When we think of industries that have been hit the hardest during the pandemic, restaurants and the hospitality industry are the first to come to mind. One proposal from Gov. Andrew Cuomo would allow owners of empty hotels and office buildings in Midtown Manhattan to convert their properties into apartments. But will it work?
In his 11th State of the State address, Cuomo said that opportunities for innovation have come out of the COVID-19 outbreak. One area where the Governor said we need to think outside the box is the office space industry, since many office buildings are sitting vacant due to employees working from home. Another area is the hospitality industry, since NYC has essentially closed indoor dining-and there has been a dramatic drop in tourism due to the pandemic.
Housing, however, is always needed. Cuomo stated that “[t]he housing problem in our cities has gotten worse. But the crisis of growing vacancies in our commercial property provides an opportunity. We should convert vacant commercial space to supportive and affordable housing, and we should do it now.”
Cuomo’s proposed legislation would create a five-year period during which owners of office buildings and hotels in Midtown Manhattan could convert them for residential use. Real estate groups like REBNY have supported this proposal, and have commented about the need for reimagining how central business districts will succeed and thrive in the 21st century (i.e., the need to create “walk to work” environments, and an increase in affordable housing).
Recently, the Roosevelt Hotel in Midtown closed while other hotels such as the Lucerne became homeless shelters. So, it is no surprise that Vijay Dandapani, president of the Hotel Association of NYC supported Cuomo’s idea. Dandapani said, “The hotel industry is the most stressed industry in the commercial property sector due to the near total evaporation of revenues since March 22. With no prospect of a meaningful revival for another three to four years, the Governor’s proposal that seeks to make it easier for owners and operators of hotels to maximize the value of their severely negatively affected assets will be welcomed by many.”
A spokesperson from Cuomo’s office said that details would be fleshed out in the coming days. Officials said they believe a state law would supersede the city’s zoning laws if there were any conflicts. However, zoning remains a big issue.
State Senate Housing Committee Chairman Brian Kavanagh (D-Manhattan) also supports the proposal, saying “The governor is smart to focus on the opportunities that may be available to convert commercial and retail space but it’ll take some smart thinking to figure out how to do that effectively,” Kavanagh said.
And in what seems like a unique event where the State and City agree on something, Kavanagh said that the New York City government will have to be a willing partner to make such building conversions work. A spokesman for Mayor Bill de Blasio, Bill Neidhardt, said of the conversion plan: “We’re reviewing it. We want affordable housing at the center of all rezonings.”
It wouldn’t be a true blog post if there wasn’t at least a bit of conflict to talk about. What will happen with the hotels that have labor contracts with the Hotel Trades Council union? It includes 40,000 union workers employed at 300 hotels. The solution is unclear for now. An arbitrator’s ruling last year ordered 75 hotel owners to pay $500 million in back severance pay and benefits to employees who lost work during the pandemic.
This is one exciting development that we will certainly be posting more about.
Doesn’t it seem like we can blog about Cuomo’s proposals every week this month? Sanchez & Polovetsky is based in NYC, so anything New York City related captures our attention. On a personal note, we are big fans of the High Line, especially in the warmer weather. In case you haven’t heard, Gov. Andrew Cuomo has plans to extend the High Line from 10th Avenue, where it currently ends, to the entrance of the newly opened Moynihan Train Hall.
A new L-shaped elevated walkway will link the existing public park at 30th street to a pedestrian plaza at Manhattan West, which is a six-building mixed-use development from Brookfield Property Group (that stretches from 9th and 10th Avenues and 31st to 33rd Streets). The extension would end on 9th Avenue, across from the entrance to the new Moynihan Train Hall. Just in case you are unaware, the Manhattan West development measures eight acres and contains six million square feet of Class-A office space, 844 residences across The Eugene and The Pendry Manhattan West hotel, 200,000 square feet of retail, a new Whole Foods, a food hall, and a multi-concept restaurant from Danny Meyer’s Union Square Hospitality Group.
There are several organizations in the partnership named in the proposal including Brookfield, Empire State Development, the Port Authority of New York and New Jersey, and Friends of the High Line.
According to Cuomo, “This will be the most ambitious redevelopment that New York City has seen in decades. When the private sector economy lags, state governments build infrastructure and spur development. The beautiful Moynihan Train Hall is open, the renovation of Penn Station and this High Line extension project begin this year. This connection is part of a district-wide redevelopment of the West Side that will jumpstart the private market in a post-COVID world.”
While many of us stopped commuting to Penn Station during the pandemic, by the time we get back on the train we will be able to explore the new Moynihan Train Hall which opened in early January 2021, in the landmarked James A. Farley Post Office Building on Eighth Avenue, across the street from Penn Station. We always like to give a bit of history, so you may remember that the $1.6 billion project actually expands Penn Station. It does this by providing new waiting areas for the Long Island Railroad, Amtrak, and new commercial and retail spaces.
Cuomo is also proposing another extension for the High Line that will run from 34th Street and 12th Avenue past the Javits Center and cross the West End Highway, ending at Pier 76 and Hudson River Park. Currently, the property is a tow pound run by the NYPD that will be vacated by the end of January 2021, with plans to make it into a public park.
The purpose of the High Line expansion is to create more public space and address community concerns about pedestrian access to the west side of Manhattan. Anyone coming in and out of the area around Penn Station knows that there is a lot of traffic and congestion that continues on to Hudson Yards. The cost of the project is estimated at $60 million, which will come from a combination of private and public funds.
The bustle and excitement for hockey fans will likely increase, since the NHL is set to move its headquarters to One Manhattan West. There will also be a program on the plaza’s ice rink, along with public art and events by Arts Brookfield.
Keep an eye out for more news on the area and for Penn Station. We recently heard that Cuomo has announced a proposal to revamp Penn Station with upgrades that will increase train capacity by 40-percent. Stay tuned!
We often blog about eminent domain in New York and across the country. This week we came across an interesting story about Los Angeles’ Chinatown, where the City council is trying to use eminent domain and COVID-19 funding to ensure that an affordable housing building remains.
What is interesting about this story is that cities have started to use eminent domain more frequently to acquire properties for public/affordable housing. Of course, affordable housing is a valid public use under the eminent domain laws, so this makes perfect sense.
Back to our story: this month, the City council will decide whether to acquire the building known as Hillside Villa through its powers of eminent domain; in order to keep it permanently affordable as public housing. In 2018, a 30-year affordable housing agreement expired at the Villa, and landlord Tom Botz issued a one-year notice to tenants that their rents would rise to market rate. For some residents this could mean a 200% increase. In 2019, L.A. agreed to pay Botz $12.7 million to maintain the Villa’s affordability agreement for another 10 years, but he reneged on the deal.
Los Angeles has a housing crisis. Ananya Roy, a professor of urban planning at the University of California, Los Angeles, says L.A. must use eminent domain to beat its housing crisis. The City’s ability to meet its housing goals “will rest on the public acquisition of land and property,” she wrote in an email.
The history of eminent domain in Los Angeles is most remembered by events in the 1950’s, when the City seized properties to build Dodger’s Stadium. The properties, which were designated as public housing, were taken from families in Chavez Ravine to build the stadium.
History is looking to be remade. Councilmember Gil Cedillo first called for the acquisition of the Villa in January via eminent domain, and this month he proposed that the City finance the acquisition with its remaining CARES Act money. Los Angeles received nearly $700 million from the federal government to combat the COVID-19 crisis last spring, and around $43 million remains. ,
The Villa’s market value has been appraised at approximately $46 million. A $46 million acquisition would cost the city approximately $371,000 per unit in the Villa, while construction and development regulations mean new units can cost the city more than $500,000. Even if the money is available, Botz insists the building is not for sale.
Eminent domain has been regularly used to create affordable housing in NYC, and it appears that now L.A. intends to do the same.