Bill to fund hotel and office conversions heads to Cuomo’s desk

Legislation to create affordable housing relies on nonprofits

 Assembly member Karines Reyes, Andrew Cuomo and Sen. Michael Gianaris (Getty)
Assembly member Karines Reyes, Andrew Cuomo and Sen. Michael Gianaris (Getty)

A bill that aims to convert distressed hotels and offices into affordable housing will head to the governor’s desk.

The state Assembly passed the bill late Wednesday, paving the way for a government-financed conversion program run by nonprofits.

Under the measure, the state agency that administers housing vouchers and other federally funded programs will gain authority to finance the purchase and conversion of hotels and offices on behalf of state-approved nonprofits. The Senate approved the bill earlier in the day.

The bill, dubbed the Housing Our Neighbors with Dignity Act, or HONDA, requires that at least 50 percent of converted units be set aside for residents who experienced homelessness immediately before moving in. The properties would be dedicated to residents making an average of 50 percent and no more than 80 percent of the area median income.

The apartments created must be permanently affordable through a regulatory agreement with the state or local housing agency, or through another type of pact. The units must also remain rent-stabilized.

“There are obvious tools to confront the state’s historic homelessness crisis and end the perpetual suffering of so many people, and converting hotels to permanent, high-quality affordable housing is one of them,” said Paulette Soltani, political director of Vocal NY, an advocacy group that backed the bill.

The latest version of the legislation, sponsored by Sen. Michael Gianaris and Assembly member Karines Reyes, includes a provision that will benefit building service workers union 32BJ SEIU. Though the measure applies statewide, it requires building service workers in converted buildings in New York City to be paid prevailing wages.

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The Hotel Trades Council, which represents hotel workers, has also indicated its support for the measure, which requires that any hotel with an active collective bargaining agreement must notify and secure the approval of union representatives before moving forward with a conversion deal.

It is unclear where Gov. Andrew Cuomo stands on the bill. He had initially proposed a measure facilitating hotel and office conversions as part of the state budget, but it was criticized for overriding local zoning and not creating enough affordable housing. Ultimately the state budget included $100 million for conversions of distressed commercial buildings, but not specifics on how it will be spent.

Sheila Pozon, a real estate attorney with Kramer Levin, said funding for the program seems to be limited to the $100 million, as the bill notes that nonprofits will need to turn to subsidies, vouchers, rent and other sources of income to cover operating expenses.

The approved version of the bill doesn’t include the creation of a social housing fund to accept grants, gifts, bequests or loan authority to finance conversions.

The hotel industry was slammed by the pandemic, and occupancy rates aren’t expected to return to 2019 levels until 2025, according to an April CBRE study. Still, some 13,000 hotel rooms are projected to come online in the city this year and more than 60 percent of office workers in Manhattan are expected to return to the office by September.

That means the window for HONDA conversions may be brief, if it opens at all. Its success will depend in part on owners not having better options. Pozon pointed to the de Blasio administration’s efforts to require special permits for new hotel construction, which is expected to restrict new supply and enhance the value of existing hotels.

“I would think there will be some hotel owners that are going to just try to hold on,” she said.