Over 200 Illegal Hotel Buildings in NYC

From AMNY: Report: 200 illegal hotels exist in the city

There are more than 200 apartment buildings in the city that have been illegally converted to hotels, according to a report released Sunday, significantly reducing the number of rent-stabilized units available.
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Illegal hotel operators frequently take advantage of tax loopholes designed to encourage the construction of residential units, according to Raskin.
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Advocates are calling for increased penalties and changes in the zoning laws to clarify where hotels can and cannot operate.

And today’s Sun: Crackdown Sought on Illegal Hotels in the City

What does this tell us about the housing/hotel markets? It seems to me that tax structures (and probably zoning) favor housing, while there is significant unmet demand for hotel rooms. Nonetheless, there is definitely a shortage of built space in NYC, which could be better accommodated by loosening zoning restrictions on new development. Any other thoughts?