Controversial Citywide Hotel Special Permit Enters Public Review

Kramer Levin Naftalis & Frankel LLP

On May 3, 2021, the City Planning Commission referred out for public review a zoning text amendment that would require a special permit for the creation or material enlargement of transient hotels (Zoning Use Group 5) and motels, tourist cabins and boatels (Zoning Use Group 7A) in commercial and mixed-use districts throughout the city of New York. The referral marks the starting point of the city’s public review process and puts the proposal on track for final consideration by the City Council before Mayor Bill de Blasio leaves office at the end of this year.

The proposal is the latest action taken by the city to regulate hotel development. In December 2018, the city adopted a zoning text amendment that requires, in most M1 districts, a special permit for most new hotel uses or substantial enlargements of existing hotels (read our prior coverage here). Certain neighborhood rezonings, including those in Tribeca, Hudson Square, East Midtown, East Harlem and Inwood, have also included restrictions on new hotel use.

The proposal would replace the neighborhood hotel special permits with a single, citywide special permit for the development of a hotel, a change of use or conversion to a hotel, or an enlargement containing a hotel of a building that did not contain hotel use prior to the date of adoption. A special permit also would be required for an enlargement or extension of a hotel existing on the date of adoption where the floor area of the hotel is increased by 20% or more. In addition to the general findings applicable to all use special permits, the sole finding required for the grant of the hotel special permit is that the proposed hotel use will “not impair the future use or development of the surrounding area.” The existing special permit regulations for hotels in M1 districts would be retained.

The de Blasio administration has struggled to articulate a legitimate and defensible land use rationale for the proposal. It claims that a uniform zoning framework for hotels would minimize conflicts with adjacent uses and support a more uniform and predictable pattern of hotel development. However, the proposal neither defines nor documents clearly the alleged negative impacts of hotels; its stated goal of uniform and predictable development may be frustrated by the malleability of its finding; and its broad, citywide applicability seems questionable given that uses with significantly greater land use impacts than hotels are not subject to such scrutiny. There is also a widely held concern that the required finding for the special permit is so vague and subjective that it will invite arbitrary and politicized administration of the land use approval process.

In addition, questions have been raised about the potential impact of the special permit on the city’s economic recovery in light of the devastating impact the COVID-19 pandemic has had on the city at large and the hotel industry, which some reports have projected will not return to pre-pandemic occupancy until 2025, in particular. The city appears to have recognized these concerns and added a number of unusual provisions to the proposed text to mitigate, at least in part, the burden that the special permit will impose on the city’s hotel inventory:

  • Existing zoning regulations that discontinue nonconforming uses that are vacant for two or more years would be suspended for existing hotels until six years from the date of adoption. This would allow existing hotels that closed in response to the pandemic a longer time frame in which to reopen without triggering the special permit requirement.
  • Existing hotels that are converted to other uses (which would ordinarily terminate the nonconforming hotel use) would be permitted to convert back to hotel use up to six years from the date of adoption without obtaining the special permit. This provision appears to be intended to give hotel operators some flexibility to weather the impacts of the pandemic by taking advantage of existing or future statutory options to convert to other uses until hotel occupancy recovers to pre-pandemic levels.
  • In addition to existing vesting mechanisms under the Zoning Resolution, hotel projects that have (i) an application filed with the Department of Buildings by May 3, 2021, and (ii) zoning plan approval of such application by the date of adoption will be vested under current zoning provided that a temporary certificate of occupancy is obtained within six years from the date of adoption. However, applications for hotels filed with the department prior to 2018 must also obtain a building permit by the date of adoption. The six-year outside date may be further extended by applying to the Board of Standards and Appeals.
  • Projects involving hotel development approved by the City Planning Commission or the Board of Standards and Appeals after Jan. 1, 2018, or that have filed with the Board of Standards and Appeals or that have been certified by the City Planning Commission before the date of adoption, would be excluded from the special permit requirement provided that a temporary certificate of occupancy is obtained within six years from the date of adoption.
  • Hotels existing on the date of adoption would be considered conforming uses to allow limited enlargements (less than 20%), alterations and extensions on an as-of-right basis, and to allow the reconstruction of such hotels up to their preexisting floor area without the need for a special permit in the event of damage or destruction.

At the City Planning Commission’s public review session, some commissioners questioned the timing, scope and necessity of the proposal, other than the provisions focused on the recovery of the hotel industry. One suggestion was that the proposal include a sunset provision, which would allow the commission to study the impacts of the proposal at a future date before deciding whether to make the special permit permanent. Others noted that no new hotels have been constructed under the existing special permits.

In the end, the citywide special permit would add significant time, cost and uncertainty to hotel projects, and could have wide-ranging and long-lasting impacts on the city’s economy and development — potentially, according to the city’s own study, resulting in the loss of $7 billion in future business activity. These considerations would be matters of concern by themselves. They are deeply troubling in light of the proposal’s absence of a meaningful planning rationale.

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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