Comparing Per Diem Hotel and Service Costs for Shelter for Asylum Seekers

Introduction

In response to unexpected and sustained migration of asylum seekers[1] to NYC that started in late spring 2022, the City has opened hundreds of shelters to provide shelter to those in need. Initially, emergency shelters were contracted by the Department of Homeless Services (DHS), followed by other agencies and authorities including NYC Health and Hospitals (H+H), NYC Housing Preservation and Development (HPD), NYC Emergency Management (NYCEM) and the Department of Youth and Community Development (DYCD). These multi-agency emergency shelter systems are in addition to the City’s pre-existing shelter system operated by DHS. Currently, in addition to roughly 54,000 people in the DHS homeless shelter system who resided in New York City prior to July 2022, there are more than 65,000 asylum seekers in emergency shelters.

The City has opened emergency shelters for asylum seekers in several different types of spaces, including hotels, large tents, repurposed office, warehouse, and industrial spaces, religious institutions, and other public buildings. The Comptroller’s Office estimates that 77 percent of asylum seekers are sheltered in hotels, with the City leasing approximately 15,750 rooms across 157 hotels in New York City. This represents approximately 11.5 percent of the overall hotel inventory of 136,000 rooms in New York City.[2]

About 9,500 of the rooms (or nearly half of the hotel rooms that the City is utilizing to shelter asylum seekers) are in 119 hotels DHS contracted through an agreement with the Hotel Association of New York City (HANYC).[3] Of the 119 hotels in the contract, a plurality are in Queens (48), followed by Brooklyn (30), Manhattan (19), the Bronx (17), Staten Island (4), and Yonkers (1). In addition to the HANYC contract, there are nearly 5,800 rooms in 38 additional hotels contracted by other agencies.

This report analyzes the cost of hotel rooms contracted by DHS through the agreement with HANYC to provide shelter for asylum seekers, as well as the overall per diem cost of shelter for asylum seekers across City agencies. The main results are as follows:

1. In Fiscal Year 2024, the average daily rate paid by DHS for hotel rooms under the HANYC contract was $156. Contracted room rates are generally in line with market data of comparable hotels.
2. These hotel rates are substantially more expensive than the daily rental per-diem for standard DHS shelters, which the Comptroller’s Office has estimated to be approximately $52. However, that is because those shelters typically have longer leases and/or use City-owned property.
3. The average daily cost of services beyond shelter (i.e., all non-rent expenditures) for asylum-seekers in DHS shelters was $176. This amount is only slightly higher than in non-emergency shelters.
4. The daily all-in cost of DHS emergency hotel shelters of $332 is substantially lower than the cost of shelter and services contracted by other City agencies (H+H, NYCEM, HPD), estimated to be $404.
5. The combination of the non-emergency DHS service per diem and the average HANYC hotel rate, for a total of $306 per day likely represents a floor for the provision of shelter in hotels. This is 24% less than the estimate of $404 for non-DHS emergency sites – a significant opportunity for cost savings.

Use of Hotels for Emergencies

A 1981 settlement, Callahan v. Carey, established a right to shelter for homeless men in New York City, which was later extended to homeless women (Eldredge v. Koch in 1982) and homeless families with children (McCain v. Koch in 1983).[4] The City has developed and continues to develop shelters, often built specifically for that purpose, to house people experiencing homelessness. However, periodically, the growth of the population has threatened to exceed shelter capacity and the City has been forced to look for alternatives.  As a result, at various times in the past, the City has rented hotels or parts of hotels to provide shelter.[5]

By early 2017, the City was using approximately 80 hotels to shelter around 7,500 clients, a trend that had begun earlier under the Bloomberg administration when the number of people needing shelter increased dramatically due to the lingering effects of the 2008 recession and the interruption of subsidized exits from shelter through the Advantage rental assistance program.[6] In most of these cases, the City’s Department of Homeless Services held a contract with a not-for-profit social service agency, which then subcontracted with the individual hotel to provide the space. The City planned to exit hotels as shelter through its Turning the Tide plan, announced in February 2017, which sought to fully discontinue DHS’s use of commercial hotels for homeless New Yorkers by the end of 2023.[7]  However, as of January 2020, 83 hotels were still in use (down from 91 in 2018).[8]

During the pandemic, when there was a strong demand to provide individual rooms to single adults who were residing in congregate shelters and therefore perceived to be at elevated risk for the spread of Covid-19, DHS expanded its use of hotels for shelter.[9] NYC also used hotels during the pandemic to provide isolation rooms for those who tested positive for COVID-19 as well as for healthcare workers (traveling workers and those wanting to minimize the risk to their families or roommates at home).[10]

To facilitate some of this expansion, rather than solely contracting with social service agencies who entered into subcontracts with individual hotels as in the past, the City entered into a pandemic emergency contract with the Hotel Association of New York City (HANYC), a nonprofit trade association that represented nearly 300 hotels, to house homeless New Yorkers in 75 hotels.[11] Under this arrangement, the City contracts for the hotel space through the HANYC contract, and the contracts separately for the provision of other services (e.g. food, security, social, health, and legal services). The pandemic contract with HANYC was initially signed for $78 million in April 2020, and subsequently amended, with the City spending $546 million by the end of 2021.[12] By February 2022, City data indicate hotel use had stopped for all families with children and adult families, but it continued for 4,599 single adults.[13],[14]

DHS-Contracted Hotels for Asylum Seekers

With the significant influx of people seeking asylum beginning in April 2022, the right to shelter mandate required the City to rapidly find additional accommodations. To secure a supply of hotel rooms for asylum seekers, DHS entered into a new contract with HANYC for 5,000 rooms for up to $237 million for September 2022 through August 2023. The contract was subsequently extended and increased, to a total value of $987 million for up to 14,000 rooms from September 2022 through August 2024.

As of May 31, 2024, the most recent date for which data is available, there were 54,000 individuals in hotels that the City was paying for — 4,580 non-asylum seekers and 49,460 asylum seekers. DHS-contracted hotels house 36,856 individuals (31,960 in families with children, 4,828 single adults, 68 in adult families).[15] The Comptroller’s Office estimates that 32,300 of the individuals in DHS-contracted hotels are asylum seekers or newly arrived migrants (with an additional 17,000 migrants in non-DHS emergency hotels). ^[16]

Table 1. Estimated Asylum Seeker Population in Hotels as of 5/31/2024

Source: Office of the New York City Comptroller

The agreement outlines that HANYC will work with DHS to negotiate a daily room rate and contract terms with individual hotels to be paid with funding from DHS. To receive payment, a hotel must submit a DHS invoice to HANYC. Invoices must include hotel information, a period of occupancy, number of rooms utilized, and the total amount. HANYC is then ordered to pay the hotel’s invoice within five days of receiving funds from DHS.  As part of the rate, units must have furniture suitable for clients; and the hotel is also to provide housekeeping services, maintain all corridors, and provide trash services, Wi-Fi, telephone, and basic television. Rooms under the contract cannot remain vacant for extended periods of time, and once vacated, they should be cleaned and made available within 24 hours.

The Comptroller’s Office submitted a request for information (RFI) and DHS subsequently shared information on the 119 sites (9,500 rooms) in the HANYC agreement—along with one hotel in Yonkers—in use as of late January 2024.[17] As described earlier, this HANYC agreement currently covers half of all contracted hotel rooms for newly arrived migrants (the remainder are still contracted directly with individual hotels).

Table 2. Daily Rates for Asylum Seeker Designated Hotels, January 2024

Source: New York City Mayor’s Office

The information provided showed variability across the number of sites and rooms in each borough, as well as the daily rental rates by borough: average rates are the highest (as well as less variable) in Manhattan, followed by Queens, Brooklyn, the Bronx, and Staten Island. Compared to other boroughs, Queens has the most sites, followed by Brooklyn, Manhattan, the Bronx, and Staten Island.

The distribution of HANYC daily rental rates is clustered around a low of $130 and a median of $135, with others ranging up to a maximum daily rate of $200, as shown in Table 3.

Table 3. Distribution of HANYC Per Diem

Source: New York City Mayor’s Office

Comparing Hotel Shelter Rates to Market Data

The Comptroller’s Office utilized CoStar commercial real estate analytics data to compare market rates to hotels used as shelters for asylum seekers, disaggregated by geographical zone. A data set was designed comparing hotel revenue per available room (RevPAR) with HANYC rates for sites across nine geographic submarket areas in NYC (as defined by CoStar).[18]

Comparing the HANYC sites and their comparable market rates in the same geographic area, as shown in Table 4 below, HANYC rates are generally similar to the market rates. On average, the City’s HANYC rates are $1.50 more expensive than the market economy rate, and $27 less expensive than the upscale rate. HANYC hotels are found in the four lowest of the six hotel classes in CoStar data.

Table 4. Comparison of CoStar Class Rates to HANYC Rates

Note: Submarket Class for Economy Rate includes midscale and economy levels of accommodation, Upscale Rate includes upscale and upper midscale (categories defined by CoStar). The midscale grouping includes hotels that have a food and beverage capability, whereas the economy does not. The rate class (in ascending order: economy, midscale, upper midscale, upscale, upper upscale, luxury) is not indicative of quality or level of service, but reflects pricing against its market.[20],[21]

Note: CoStar rates are weighted. Rates are aggregated to the submarket and class level to protect individual hotel privacy. The Comptroller’s Office used HANYC site addresses to match with CoStar data. The above CoStar rates are inclusive of the applicable HANYC hotels.

*New York City Area represents hotels in regions not classified in other submarkets, and includes the Bronx, Staten Island, and other outlying areas.

HANYC Hotel Distribution – Class and Submarket

The economy and upscale classes can be broken down even further: of the 119 HANYC shelter sites examined, 106 had market class types that could be confirmed by the Comptroller’s Office. Of the 106 sites where the class type could be confirmed, half are in the economy class, followed by 25 percent in upper midscale, 13 percent in midscale, and eight percent in upscale. As seen in Table 5 Comparison of CoStar rates to HANYC rates, the distribution of daily rates varies both within and across boroughs.

The table below outlines the number of HANYC shelter hotels by geographical submarket. Within each submarket, hotels are broken down into their class rate and compared to the CoStar RevPAR for the same submarket and class.

Table 5. Comparison of CoStar rates to HANYC Rates (Submarket and Class)

Source: Office of the New York City Comptroller, CoStar

The comparison between CoStar RevPAR and the HANYC contract weighted daily rate shows that, with few exceptions, the City is paying market rate for the hotel rooms. In the aggregate, the HANYC contract rate is nearly identical to the market rate.  Obviously, the DHS contract provides more certainty because rooms have guaranteed income regardless of economic conditions and seasonal fluctuations.

Higher-priced Sites

Certain hotels in the HANYC contract are significantly more expensive than others but are still in line with the CoStar rates for their rate class and geographical submarket. Of the 19 most expensive sites, each with a per diem of $185 and above, 16 are in Manhattan (five in Midtown South, five in Midtown West, four above 59th Street, and two in Village/SoHo/Tribeca), two are in Brooklyn, (Brownsville and Kensington), and one in Queens hotel (Long Island City). The Brooklyn sites are in the New York City Area (Other) submarket, which has an upscale RevPAR of $153, significantly less than the $195 and $185 nightly rate that the City is paying for these two hotels. Elsewhere, the rates appear justified by their location in more expensive submarkets.

The Per Diem Cost of Services

The Comptroller’s Office analyzed 66 DHS contracts for the services provided at hotels, excluding rent. This service cost per diem includes all services and costs for operations, including wages, at the shelter locations. These 66 contracts include budget details for all services across more than 20 categories including security, food, overhead, etc. Most contracts cover FY 2023 and FY 2024. Of the 66 contracts, 59 are for specific HANYC shelter sites. The remaining seven associated locations were not on the HANYC shelter list, but instead rent is likely paid through a subcontract by the non-profit provider contracted by DHS. The terms of these contracts do not vary appreciably from those for HANYC hotels.

Of the 66 DHS service contracts, the average per diem excluding rent was $176. The table below shows average daily costs broken out by personnel services (PS) costs (salaries and associated benefits) and other than personnel services (OTPS) costs, such as sub-contractors (e.g. food and security) and supplies.

Table 6. FY 2024 DHS Service Contract Per Diems (Excluding Rent)

Source: Office of the New York City Comptroller

Combining Rent and Service Costs

The average service per diem of $176 for services, combined with the average HANYC daily rate of $156, yields a combined per diem of $332. This is lower than the City’s overall reported daily average per diem for asylum seeker shelter of $377 as of May 2024, but significantly higher than DHS’s non-emergency shelter rates of $136 for singles and $186 for families, as reported in the Mayor’s Management Report.[22]^, [23]

The higher overall per diem rate for provision of emergency shelter and services includes the array of shelters run by other City agencies, particularly NYC H+H, who are not using the HANYC contract, are contracting primarily with for-profit service providers, and who do not have the same level of contracting and operational experience in providing shelter that DHS does. On an aggregate basis, the Comptroller’s Office estimates that the per diem cost at non-DHS emergency shelters is $404 using cost data through April 2024.[24] NYC H+H, HPD, and NYCEM rely more heavily on for-profit service providers and less favorable contractual terms, like, for instance, the payment of $170 for hotel rooms outside of NYC awarded to DocGo in its contract with HPD.[25]

These agencies are procuring contracts for particular types of services (e.g, food, staffing and site management, laundry, and security) that are then used across multiple sites, often at much higher rates than DHS’s existing vendors, as shown by a previous analysis by the Office of the Comptroller. More recently, H+H and other agencies have begun to issue competitive RFPs, and the City is budgeting savings as the cost-containment efforts expand and the City moves away from some of the vendors it contracted with in the beginning of the period of emergency procurement. The contractual information available to the NYC Comptroller’s Office is available online at its resource hub.[26]^, [27]

On the other hand, the budget framework for DHS emergency shelter sites is similar to their non-emergency shelter sites, enabling a cost comparison between the two sets of shelters. An examination of 13 non-emergency DHS contracts shows a weighted average per diem of $202, $150 for services and $52 for rent. Non-emergency contracts are often in buildings that were designed for shelter (non-hotel), contracted previously with extended contracts of up to 20 years, or are located on City property, leading to per diem rents that are one third of those paid under the HANYC contract.

The service per diems across the two sets of shelter, on the other hand, are more comparable — $150 for non-emergency shelters compared to $176 for emergency ones, a much smaller difference of $26.

Conclusion

The combination of the non-emergency DHS service per diem and the average HANYC hotel rate, for a total of $306 per day likely represents a floor for the provision of shelter in hotels. This is 24% less than the estimate of $404 for non-DHS emergency sites – a significant opportunity for cost savings.

The latest available overall budgeted per diem cost target for FY 2025 is $352 and the data provided to the City Council shows a gradual reduction in daily costs.[28] The Comptroller’s Office, in its most recent budget report, projects that the aggregate (DHS and non-DHS) per diem for FY 2024 of $372 can be brought down to $335 for FY 2025, bringing it closer to this floor.

The FY 2025 Adopted Budget has $4.75 billion budgeted for Asylum Seekers. Assuming that the census remains relatively flat (compared to OMB’s higher projections), and using the target per diem of $335, the Comptroller’s Office projects that overall costs will be closer to $3.42 billion.

Acknowledgments

This report was authored by Jack Kern, Senior Budget and Policy Analyst. With support from Krista Olson, Deputy Comptroller for Budget, Krzysztof Haranczyk, Director of Budget Analysis and Research, Jason Bram, Director of Economic Research, and Francesco Brindisi, Executive Deputy Comptroller for Budget and Finance. Layout and design were completed by Archer Hutchinson, Creative Director.

Endnotes

[1] The Office of the Comptroller uses the term “asylum seeker” to refer to newly arrived migrants who have come to NYC in need of shelter and are seeking asylum or other forms of immigration relief.

[2] The hotel inventory comes from CoStar; the number of hotel rooms contracted for asylum seekers is based on a variety of sources provided by NYC.

[3] This figure does not include the HANYC voucher contract with HPD. From early February 2024 through July 16, the voucher program averaged approximately 1,300 individuals in 391 families shelter in more than 15 hotels. These rooms are supplemental capacity to ensure that FWC always have shelter. Individual rooms are reserved by HPD staff through HANYC’s internal platform. On June 2, 2024, the program occupied an estimated 424 rooms.

[4] https://www.escr-net.org/caselaw/2006/callahan-v-carey-no-79-42582-sup-ct-ny-county-cot-18-1979; https://www.coalitionforthehomeless.org/our-programs/advocacy/legal-victories/the-callahan-legacy-callahan-v-carey-and-the-legal-right-to-shelter/

[5] For the purposes of this document, a “hotel” refers to pre-existing commercial hotels that the City has entered into agreements with to house asylum seekers. The term does not include buildings that previously served another purpose, or newly constructed buildings used to provide shelter.

[6] https://www.coalitionforthehomeless.org/state-of-the-homeless-2014/#:~:text=The%20Bloomberg%20administration%20dramatically%20expanded,%2Dsite%E2%80%9D%20shelter%20units); https://www.nyc.gov/assets/dhs/downloads/pdf/turning-the-tide-on-homelessness.pdf

[7] https://www.nyc.gov/assets/dhs/downloads/pdf/testimony/post-90-day-general-welfare-committee-testimony.pdf

[8] NYC’s Homeless Hotel Population Surges as City Grapples with Housing Crisis (citylimits.org)

[9] https://citylimits.org/2021/09/01/pandemic-worsens-hard-road-to-housing-for-homeless-new-yorkers-with-health-needs/

[10] https://www.nyc.gov/assets/helpnownyc/pdf/community_provider_hotel_referrals_website.pdf

[11] https://www.costar.com/article/534199142/us-hotels-expand-homeless-programs-during-pandemic

[12] https://www.checkbooknyc.com/contract_details/agid/5977576/doctype/CT1/newwindow

[13] https://data.cityofnewyork.us/Social-Services/Individual-Census-by-Borough-Community-District-an/veav-vj3r/about_data

[14]The City categorizes households into three groups, it can be a family with children, adults living together as a family (adult parent with an adult child or adults living as partners without children) or a single adult living alone.

[15] https://data.cityofnewyork.us/Social-Services/Individual-Census-by-Borough-Community-District-an/veav-vj3r/about_data

[16] The New York City Council – File #: T2024-0283 (nyc.gov), NYC Council Preliminary Budget Hearing for FY 2025 with the Department of Homeless Services noted that 155 of 162 (95%) DHS emergency shelters are hotels. Under the assumption that all asylum seeker individuals in DHS shelter reported in the term and condition to City Council are in hotels

[17] Notably, the use of hotels in late January totaled 9,500 rooms, 4,500 less than the 14,000 contract capacity.

[18] The RevPAR is calculated by multiplying a hotel’s average daily room rate (ADR) by its occupancy rate, and figures analyzed are aggregated over the course of a year (to include adjustments for seasonality of pricing and occupancy). This method factors in unoccupied rooms and shows hotel room value over a specified period.

[19] CoStar rates reflect annual average for March 2023 – March 2024

[20] Back on the Chain Scale (costar.com)

[21] Hotel Industry Terms to Know (costar.com)

[22] Asylum-Seekers-Report-May-2024.pdf (nyc.gov)

[23] 2023_mmr.pdf (nyc.gov) p. 241. FY 2022 figures used for pre-asylum comparison.

[24] The lack of available information precludes a more detailed analysis.

[25] https://www.nytimes.com/2023/09/18/nyregion/docgo-lander-audit-contract.html

[26] H+H emergency contracts are not filed with the Comptroller’s Office.

[27] Asylum Seeker Staffing Contract Comparison and Review: Office of the New York City Comptroller Brad Lander (nyc.gov)

[28] Fiscal Year 2024 Budget – Budget (nyc.gov)