New York’s Controversial Citywide Hotel Permit Proposal Hit With Another Lawsuit

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The City Planning Commission’s controversial citywide hotel special permit proposal just got hit with a lawsuit.

A group dubbed New Yorkers for Tourism filed a lawsuit against the City Planning Commission and the City of New York arguing that requiring new hotels be approved through a special permit process would hamper development and be an unconstitutional ploy to require hotel developers to pay higher, union wages.

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The proposed change would require developers to go through a special permit process, which would include a Uniform Land Use Review Process (ULURP) that requires approvals by local community boards, the borough president’s office, the City Planning Commission and the City Council in order to build a new hotel in New York City. 

The city’s Law Department is reviewing the New Yorkers for Tourism case, a spokesperson told Commercial Observer. 

A similar proposed change previously triggered a lawsuit from Morris Kalimian of ELK Investors, who filed an Article 78 petition to block a rule change that would only impact an area south of Union Square in February last year, The Real Deal reported. The current lawsuit is against a policy that would affect all five boroughs, and has incurred rancor from developers and city commissioners alike.

“The city did not consider any alternatives to address the purported problem the amendment is meant to solve; it also rejected, out of hand, mitigation measures that might have cushioned the economic blow to the tourism industry — economic impacts the city’s own analysis concedes will be the result of the amendment,” Jennifer Recine, a partner at Kasowitz Benson Torres, the firm suing the city, said in a statement. “There is no proper zoning purpose for it, and the regulation is patently unconstitutional.”

New Yorkers for Tourism — a recently formed undisclosed group of “individuals and businesses engaged in New York City’s tourism and hospitality industry, as well as concerned citizens” — argue in their lawsuit that there is no compelling government interest in benefitting current hotel owners at the expense of future developers or ensuring union labor is used in projects by enacting the zoning law. 

The ​​New York City Hotel Trades Council, the union Mayor Bill de Blasio is accused of favoring in the legislation due to its political support of the mayor, did not immediately respond to a request for comment. City council members have argued that the requirement would provide community members with more say about what is built in their neighborhoods, addressing quality-of-life issues like noise and traffic, TRD reported.

“Until the COVID-19 pandemic halted most new construction in March 2020, new hotels outpaced other types of non-residential development in some parts of the city. In some cases, this altered established patterns of activity and the environment New Yorkers, visitors and all businesses share,” the city’s description of the proposed change reads. “The review process would allow the commission to ensure that new hotels do not create significant conflicts with surrounding development.” 

In a tense public review meeting in May, city commissioners raised concerns about the proposal, with many asking why the proposal was up for review as the city’s hotel industry recovered from a grueling pandemic. The change is expected to create a shortfall of 30,000 to 60,000 hotel rooms in 15 years, according to the Department of City Planning’s analysis. The hotel room shortage could cost the city as much as $7 billion in lost taxes during that time, The New York Times reported.

The proposed citywide text amendment must go through borough boards, borough presidents and the New York City Council before it can be approved.

Celia Young can be reached at cyoung@commercialobserver.com.