Why Did HONDA, New York’s Hotels to Housing Plan, Flop?

As COVID-19 tore apart New York in the spring of 2020 and tourism anything but dried overnight, desperate hotel owners were willing to try almost anything to fill rooms: dozens of properties signed contracts to become temporarily hospital infirmaries while luxury brands slashed prices and presented themselves as decadent home offices or mini-escapes for the restless in confinement. Talk of ‘virtual reality’ tourism circulated among the wildest while the Soho Grand opted for nostalgia – recalling on Instagram the time Alexa Chung came to her New Year’s Eve party and the guy from LCD Soundsystem is doing a DJ set. Things were grim – the closures ‘put the dagger in the throat’ of the industry, as the president of the New York Hotel Association said at the time.

In this chaotic moment, an unlikely coalition agreed on one thing: some of these distressed hotels could possibly become permanent accommodations. As the market forecast remained terrible In 2021, a group of housing and tenant rights activists, homeless advocates, affordable housing developers and lawmakers drafted the Housing Our Neighbors With Dignity Act, dubbed HONDA. The bill would simplify the process of converting hotels into affordable housing, ultimately pumping $200 million into the project. The largest hotel lobbying organization – the Hotel Association – and the powerful union of hotel workers – the Hotel Trades Council (HTC) – have even spoken out in favor, and the bill has was adopted in June 2021. It was quite a radical proposal, but it was also terribly practical: what good was an empty hotel for someone?

But then nothing happened. In a year and a half of existence, the legislation has yet to produce a single hotel conversion. The story of this failure has now been Told again and again through a declining Renaissance-style monument in the heart of Times Square: the Paramount. Its size and location make the hotel an ideal candidate for conversion. It was also, by all appearances, a miserable place for tourists (complaints on review sites ranged from mold on the ceiling to stained carpets to a cockroach in the bed), and owner Aby Rosen was supposed to even willing to sell. But Breaking Ground, an affordable housing nonprofit, and HTC, which represented Paramount’s 170 laid-off workers, ultimately found themselves at odds. Despite their mutual support for the law, they deadlocked on a provision requiring developers to honor the union contract’s successor agreement, which says they must retain its union workforce — or buy out their contract. It was a $50 million outlay that Breaking Ground says it couldn’t afford. The deal is dead and the story of why has taken sides: work versus affordable housing.

But the successor clause, and its likely price, have always been part of the deal — that’s how the state managed to get HTC on board and pass the bill in the first place. So why didn’t HONDA meet the moment of crisis it was destined for? “Another version of ‘doomed’ is ‘never had a chance to really get started,'” says Sam Stein, housing policy analyst at the Community Service Society. The slow pace of legislation, the delay in regulatory relief, the fact that HONDA happened between the administrations of governors and mayors so it wasn’t really a showpiece for a high-profile politician, “it all meant that when the iron was hottest we couldn’t knock Even as political leaders continue to declare the city a housing emergency and campaign on the issue, with Kathy Hochul announcing that housing is its top priority for 2023, solutions remain frustratingly undersized.

HONDA was passed at the last possible moment during the 2021 legislative session – just days before lawmakers were set to take a break for the summer. It took another full calendar year to approve regulatory reforms what real estate developers and advocates have said should have been included in the original invoice. Language relaxing zoning restrictions in manufacturing districts (a major obstacle to any conversion) was finally added in June 2022, just six months ago. Supporters say it took months for the state’s Division of Housing and Community Renewal, the agency that handles HONDA applications, to share a “terms sheet” outlining requirements for conversion projects, and that the Department of Buildings has not yet published its own. “I think it’s hard to look at the schedule for these programs and say it was treated as an emergency,” says Noah Kazis, a University of Michigan professor and former Furman Center researcher who studied the right.

In contrast, California spent nearly $800 million of its federal COVID relief funds in 2020 alone to buy 94 vacant hotels under its Project Homekey plan, turning them into more than 6,000 housing units. This allowed the state to avoid dependence on private developers to undertake conversion projects. “California was really bold,” says Kazis. “Obviously we have to know the long term, but in the short term they did what they planned to do.” Vermont passed $13.5 million in three months in 2020 to house 30% of its homeless population in hotels through an expanded voucher program. King County, Washington, where Seattle is located, quickly leased six hotels in 2020, moving more than 600 homeless people out of mass shelters, and has since purchased three for permanent conversion. New York housing activists initially wanted the state to buy the hotels, as King County did, as part of HONDA. “But it’s anathema to this government,” says Stein, who helped work on the legislation.

Now, nearly three years into the pandemic, with hotel rooms across the city renting for record amounts, many landlords are much less inclined to sell. The average daily earnings rate in October was $339, according to data from industry tracker STR, the highest on record, a trend driven by the high-end luxury market. Although occupancy has not returned to pre-pandemic levels, fewer tourists are paying more to visit. Of the 200 properties that closed at the start of the pandemic, 65 have since reopened, including 77 under construction. Only 45 remained closed. Vijay Dandapani, President and CEO of the New York Hotel Association, said very bluntly in April in New York Focus: “With a gradual increase in occupancy, the incentives for owners to participate in the adaptive use of affordable housing diminish.” Ted Houghton, the president of Gateway Housing, a nonprofit that consults with affordable developers who have worked on HONDAs, tells me he has his eye on a vacant hotel, but its wealthy landlord in Singapore has more bargain to let it sit empty and unused and eventually sold at market price ($500,000 a room, according to Houghton) rather than selling it now to an affordable developer. “There’s no way I can buy it.”

Which, like the high cost of a syndicate buyout, raises another uncomfortable point about HONDA’s viability: Was $200 million ever going to be enough to launch such an ambitious program? The costs involved were no secret: Breaking Ground bought 90 Sands, a former hotel in Dumbo owned by Rosen, in 2018 for $170 million. Sources I spoke to who worked on HONDA said the amount was far below what they would have liked to achieve, especially given the lack of major federal funding for affordable housing. And as the hospitality industry continues to rebound, it will become increasingly difficult to compete with private developers.

Still, Houghton says there are a few conversions he’s heard of that he hopes will be announced this year, though he can’t give me more details. There are certainly failing non-union hotels concentrated in the outer boroughs that will be easier to convert, but advocates say they are badly needed in central business districts, where union hotels dominate, and properties in outside of Manhattan are often too small to make conversion financially feasible. How many homes – and where and when – HONDA will ultimately produce remains an open question. Meanwhile, in Times Square, which has some of the highest concentrations of people sleeping in subway stations in the city, the Paramount has reopened, offering rooms for up to $475 a night. In a recent Tripadvisor review, a manager responded to a ranting guest that he had to throw away his Junior’s cheesecakes without a fridge in the room to store them. “We hope you will give us another opportunity to welcome you back for an exceptional stay you deserve,” the hotel rep wrote.