Vacant Hotels are Getting Converted into Affordable Housing – Crucial Facts and Insights by Maxwell Drever
It’s interesting to watch how the pandemic outbreak is altering the scene for the American real-estate domain. Today, most investors are purchasing hotels and converting them into affordable housing units and rental apartments. Most of these buyers are attempting to leverage the crisis of the hospitality industry by overtaking the foreclosed and struggling properties at the best possible price. Also, they intend to make profits from the increasing demand for the cheap housing units from the households that got compelled to downsize because of the recession.
Maxwell Drever says that the little but rapid hotel conversions signify the pandemic’s suffering resulting in the hotel industry vertical. Many properties got shut down and are witnessing losses because of a decline in travel. It’s mostly the majority of people who used to travel are afraid to resume travel because of the virus infection. The percentage of the hotels that have securitized mortgages that got aberration the loans is 19.66%. And much before the pandemic outbreak, an increase in hotel construction in the past ten years left a few cities with excess rooms.
The Hotel Conversion Scene in Madison City
Madison city is currently functioning under a novel vision to expand its options for affordable housing. In this pursuit, the city is all set to buy hotels and convert the same into housing units for people witnessing homelessness. It is also to cater to people having low incomes. The city has decided to use $2.5 million reserved for the probable hotel conversion assignment with the American Rescue Plan Act funds that it got during the pandemic outbreak.
There will be an addition of $5 million from the federal Housing and Urban Development department. Also, the city is waiting for directions for utilizing HUD funds. Once the funds get sanctioned, the city intends to continue purchasing hotels and converting them to affordable housing units.
An Example to Count On
In the meantime, a local developer had already announced its intention to convert the Madison Plaza Hotel into affordable housing that will comprise as many as 105 units. This conversion will cost approximately $23.4 million. The plan for this conversion will involve transforming the hotel of 197 rooms into a housing unit available for people, thereby making about 60% of Dane County’s median earning or less. And the local developer also mentioned that the conversion proposal would also have 21 apartments cast aside for the individuals who are earning less than 30% median earning of the county.
Today, the concerned local developer is requesting about $2 million from the city to proceed with the conversion. And according to Maxwell Drever, this financial assistance that the city might provide will assist the development teams in securing the federal tax credits, which will allow them to go ahead with the project.
The local developer looked upon Madison Plaza Hotel as a property that required a new purpose. Similarly, many developers and investors envision converting hotels across the United States into permanently affordable housing units.
