Southampton Inn expansion, with workforce housing, wins $1.64 million in tax breaks

A proposal to expand a luxury hotel in Southampton Village has won preliminary approval for $1.64 million in tax breaks.

The Suffolk County Industrial Development Agency gave an early go-ahead to the tax breaks for the proposed 40-room hotel on Hill Street. The project, which will have eight units of workforce housing, is next to the Southampton Inn, a 90-room hotel. The owners are the same.

The average nightly rate at the new hotel, which will feature a heated pool, is expected to peak at around $800 in July and August, according to a market analysis prepared by the property's owner. An office building on the property will be converted into eight one-bedroom workforce apartments. Another office building will be refurbished.

The $29 million project is expected to generate a “net public benefit” of $2.5 million over 15 years, said Kevin Gremse, of Grow America, a consulting firm that works for the IDA. Gremse cited a likely revenue boost from Suffolk County's 5.5% hotel occupancy tax.

"This is a shot in the arm for the village and the community, and the people who choose to live there on a year-round basis. They need it,” said Dede Gotthelf, owner of the Southampton Inn and managing partner of 71 Hill LLC, which owns the property, during a recent presentation to the IDA. 

But the proposal has drawn some criticism from public officials. An IDA member who opposed the relief said locals will likely be priced out of the hotel. A Southampton Village trustee said the project should include more workforce apartments.

Josh Slaughter cast the lone vote against the preliminary tax breaks during the IDA's meeting on Jan. 29. The owner could hike room rates and not need the public assistance, Slaughter said at that meeting.

“If rates end up being that high after getting the incentive, certainly there may be concern over undue enrichment,” Slaughter said. Most Suffolk residents won’t be able to afford to stay at the hotel, he added. (Slaughter resigned from his post on Thursday, citing other personal and professional responsibilities.)

15-year PILOT

The IDA approved a $1.3 million sales tax exemption and a mortgage recording tax exemption totaling $141,454. Property taxes would be waived, and the owner would be subject to a 15-year schedule of reduced payments. The PILOT, or payment in lieu of taxes, would save the owner $170,657 over the 15-year period, according to a cost-benefit analysis presented by Grow America.

The project would likely not move forward without the relief, Gremse said before the vote.

A requirement to install a sewage treatment plant on the property, which will cost $2.5 million, makes the project “financially challenging,” he said.

Seven of the eight workforce apartments will be rented to households earning up to 130% of the area median income. One will be reserved for a household earning less than 80% of the figure. The median family income on Long Island, as established by the U.S. Department of Housing and Urban Development, is $164,900.

Two additional apartments will be built in the hotel’s basement, where up to eight hotel employees can live.

Soaring home prices

Southampton Village's planning board gave preliminary approval to the plans in November. Trustee Ed Simioni opposed a special permit for the project last February. He said he wanted more affordable housing included in the plan.

“If they're going to give the tax breaks, maybe we should have had more workforce housing as a reason for allowing those tax breaks,” Simioni said in an interview after the IDA vote.

The median home price in the Hamptons reached a record $2.3 million in the fourth quarter of 2025, Newsday previously reported. Home values in Southampton Town ZIP codes are among the highest in the country. 

The IDA’s tax breaks for the project is “good news,” said Jay Diesing, president of the Southampton Association, a village civic group. The housing is needed due to high land values, which have caused home prices to soar, he said.

But Diesing noted that public opinion has been mixed, with some residents worried about worsening traffic.

The IDA has scheduled a Feb. 20 hearing on the tax relief. A final vote is expected on Feb. 26.