A $7 Billion Mistake? New York Seeks to Curb New Hotels.

New York City leaders, led by Mayor Bill de Blasio, are closing in on a controversial plan to drastically restrict hotel development, a move that the mayor’s own experts fear could endanger the city’s post-pandemic recovery and cost billions in lost tax revenue. The mayor wants to require City Council approval for any new hotel, anywhere in the city — a layer of scrutiny otherwise reserved for neighborhood-altering projects such as airports, helipads, racetracks, large stadiums and drive-in movie theaters. He has said hotels create more traffic and activity than ordinary buildings, and he has defended the policy as good for both organized labor and community residents. If the Council were empowered to approve all new hotels, developers fear that few, if any, would go ahead. Similar requirements have been imposed in a smattering of neighborhoods dating to the Bloomberg administration; in those districts, no new hotels have been built under the stricter rules. City budget officials have calculated that the move could eventually leave New York with insufficient hotel capacity, potentially costing $350 million by 2025 and as much as $7 billion by 2035 in lost taxes, according to a confidential budget office report drafted in February and shared with The New York Times. And in an internal memo obtained by The Times, the city’s top planning official warned that a more limited proposal — requiring a special permit for hotels in the Union Square area of Manhattan — could hamper the hospitality industry, without a viable urban planning rationale. “We flag that to continue with this proposal could be seen as contrary to economic recovery principles and sound planning,” Marisa Lago, the director of the planning department, wrote last year in the memo to City Hall. But Mr. de Blasio seems to be more influenced by another group: the hotel workers union that endorsed his 2020 presidential campaign, pouring $440,000 into ads to bolster his ill-fated candidacy. The union, the Hotel Trades Council, has long pushed to limit the construction of new hotels, which are often nonunion. Its calculation has been that limiting the development of such hotels, which typically offer less-expensive lodging than existing full-service hotels, would tend to increase hotel room prices generally and bolster the higher-end hotels where many of its workers are employed. Union officials argue that many of the new hotels that have sprung up outside Manhattan in recent years have turned into homeless shelters or have become plagued by crime. They contend that the special permit would not stop development, but only ensure that it incorporates community concerns. City Hall echoes the union’s arguments. “Our goal is to strengthen the hotel industry,” said Mitch Schwartz, a spokesman for the mayor. “The pandemic hasn’t changed the basic truth that hotels are unique cases, and they require very careful planning. The special permit doesn’t ban hotels, and it won’t depress tourism or harm our city’s economic recovery.” Before the pandemic, in 2019, 67 million tourists flocked to the city. About 22 million tourists visited New York City in 2020. Much of the city’s recovery hinges on bringing those visitors back, and how to do so has become a key issue in the election to replace Mr. de Blasio, who is barred from seeking a third term by term-limits laws. Last week, the mayor announced a $30 million advertising campaign aimed at drawing tourists to the city again. “If we build it, they will come,” Mr. de Blasio said in a news conference announcing the campaign. But building hotels would certainly become more challenging under the special approval process, said Moses Gates, vice president of housing and neighborhood planning at the Regional Plan Association, an influential nonprofit planning group. No other type of routine development currently gets the kind of scrutiny that Mr. de Blasio is proposing for hotels, he said. “Hotels would be the only common land use which would always need City Council approval to be built, no matter what,” Mr. Gates said. Before the pandemic decimated the hotel sector, there were nearly 128,000 hotel rooms in New York City, and hotels averaged annual occupancy rates of between 85 and 90 percent, which the city says “were among the highest of any urban market in the United States.” Now, roughly 30 percent of those rooms have closed. In April, New York City’s occupancy rate stood at 53 percent, excluding the closed hotels, according to STR, which tracks the hospitality industry. Mr. de Blasio has strenuously denied that the union has influenced his stance on the new hotels, saying in a 2019 interview that it was “just plain good policy.” Updated April 27, 2021, 12:15 p.m. ET Opponents among urban planners and real estate professionals argue that the policy would restrict new hotel development and stymie job growth at precisely the time when it is most needed. “It is directly contrary to what the admi

A $7 Billion Mistake? New York Seeks to Curb New Hotels.
New York City leaders, led by Mayor Bill de Blasio, are closing in on a controversial plan to drastically restrict hotel development, a move that the mayor’s own experts fear could endanger the city’s post-pandemic recovery and cost billions in lost tax revenue. The mayor wants to require City Council approval for any new hotel, anywhere in the city — a layer of scrutiny otherwise reserved for neighborhood-altering projects such as airports, helipads, racetracks, large stadiums and drive-in movie theaters. He has said hotels create more traffic and activity than ordinary buildings, and he has defended the policy as good for both organized labor and community residents. If the Council were empowered to approve all new hotels, developers fear that few, if any, would go ahead. Similar requirements have been imposed in a smattering of neighborhoods dating to the Bloomberg administration; in those districts, no new hotels have been built under the stricter rules. City budget officials have calculated that the move could eventually leave New York with insufficient hotel capacity, potentially costing $350 million by 2025 and as much as $7 billion by 2035 in lost taxes, according to a confidential budget office report drafted in February and shared with The New York Times. And in an internal memo obtained by The Times, the city’s top planning official warned that a more limited proposal — requiring a special permit for hotels in the Union Square area of Manhattan — could hamper the hospitality industry, without a viable urban planning rationale. “We flag that to continue with this proposal could be seen as contrary to economic recovery principles and sound planning,” Marisa Lago, the director of the planning department, wrote last year in the memo to City Hall. But Mr. de Blasio seems to be more influenced by another group: the hotel workers union that endorsed his 2020 presidential campaign, pouring $440,000 into ads to bolster his ill-fated candidacy. The union, the Hotel Trades Council, has long pushed to limit the construction of new hotels, which are often nonunion. Its calculation has been that limiting the development of such hotels, which typically offer less-expensive lodging than existing full-service hotels, would tend to increase hotel room prices generally and bolster the higher-end hotels where many of its workers are employed. Union officials argue that many of the new hotels that have sprung up outside Manhattan in recent years have turned into homeless shelters or have become plagued by crime. They contend that the special permit would not stop development, but only ensure that it incorporates community concerns. City Hall echoes the union’s arguments. “Our goal is to strengthen the hotel industry,” said Mitch Schwartz, a spokesman for the mayor. “The pandemic hasn’t changed the basic truth that hotels are unique cases, and they require very careful planning. The special permit doesn’t ban hotels, and it won’t depress tourism or harm our city’s economic recovery.” Before the pandemic, in 2019, 67 million tourists flocked to the city. About 22 million tourists visited New York City in 2020. Much of the city’s recovery hinges on bringing those visitors back, and how to do so has become a key issue in the election to replace Mr. de Blasio, who is barred from seeking a third term by term-limits laws. Last week, the mayor announced a $30 million advertising campaign aimed at drawing tourists to the city again. “If we build it, they will come,” Mr. de Blasio said in a news conference announcing the campaign. But building hotels would certainly become more challenging under the special approval process, said Moses Gates, vice president of housing and neighborhood planning at the Regional Plan Association, an influential nonprofit planning group. No other type of routine development currently gets the kind of scrutiny that Mr. de Blasio is proposing for hotels, he said. “Hotels would be the only common land use which would always need City Council approval to be built, no matter what,” Mr. Gates said. Before the pandemic decimated the hotel sector, there were nearly 128,000 hotel rooms in New York City, and hotels averaged annual occupancy rates of between 85 and 90 percent, which the city says “were among the highest of any urban market in the United States.” Now, roughly 30 percent of those rooms have closed. In April, New York City’s occupancy rate stood at 53 percent, excluding the closed hotels, according to STR, which tracks the hospitality industry. Mr. de Blasio has strenuously denied that the union has influenced his stance on the new hotels, saying in a 2019 interview that it was “just plain good policy.” Updated April 27, 2021, 12:15 p.m. ET Opponents among urban planners and real estate professionals argue that the policy would restrict new hotel development and stymie job growth at precisely the time when it is most needed. “It is directly contrary to what the administration ought to want to do in order to revive the city’s economy, put people back to work and reinvigorate its tax base, which has been severely damaged,” said Eric Kober, who spent nearly 40 years at the New York City planning department and now works at the conservative Manhattan Institute. The mayor has faced legal scrutiny since early in his tenure over his penchant for taking political contributions from those with business before the city, including a restaurateur in Queens, an aspiring real estate developer and well-heeled advocates for a ban on horse carriages. Federal prosecutors in 2017 said they had found a pattern in which Mr. de Blasio or his aides sought political donations from those seeking favors from the city, and then reached out to city agencies on their behalf. But they stopped short of formal charges, citing a “high burden of proof.” Mr. de Blasio has denied any wrongdoing. “It’s a de Blasio payback,” said Richard Emery, a civil rights lawyer who served as the head of Mr. de Blasio’s police oversight board before resigning amid controversy. “It’s an extremely oppressive requirement that’s very hard for the City Council to resist,” Mr. Emery said, suggesting that once the special permit was in place, Council members would not readily give up their power to approve or reject any new hotel. Mr. de Blasio’s plan is about to enter a critical stage, as officials prepare to present it publicly to communities around the city. As the proposal has slowly wound its way through the city approval process, the Hotel Trades Council has been effective at mobilizing its members and making targeted contributions in local races. At a virtual meeting in January, four Council members spoke in favor of the special permits, which require a long review process culminating in a Council vote. The Council speaker, Corey Johnson, is running for comptroller with the backing of the hotel workers union and says he is “happy to see this plan going forward.” Councilman Brad Lander of Brooklyn, another comptroller candidate, spoke in favor of the proposal at the hearing earlier this year, as did Benjamin Kallos, a councilman from Manhattan’s Upper East Side. “I would like Council members and community boards to have a say in the placement of new hotels,” Mr. Kallos said in an interview. “At the current time where tourism is at an all-time low, I want to make sure that what we are building is actually what we need.” The Hotel Trades Council’s support of a special permit process for new hotels may seem counterintuitive, since it is effectively opposing the growth of jobs in the industry that it represents. Union hotel jobs in New York City provide one of the few pathways to the middle class for workers with no college education. “Labor generally is in favor of employment and of growth, but especially jobs in their own sector,” said Harry C. Katz, a professor of collective bargaining at Cornell University. But mid-market hotels that serve middle-class tourists are hard to unionize, union and industry experts say. If special permits were to be required, the hotel union would have the leverage to pressure Council members to only accept new hotels that use union labor. Asked for comment, Neal Kwatra, a spokesman for the Hotel Trades Council, sent over a quote from Tyler Morse, a developer whose company owns and operates hotels across the country. Several of his company’s hotels would likely face less competition under the new policy. “We always welcome community input on any proposed project, and it’s simply not in our interest to build a hotel that our neighbors don’t appreciate,” Mr. Morse said. The leisure and hospitality sector hemorrhaged 200,000 jobs in 2020, and the city’s Independent Budget Office expects it to be the slowest sector to recover. It is likely to take years for international travel to return. Some hotels have been converted to other uses, such as homeless shelters. Officials have called for permanently converting some now-empty hotels into affordable housing. But New York is just starting to recover from the pandemic, and city tourism officials project that the number of visitors to the city may reach its 2019 levels by 2025. By then, even in a best-case scenario, under the proposed new approval system, the city analysis found, there would be 123,000 hotel rooms — a shortage of more than 5,000 rooms. Without rooms to stay in, about half of New York City’s would-be tourists would simply not come, the city’s analysis estimated. A third of travelers would resort to using Airbnb or staying with friends. And roughly 15 percent would stay in New Jersey and travel to the city by day, pumping millions a year into New Jersey’s economy. Analysts said that the lengthy review process to get a permit would change the economics of hotel development, and existing hotels would be likely to grow more expensive. “I don’t think New York should be reserved for the tourists who can afford $400 a night to stay here,” Mr. Gates said.