Testimony of the Real Estate Board of New York Before the New York City Planning Commission Public Scoping Meeting for the M1 Hotel Text Amendment CEQR No. 18DCP042Y

The Real Estate Board of New York (REBNY) is a trade association with over 17,000 members comprised of owners, brokers, managers, lenders, and other real estate professionals active in New York City.

The hotel industry is a critical linchpin to our City’s tourism economy, providing accommodations to over 60 million tourists a year. In total, travel and tourism now sustains more than 375,000 jobs across the city. These figures are expected to rise as the City estimates that there will be an additional 1.5 million tourists that visit next year. It is vital that hotel development not be constrained so that supply can keep pace with demand. The proposed action is an unnecessary constraint on the rights of property owners to address a market condition that needs no correction, and appears to be motivated by factors unrelated to sound planning. Therefore, REBNY strongly opposes the City’s proposed M1 Hotel Text Amendment that would significantly limit as-of-right hotel development citywide.

Our members raised questions about the stated purpose and need, highlighted flaws in measuring impacts, and suggested the study of viable alternatives.

Purpose and Need

The articulated Purpose and Need for the Proposed Action is that hotels have an advantage over industrial, residential, institutional, and other commercial uses and crowd them out. However, no examples have been offered, and the problems encountered by other uses relative to hotels described in the Draft Scope of Work are largely a function of the zoning (e.g., the excessive parking requirements for manufacturing uses).

The City’s Hotel Study explains that the city is experiencing a hotel development boom as a result of supply catching up with demand. Between 1997 and 2007, there was little to no hotel development despite a dramatic rise in tourism. Over the past ten years, supply has sought to catch up with pent up demand. The study concludes that, “The development boom is unlikely to continue over the long term…Once supply catches up with pent up demand, demand growth for New York City hotel rooms will return to a more “organic” rate – one that is sustainable, in line with U.S. travel demand growth, and is based on traditional hotel demand drivers.”

The City claims that the zoning in the M1 districts gives hotels a competitive advantage over most other permitted uses and detracts from opportunities for other kinds of development, including industrial, residential, institutional and other commercial uses. Yet, there is insufficient data to support those claims, and in fact the market shows that this is not the case. There has been virtually no construction of buildings designed for manufacturing uses, the demand for Class A office space is not in the areas where M1 districts are located, and the market is not constructing new Class B and C office space.

Banning hotels will not create any new industrial space. The problems that office and manufacturing uses encounter in lower density M1 districts are a function of the Zoning Resolution itself. The City should study reforms to the manufacturing district regulations that would eliminate or significantly relieve the burdens zoning places on the manufacturing uses, rather than restrict hotels based on an unproven assertion that hotels are the cause of the problem.  

Measuring With-Action Projections and Impacts

It has been the experience of our members that the requirement of a special permit has been a deterrent to new hotel development. The Draft Scope of Work states that the Proposed Action will limit as-of-right hotel development by 45% in land area (Table 20). However, Table 24 states that the projected number of hotel rooms to be built is the same with and without action because the location of those hotel rooms would shift to the remaining as-of-right areas. This analysis is incorrect because the Analytical Approach is flawed. The Draft Scope of Work’s With Action condition did not conduct a simple soft-site analysis to determine whether or not the remaining as-of-right land area could accommodate more development. It is hard to comprehend how restricting 45% of the as-of-right lot area will have no impact on the development of hotels. The City should study in greater detail the availability of soft-sites outside of the proposed M1 restricted area.

Since the Draft Scope of Work assumes that hotel development will move to other commercial districts, the City should study how that may negatively impact the availability of Class B/C office space as well as housing, since residential is allowed in several commercial districts. Additionally, as the City anticipates that the Proposed Action will funnel all future hotel development into the remaining districts, an area that is half as large as the current footprint, the City should also study the impact that this will have on the character of those neighborhoods in the future.

Hotel development directly impacts the city’s tourism economy. The Proposed Action would severely constrict where as-of-right hotel development can occur, and it is reasonable to expect hotel room rates to increase or for hotel development to shift to New Jersey to meet the steady demand. The City should study the broader economic impacts to the tourism industry as a result of the Proposed Action.

And finally, if the Proposed Action will significantly restrict the supply of hotel rooms, it is reasonable to expect that more tourists will seek accommodations outside of traditional providers. As short-term rentals through companies like AirBnB become more prolific, along with the attendant negative consequences, the City has to take into account how its actions impact that market. The City needs to study the impact of the Proposed Action on short-term rentals, whether the demand would be a catalyst for more conversions to transient use, and the possible loss of affordable housing units.

Alternatives

In defining the scope of the Environmental Impact Statement, we ask the Department of City Planning to study the following Alternatives to the proposal:

1) Exclude Areas with Special Zoning Provisions: The City should exclude areas that have special zoning provisions that already consider and address location-specific conditions and needs. This would capture Special Districts like Long Island City, SoHo, West Chelsea, and the Garment District, as well as M1-5A and M1-5B areas.

2) Exclude Manhattan from the Hotel Special Permit: The City’s stated justification for the restriction is that hotels are crowding out other uses in low density M1 locations which are providing a reservoir of space for the new light manufacturing /commercial uses. These conditions do not apply in Manhattan where M1 districts have higher densities. Additionally, the Hotel Study states that Manhattan has reached saturation in hotel development due to the recent hotel boom. A hotel special permit in Manhattan seems unnecessary and should be excluded.

3) Alternative Based on Hotel Size: The City should study an alternative based on the number of room keys. There is likely some linkage between the number of keys and the effect on neighborhood character, which is a consideration for the Proposed Action.

4) Limit the Special Permit to Date Certain: The City’s Hotel Study states that the current hotel development boom is unlikely to sustain itself over the long term and that the market is displaying signals that supply is on pace to match demand. Once supply and demand reaches equilibrium, hotel growth can be expected to grow at an organic rate. The City should study an Alternative that limits the applicability of the hotel special permit to a certain period of time.

Conclusion

It is unclear why the City is putting forth the Proposed Action that will impose a heavy restriction on hotel development, and the Hotel Study submitted does not make a convincing case for the need for this restriction. The hotel and tourism industry are key drivers of our city’s economy, and it is important that the City examine all impacts and study all possible alternatives before moving forward with such a broad sweeping policy.