From what I understand, currently there are a few groups working with the city to iron out the specific language for the laws so that hostels will be able to operate. I am not sure when the new laws would go into effect.
As for where in NYC you would like to operate, that depends on a few things, like expected budget, size of the hostel, etc. In general, Manhattan is the most expensive/least amount of space and as you go out to Brooklyn and Queens it gets cheaper and the spaces are generally bigger. The Bronx would be cheap too, but is kind of far away from the NYC hot spots in Manhattan and BK (Staten Island isn't really traveler friendly). Jersey City and Hoboken are good options as well (easy access to the city, cheaper).
I would be happy to go further in depth on this. You can reach me at Chris AT WeHostels DOT COM.