Hotel bill promises nothing but trouble for real estate industry

By Steve Spinola

On Thursday, the City Council approved a bill which severely impedes hotel owners’ rights and ability to convert guest rooms in their buildings into condo apartments.

Specifically, this bill would mandate a waiver from the city Board of Standards and Appeals in order for owners of hotels with 150 rooms or more from converting over 20 percent of those rooms to apartments.

REBNY strongly opposes Intro 592 for a number of reasons, and will continue to voice our concerns.

One of our primary concerns is that the bill will hurt the hotel and tourism industries – one of the biggest contributors to the New York City economy.

Over the last decade, tourism has jumped from 37.8 million visitors per year in 2003 to over 54 million in 2013, and the number of hotel rooms has risen accordingly, adding 30,000 more rooms and creating thousands of construction jobs over that same time period.

Accompanying that surge in the number of hotel rooms is the rate of hotel employment, from 37,900 to 49,400 in the past ten years.

According to NYC & Company, another 23,000 more rooms will be built by 2017, and there is no reason to suspect that the rate of increase in those numbers will slow down as New York City continues to grow.

Common sense would tell anyone with our city’s best interests in mind to allow the hotel industry to continue to flourish and contribute to New York, and putting restrictions on that growth is unnecessary, unwise, and without any significant benefits whatsoever.

The legality of this new bill also demands questioning.

Not only does it remove hotel owners’ rights to do what they want with their property, it also blatantly disregards ULURP, the time-tested land-use review system that has governed real estate policy since 1976.

There is a reason procedures such as ULURP exist, and circumventing those procedures should not be something the Council should so easily approve.

The bill also raises legal concerns regarding denial of due process and/or equal protection, unlawful appropriation of the zoning authority vested in the Planning Commission, and unconstitutional taking of property.

The investor market would also be impacted by the prohibition of hotel room conversions as it would lower a hotel’s market value.

This would soon become an unnecessary obstacle in transforming an underperforming hotel that is generating less tax revenue for the city into a vibrant mixed-use property which not only generates more tax revenue, but also more jobs.

Introduced by City Council member Corey Johnson, it was created as a response to the potential loss of union jobs and its goal is simply to protect union workers in those positions.

However, as the numbers show, there are no shortage of job opportunities existing in and arising from the hotel industry. In fact, only if this bill is enacted will we see a slowdown in the creation of jobs in the hotel industry.

By preventing hotel owners from re-designating some of their rooms into condos, we will be unfairly regulating a sector of the real industry which has been nothing but good for New York City.

This legislation is harmful not only to the hotel and tourism industry, but to New York City. It raises a myriad of legal concerns, it will negatively affect the investor market, and it will only make it more difficult to achieve the goals it itself is designed to achieve.