The New York City hotel market is under pressure.  Over the past decade, this market has experienced substantial growth in supply, adding 42 percent in new hotel rooms since 2010.  (See “NYC Hotel Market Analysis: Existing Conditions and 10-Year Outlook,” New York City Department of City Planning (2017)).  In fact, nearly 5,500 additional rooms in 30 new hotels came into the market in the last year alone.  (See “Outlook for Hotel Development in NYC,” NYC & Co. (2017).  The confluence of over-supply and the omnipresence of Airbnb has put downward pressure on both rates and overall occupancy, causing NYC hotel assets to suffer loss of revenue.

In the midst of this perfect storm, when many hotel owners and operators in New York are looking for alternate ways to put their properties to use, the city passed a law banning conversion of more than 20 percent of rooms in hotels with over 150 rooms. Local Law 50 holds large hotel owners hostage, and imposes restrictions on their ability to put hotel properties to their highest and best use. As described below, this may violate the Federal and New York State Constitutions.

History of the Law