotel in Sunset Park, Brooklyn, to lay out his plan to fight the growing homelessness problem. Convert enough properties like the one behind him into 25,000 rooms of permanent apartments, as he proposed, and you’d have room for roughly half the people in the shelter system. It’s an idea that’s been part of the political landscape for months, as Adams and other Democrats vying to run the city have proposed the return of single-room-occupancy hotels, the low-income, dormitory-style housing largely banished since the 1980s for its role in the city’s worsening social conditions after World War II. But his plan, such as it is, had few other details except that it would be focused away from Manhattan and into the other boroughs. “If we make the investment now and streamline city rules to allow for these conversions, we can create tens of thousands of new supportive housing units with services to get homeless New Yorkers off the street,” Adams said in a statement.
But in the weeks since, the proposal has raised pointed questions about how Adams can actually make his plan a reality. A campaign insider directly familiar with the plan said that the 25,000-room figure had been taken from a hotel industry survey that includes Manhattan buildings, and that Adams planned to circumvent the usual complicated process for making zoning changes with a process called “spot rezoning” — targeted changes to how individual buildings can be used, which just happens to be unconstitutional in New York State. The rebounding real-estate market, the reopening of international travel, and zoning laws make the whole project unlikely to be quick or cheap, and the campaign is already weighing what other programs will have to cut in order to fund it.
The Adams plan lines up with the priorities of the New York Hotel Trades Council, the powerful union representing hotel workers, at a time when the future of the hospitality industry is on unsteady ground. The HTC, which supports the plan (and has endorsed Adams’s campaign), is also the force that throttled Airbnb in New York and put forth a proposal that would have effectively frozen new hotel construction. But critics of Adams’s plan worry it could have long-lasting effects on tourism — a major supplier of New York’s tax revenues — by permanently shrinking the supply of available rooms, keeping out all but the wealthiest visitors, and reducing the amount of money collected to fund social programs that help the homeless in the first place. “The real question is, ‘Are we adversely impacting our economy by doing this and making it more difficult for one of our critical industries to come back?’” said Ester Fuchs, director of Columbia University’s Urban and Social Policy program and a former adviser to Michael Bloomberg.
Hotels have been a growing target for conversions since the start of the pandemic, when the city paid for thousands of hotel rooms a night in order to depress the spread of COVID-19 among the unhoused population. Adams’s plan — which would make these rooms permanent housing — would rely on nonprofits, funded by the city, to purchase the hotels and convert them. Shams DaBaron, an advocate for the unhoused who supports Adams’s plan, said private SRO living spaces would make it easier for people to avoid drugs and alcohol — often a probation condition — than the current congregate settings do. “If you get people into houses quickly, you can stabilize them better and get them the services they need,” he said.
These buildings haven’t been sold or even put on the market yet. Building the SROs will require cooperation from perhaps 100 hotel owners, and wrangling them into a deal will be difficult, if it’s even possible. “The problem with my industry is we don’t have, say, American Airlines, who owns all the planes. Almost every hotel owner is a different entity or person, so to get them to act in concert is very difficult,” Vijay Dandapani, president and CEO of the Hotel Association of New York City, told Curbed. There were, by his group’s count, about 123,000 hotel rooms in New York City in 2019, with about 19,000 more in the pipeline. Lately, about 40,000 are sitting empty, and a survey by the group found that over half of those — about 25,000 — are likely to be permanently closed anyway, Dandapani said. The Adams insider said that an “aggressive” plan would convert 5,000 to 10,000 in the first year but acknowledged that it would get harder to do so after that.
There’s also the issue of zoning. Most hotels are zoned for industrial or manufacturing districts, which don’t allow for permanent residences. Changes to those rules usually require submitting proposals under the Uniform Land Use Review Procedure, then hearings at community boards, approval from borough presidents, passing through committees at the City Council, passing the legislature, and getting signed into law by the Mayor — a roughly 12- to 18-month process that, by the time it’s over, could see the tourism industry recovering and more leverage to command a higher price per room. In other words, the window in which the Adams administration could carry off such a feat may already be closing.
Adams’s people want to move quickly, and one insider has described plans for targeted “spot rezonings” that would allow for hotels to convert to SROs. “The current process is just too slow. We’ve got to — we’ve got to — take advantage of the market,” Evan Thies, spokesperson for the Adams campaign, said. He added that Adams’s plans for amending the zoning laws is a process that would take three to six months, including a possible public comment period. After that, it would go to the New York City Department of City Planning, which is controlled by City Hall.
The problem with that is that “spot rezoning” has been outlawed in New York since at least 1951. “Spot zoning, by definition, is illegal — period,” said Michael S. Hiller, a land-use lawyer whose litigation successfully stopped the Metropolitan Museum of Art from building deeper into Central Park. Thies was dismissive about these concerns. Adams, he said, “is not afraid of taking on fights in order to create more affordable housing wherever he can and however he can, as long as it does not reduce the quality or does not impact the public safety of those areas and is done in a well thought-out way.”
At the core of any deal would be the price per building, and what owners find acceptable is going to vary widely. “Every building is different, and every capitalization is different,” said Eric Anton, a broker for the firm Marcus & Millichap. “A building that was built in the ’30s that has rent-stabilized units and has been a low-end hotel — that could work. Whereas a more modern hotel — tall, skinny, 25 stories, built in the last 10, 15 years — it probably wouldn’t.” Edward Cardenas, who heads regional sales and marketing for Chase Hotel Group, which owns a Queens hotel, said that buying owners out at $225,000 to $250,000 a room would be a reasonable rate — down from roughly $300,000 a few years ago — and added that the cost of gut renovations to turn the buildings into residences would about double the total cost. And some hotel owners will want more because they’re doing well — on occasion, outside the law. Ted Houghton, president of the nonprofit Gateway Housing, said he offered $200,000 a room to buy a Manhattan hotel last year, but the owner wouldn’t take less than $350,000 — and would rather just illegally rent out the rooms as permanent residences instead of losing money on a sale. “You can’t do that,” Houghton recalls telling the owner. “He said, ‘Watch me.’”And hotel owners will have less incentive to sell at low prices if the City Council follows through on a plan to require special permits to build new hotels, said Edward Kober, a senior fellow at the Manhattan Institute and the city’s former director of housing, economic, and infrastructure planning. “The city would not be solving its housing problem in any fundamental way, but it would be paying top dollar for hotel rooms scattered around the city, and then it would have to pay more to convert them into housing,” he said.
City planners are worried that Adams’s plan will affect the future of tourism in the city, driving up the price per room to unaffordable levels and sending tourists elsewhere. When asked to respond to criticism that Adams’s plan is in line with the HTC’s interests, Thies said, “I disagree with the premise of the question.” At its peak in 2019, New York tourism brought in $80.3 billion, according to the New York State comptroller’s office. According to an analysis of tax revenue by the IBO done for Curbed, the city would lose about $6 million a day in taxes if Adams’s plan were fully implemented and 25,000 units were taken out of the supply.
Still, the potential benefits of SRO living for the unhoused could be major. Having safe, private spaces for people with on-site medical services could help people stay healthy and give them the time to find a job and resources to leave the shelter system, he said — which could ultimately bring down the public cost of medical services, too. “What are we gonna do with all of those people, many of them Black and brown, that are gonna be headed to the shelters?” he said. “We have to move on this now for the sake of saving people’s lives.”