The Terner Center and The Housing Crisis Research Collaborative released a joint report evaluating how hotel and motel acquisition and conversion can expand the supply of affordable housing more rapidly and more cost-effective than new construction projects. According to the report, distressed sales among hotel and motel properties have increased due to the negative impact of the pandemic on tourism and business travel in early 2020. A significant share of these acquisitions has been targeted for residential conversions.
Through their analysis of 13 hotel and motel acquisitions from across the county, researchers found that “acquisition and conversion projects can be less expensive – and take less time – than new construction.” For instance, in California, early analysis of the state’s Homekey program found that the average cost per unit was about $148,000, substantially less than the $425,000 it cost to produce an average affordable unit in a 100-unit project in California in 2016. The study highlights that though hotels and motels are built for residential use, such properties may “need significant work to make them suitable for long-term occupancy.” Study respondents emphasized the importance of due diligence and prioritizing acquisition of newer, higher-quality properties. Researchers also noted that study respondents often cited project-based vouchers as the “preferred funding source for the viability of conversion projects and the sustainability of permanent supportive housing in general.”