Zoning Laws Are Blocking the Conversion of Hotels into Affordable Housing

Althea Matthews, a Bronx-based affordable housing activist, has been homeless since losing her apartment in a fire in December 2019. She currently lives in a single room in a homeless shelter and is grateful that it’s safe and mostly clean — especially compared to congregate shelters. Still, she wishes that she didn’t have to share a bathroom with other residents, and she has avoided using the kitchen since repeatedly seeing mice on the stove.

“If you can have your own shower, your own cooking area, it could do a lot for me,” she told New York Focus, adding that it would do even more for people living in dormitory-style shelters.

Last year, she and other advocates fought for New York State to fund a program to convert vacant hotels and commercial properties—many teetering on the edge of financial ruin due to reduced demand during the pandemic—into single-room affordable housing units.

They won: in June 2021, the legislature passed the Housing Our Neighbors With Dignity Act, or HONDA, which allotted $100 million for such conversions in New York City and required that the resulting housing be reserved for homeless and low-income New Yorkers. The Community Service Society, an anti-poverty nonprofit, called it “a major step forward towards a just recovery.”

But nearly a year later, none of the HONDA money has been used, and no conversions have even begun.

The New York State Division of Homes and Community Renewal (HCR), the agency in charge of administering the program, told New York Focus that it has received no applications and only two preliminary proposals. (In February, Politico reported that the program had drawn one applicant, but this was a preliminary proposal rather than a complete application, according to HCR.)

This year’s state budget included another $100 million in funding for HONDA conversions and expanded the program statewide, but both developers and advocates say that money is not the main obstacle to hotel conversions. The problem is New York City’s relatively onerous zoning and housing code regulations, which make it difficult and expensive for affordable housing developers to legally convert hotels to affordable housing.

“The extra money won’t do any good without the regulatory changes,” said Mark Ginsberg, a partner at Curtis + Ginsberg Architects, a firm that has designed numerous affordable housing developments in New York City. “It doesn’t pencil out unless you change the code.”

State lawmakers have introduced bills that would exempt HONDA conversions from some of these regulations. Although former Mayor Bill de Blasio opposed similar exemptions, Mayor Eric Adams has indicated support and City Council Speaker Adrienne Adams told New York Focus that she supports the Senate and Assembly bills.

But time may be running out. Hotel occupancy rates have begun to rebound as tourists return to the city, making the prospect of affordable housing conversions less attractive to hotel owners.

“The window is rapidly closing as New York gets back to normal,” said Ted Houghton, president of the affordable housing advocacy group Gateway Housing. “We need to act quickly.”

A Potential Fix

Under New York City’s zoning regulations, permanent residential housing may only be built in residential zones. That means hotels currently located outside commercial zones cannot legally be converted to housing. Rezoning hotels for housing requires a process that can take months or even years of near-herculean lobbying and constituency building, during which opposition from neighborhood residents, community boards, local electeds, or the mayor can derail the entire project.

Hotels located inside residential zones can legally be converted into permanent housing, but only after undergoing extensive renovations to bring them up to code. Hotels and residential housing are subject to different sections of the building code, so when a hotel room is changed to a residence, it must be retrofitted to match residential codes. This process can require costly measures such as widening elevator shafts and door frames and reconfiguring walls to increase units’ floor space.

These expenses can make retrofits cost-prohibitive for the affordable housing developments envisioned by HONDA–perhaps accounting for the low number of proposals that the state has received.

“Hotels aren’t cheap,” to purchase, Ginsberg said. “But if you are going to just update some finishes to make them more durable, and make it supportive housing, it’s a lot cheaper than having to gut and rebuild the whole thing.”

A pending bill, sponsored by Senate Housing Committee Chair Brian Kavanagh and Assembly Housing Committee Chair Steven Cymbrowitz, would give affordable housing developers a way around these obstacles.

The bill would make any hotel within 400 feet of a residential zone eligible for conversion to permanent residences and allow developers to bypass the code requirements that usually apply to residences, as long as the development is in compliance with the hotel building code. These changes would open up several hotels that developers have been eyeing since HONDA became law, some of which are just a few yards outside residential-zoned areas.

“We have a tremendous housing crisis, and we ought to be moving as rapidly as possible to generate new housing opportunities,” Kavanagh told New York Focus. “It’s valuable to have a quicker and more flexible approach.”

A Shrinking Window

The HONDA funds don’t expire, but the chance for cost-effective conversions may be slipping away as tourism and commerce return to New York City and hotel owners feel less incentive to sell their properties. In recent months, hotel occupancy in New York City has rebounded to over 85 percent of pre-pandemic levels.

“With a gradual increase in occupancy the incentives to participate in adaptive use to affordable housing diminishes for owners,” Vijay Dandapani, president and CEO of the Hotel Association of New York City said in a statement to New York Focus.

Over 100 hotels remain closed citywide, and Mayor Eric Adams’ administration doesn’t expect tourism to fully recover until 2024 — meaning that there may still be a chance for HONDA.

Hotels in Manhattan may be out of reach given the limited funds available, but Charles King, president and CEO of Housing Works, said that hotels in other boroughs likely have a longer time window.

“Smaller hotels outside of the tourist hub are going to have a much harder time coming back, so I think they are more likely to continue to be on the market,” he said.

“Still a Big Priority”

Will the state legislature pass the bill this year?

Cymbrowitz told New York Focus that he’s “optimistic” about the bill’s chances in the Assembly and that it has broad support, but noted that he hasn’t yet discussed it with Assembly leadership.

On the Senate side, Kavanagh said that he’s “confident” that the bill will move forward and that there’s “significant interest” in passing the bill. He declined to say whether Senate leadership supports the bill, and spokespersons for Senate and Assembly leadership did not respond to questions from New York Focus.