Governor Signs Hotel Conversion Bill

On June 7, Governor Kathy Hochul signed into law New York State Senate Bill S4937C. This law allows hotels that are already authorized as Class B hotels to rent rooms for permanent residence purposes and unlocks $200 million in state funds to finance the conversions. The bill cites both the lack of housing stock in New York City and underutilized hotel rooms in the wake of the COVID pandemic as reasons for converting hotel rooms into permanent housing. The bill’s authors also anticipate a net increase in tax revenue as empty hotel spaces increase in occupancy. After Governor Hochul signed the hotel conversion bill into law, the change became effective immediately.

Under New York State’s Multiple Dwelling Law, multiple dwellings are classified as either Class A or Class B. Class A multiple dwellings are designed for permanent residence, such as apartment buildings. Class B multiple dwellings provide more temporary, transient housing such as dormitories, boarding houses, and hotels. The new law amends the Multiple Dwelling Law to allow hotels to be used as permanent housing without needing a new or amended Certificate of Occupancy.

Only hotels that are located in areas zoned for residential use or 400 feet from a residential district are eligible for conversion. By allowing qualifying hotels to keep their Certificates of Occupancy, the hotel conversion projects would be exempt from undergoing a lengthy review process, thus addressing concerns from developers who blamed heavy regulations for the low number of applicants applying for state financing.

The state allocated $200 million in funding to the Housing Our Neighbors with Dignity Act (HONDA), which first outlined a mechanism for state-financed hotel conversions when it was signed into law last year. However, none of the first $100 million in financing the state allocated in 2021 for hotel conversions has been used. State Senate Deputy Majority Leader Michael Gianaris, HONDA’s sponsor, blamed the low number of applications on the city’s lengthy Uniform Land Use Review (ULURP) process and developers being forced to get a brand-new Certificate of Occupancy. The new law removes these two hurdles.

The new law appoints HPD to provide oversight, and only HPD needs to approve conversions. HONDA requires half the units to be set aside for people experiencing homelessness while the other half will be subject to an 80 percent area median income cap for tenants. Rents can’t exceed 30 percent of a tenant’s income, according to the bill’s text.