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After Cracking Down on Airbnb, New York City Comes After Traditional Hotels

New York City's new zoning ordinance would give the city an effective veto over proposed hotel projects in much of the city.

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Having succeeded in slapping restrictions on Airbnb, New York City politicians are now coming after traditional hotels with a proposal that would make it far more difficult to build new hotels across much of the city.

The proposal in question—the uninterestingly-named M1 Hotel Text Amendment—would require that all hotels being built in areas zoned as "light industrial" first receive a special permit from the city's Planning Commission before starting construction.

That all might sound like the height of bureaucratic minutia, but the law would be a substantial restriction on property rights and the ability of developers to put up new hotels in the city.

Currently, New York City allows for hotels to be built "as-of-right" in light industrial zones, meaning developers have a right to build new hotels, and project opponents—be that the government or anti-development NIMBYs—have few means of stopping or imposing conditions on new construction.

Should this ordinance pass however, developers would lose this right.

Instead, they would have to obtain those special use permits from the Planning Commission, but only after first going through the city's cumbersome public review process, which can take years and mandates multiple layers of review from community and borough-level governing bodies.

Because these permits would be discretionary, the Planning Commission could deny any one development. Both the Mayor and City Council could, under certain circumstances, also torpedo a new hotel, should they wish.

Developers are naturally opposed to the proposed ordinance.

"Tourism and business travel, including their spending and the jobs they support, would be severely curtailed," wrote Gene Kaufman, a hotel architect and vocal critic of the new law, in a July op-ed in Crains, warning that "concerted efforts to provide affordable hotel rooms in New York City will be largely shut down."

Indeed, the current "as-of-right" arrangement for new hotel construction has led to a boom in hotel construction and consequentially, a fall in room rates, even as New York has seen record numbers of tourists.

New York has added some 40,000 new hotel rooms and 275 hotels since 2007, representing a 57 percent increase in hotel room inventory, with some 24 percent of those rooms in the light industrial areas that would be affected by the new law.

Meanwhile, average daily rates for rooms in the city have declined from a 2014 high of $271 to a little under $240 in 2018, according to data reviewed by The Wall Street Journal.

The increase in inventory and corresponding rate decline is a big reason are why some folks are pushing for these new restrictions.

"If it keeps additional hotel development from getting approved within the city, that's a good thing for existing hotels. Anything that can help current hotels raise their average daily rates is badly needed," said Jay Stein, CEO of Dream Hotel Group, to Commercial Observer in April.

The same line has been adopted by the New York Hotel and Motel Trades Council, a union representing some 36,000 hotel workers in the city. In written testimony submitted to the city council, the union fretted that "the proliferation of hotels in manufacturing zones is ultimately not good for the city's tourism industry," citing the fall in hotel room prices.

Indeed, the hotel workers union—which was also a driving force behind New York's recently imposed Airbnb restrictions—has many reasons to protect existing hotels from new competition. For starters, it's difficult to demand wage and benefits increases from less profitable hotels. In addition, the rapid rate of new hotel construction has outpaced the union's ability to organize workers.

According to real estate news website The Real Deal, only five of the 120 hotels completed since 2013 are unionized.

Slowing down the construction of new hotels would help arrest that fall in room prices, while also giving the union more time to organize workers at new projects as they come on line.

Forcing new hotels to go through the public review process also means that projects will have to vetted by community review boards, which the Hotel Trades Council actively works to influence, and which could make life difficult for developers that don't agree to union demands.

In this way, New York's new hotel zoning ordinance is a lot like zoning ordinances for pretty much anything else: designed to protect the interests of the businesses, workers, and residents already in place at the expense of newcomers (in this case, hotel developers and future hotel employees) and customers (the aforementioned tourists, who'll have to shell out more each time they visit "the greatest city on earth").

The city council is expected to vote on the ordinance sometime next month, after which it will to Mayor Bill DeBlasio for signing.

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  1. Pray they don’t alter the deal any further.

    1. I find your lack of faith disturbing.

  2. Currently, New York City allows for hotels to be built “as-of-privilege” in light industrial zones, meaning developers have a privilege to build new hotels, and project opponents?be that the government or anti-development NIMBYs?have few means of stopping or imposing conditions on new construction.

    Should this ordinance pass however, developers would lose this privilege.

    Almost like NYC doesn’t want tourists or even business visitors.

    1. Please check your privilege.

    2. And fortunately for both of us, I don’t go to NY …. for anything.

      Even more fortunate for me, business expansion in the south is excellent and there is lots of opportunity. NY looks like a cesspool to me, one we would be better off without. I don’t suppose the Indians would take it back?

  3. Something about riding the tiger being fun until it’s time to get off.

    1. Poor Mrs. Fist.

  4. Progressives love to tax and regulate. It really turns them on.

    1. I get turned on by the tears of orphans, personally. But what you’re talking about is just plain sick.

  5. I have to take a day trip for work to New Jersey on my birthday.

    1. You do outcalls?

      1. To the other side of the country. Are you that in demand in your work?

        1. No, your anus wins in that regard.

          1. How kind of you to say.

            1. Just remember Tony, crack kills! LOL

  6. So there is a clear plan on the part of New York City government to do all possible to drive visitors away as fast as possible.
    Is there a down side?

    1. “Tourists: Give Them A Hand, Not The Finger”

      1. Meanwhile, in Nevada tourists may legally pay for either. See what a statist dystopia we are over here?

  7. When they came for the mom and pop pads, I just watched, because it wasn’t my assets. When they came for the union goons, I chuckled in schadenfreude. Then, when they came for Utilitarian me, I said “Sturmbannfuehrer, I cannot tell a lie… the Jewish girl you are looking for has rented some space in yonder attic. Go do your duty.”

  8. Sounds like a great deal for the existing hotels around the site of the new Amazon hq. A great opportunity to restrict supply and jack up the room rates on all those business folks that will be visiting Amazon.

    1. Well those are just TOURISTS and VISITORS! It’s free money, right?

    2. Of course, Amazon hasn’t weighed in yet. Maybe a few words from Mr. Bezos would make this all go away? The HQ could be moved to another city pretty easily at this point.

  9. Truth be told, fucking over hotel consumers is so politically easy (since natives don’t stay in hotels) that damn near every politician of any ideological stripe favors them. (Witness how easy it was for the Raiders to get Nevada to pay for them with hotel taxes.) Plus bonus when you favor those “stakeholders” who have already entered the market the industry becomes quite friendly to your proposal. NYC is only doing for hotels what it has already done for taxis: limit “official” capacity; crush the ability to add “unofficial” capacity.

    But this is just the tip of the iceberg in how this whole city is run on connections, and the little guy gets a big FYTW from everyone in power. But we can’t elect Republicans, because they will: not add more gun laws that no one is complying with or enforcing in the first place; not repeal abortion laws that were struck down forty-five years ago (when they were already the country’s most liberal); not “stand up to” (i.e. rage impotently at, with no actual effect on anything) the Trump Administration; and so forth. It can’t even be charitably be called an ideology! And the problem is only getting worse and worse; this is now a one-party city almost everywhere where people will not even consider a Republican and you can get elected by just regurgitating prog boilerplate. I can’t believe it’s gotten this bad. Maybe we deserve it.

  10. This would never have happened when Donald Trump was in the real estate business in NYC, back when he was a Democratic Party contributor.

    1. Well, to be honest, that’s exactly what would have happened when Donald Trump was a Democratic Party contributor.

      1. And this is WHY Donald was a “Democrat” back then. You have to pay to play if you want to be a developer in NY. Do you think he would have gotten any permits as a Republican? Those aren’t really contributions, they are protection money.

  11. The City has a law that does not allow hotels to be converted to other uses saying that hotel stock is in danger of going the way of the dinosaur while on the other hand they say there are too many hotels in the manufacturing zone! Stinks of politics with no connection to economic facts

  12. Absolutely ridiculous! The city needs to stop this senseless regulations.

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