There has long been the question of whether hotels could expand their offerings to include housing. However, in recent years, such expansion has been one of the last things on the minds of most hotel owners.
Before the recession, many owners thought that they could make a ton of money by renting out their unused rooms to independent travelers seeking luxury accommodations. These private rooms became known as “boutique” hotels. Once the economy turned down, however, many owners stopped renting out the rooms for supplemental income, even though there were countless professional travelers looking for luxury alternatives. This lack of interest has stymied expansion into the lodging housing business.
Now, when it comes to what properties owners are thinking about, perhaps it’s time for a change in strategy. Industry experts say the time is ripe for major hotel operators to consider opening affordable lodging, as the rising cost of living is keeping people from making long-term plans. A case in point is the former Four Seasons in St. Regis, on the eastern shore of Long Island. The building was leased for an extended-stay hotel but now the property is running a resort and is fully occupied.
Growth in the hotel industry has stagnated, but there are large areas of the country in which apartment and household income growth have been significantly faster than the country average. According to the U.S. Census Bureau, the number of homeowners increased by 1 percent between 2012 and 2014, compared with an increase of nearly 14 percent in people earning more than $100,000 a year.
Over the past five years, about half of new multifamily developments built have been of multifamily housing units. But the goal of any multifamily development should not be to simply improve profit margins, but to increase affordable housing in communities.
Only approximately 15 percent of the hotel beds in the U.S. are for low-income people. The problems of affordable housing go well beyond the number of rooms available in the hotel sector. According to a recent report from Vanderbilt University’s Norman Lear Center, the changes to housing finance from the financial crisis of 2007 and the resulting end of the era of cheap and plentiful credit for mortgages, will leave a huge hole in the affordable housing system.
In the past two years, over 50 million American households have faced severe stress when renting or owning a home. Between 2011 and 2016, the number of renter households increased by 6 million. And the median income for renters has remained stagnant, decreasing by 2 percent since 2005.
This means that tens of millions of Americans are facing serious challenges in meeting their home-ownership or rental costs. Under the current economic landscape, there will be an ever-increasing demand for affordable housing. Not surprisingly, most researchers in the housing sector agree that the housing crisis will continue to affect the health of American communities until rental and homeownership costs are both affordable and widely available.
More than ever, hotels and apartment complexes will need to offer low-income housing in a quest to meet this demand. The cost of building and maintaining residences is prohibitive for many of the limited units currently being built. In addition, the lack of high-quality and affordable housing is a major cause of high crime rates, unemployment and student debt.
Fortunately, there are concrete developments under way to solve the long-term needs of today’s population. In 2010, the U.S. Department of Housing and Urban Development included long-term affordable housing in its national Community Development Block Grant program, which is considered one of the most important ways to mitigate the effects of the crisis. However, even that most vital public-private partnership was unable to find a way to fund 90 percent of projects covered by CDBG. HUD has since promised to fund 75 percent of such projects with a portion of its main allocation. If the developers need more support, we are inviting them to start working with us.