Testimony of the Real Estate Board of New York Before the New York City Council Subcommittee on Zoning and Franchises in Opposition to the Proposed Citywide M1 Hotel Text Amendment

The Real Estate Board of New York, Inc. (REBNY) is a broadly-based trade association representing owners, developers, brokers, managers and real estate professionals active throughout New York City.

REBNY strongly opposes the proposed M1 Hotel Text Amendment that would significantly limit as-of-right hotel development citywide. It has been the experience of our members that the requirement of a special permit has been a deterrent to new hotel development, and the Draft Scope of Work states that the proposal will limit the land area of as-of-right hotel development by 45%.

The proposal 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. 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.

The City’s accompanying Hotel Study concludes that, “The [hotel] 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.”

Over the course of the past few years, the City has often applied a hotel special permit on both public and private applications throughout the city—including central locations like East Midtown and the Garment District where hotel development should be encouraged. Rather than continuing with this piecemeal and opaque approach to regulating new hotels, the City should state its position on as-of-right hotel development. Further, the City needs to undertake a comprehensive study of the impact of recent land use actions on the hotel industry, instead of the segmented analysis provided in the City’s Hotel Study.

We ask the City Council to consider 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 is unnecessary and should be excluded.

3) Alternative Based on Hotel Size: The City should consider 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 consider limiting the applicability of the hotel special permit to a certain period.

The hotel industry is a critical linchpin to our city’s tourism economy, and it is vital that hotel development not be constrained. In total, the 60 million tourists a year sustains more than 375,000 jobs across the city. These figures are expected to rise as 1.5 million additional tourists are estimated to visit next year.

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. It is unclear why the City is advancing a proposal that will impose heavy restrictions on hotel development, and the Hotel Study submitted fails to make a case for its need. We respectfully request that the City Council not support this zoning proposal in its current form.