Gotham Gazette

The Place for New York Policy and politics


As Trade Center Plans Falter, City Could Have a Sense of Deja Vu

Photo (cc) StrahlemannBE

Once again redevelopment of the World Trade Center site is looking more like an epic struggle in a Greek tragedy. Even those characters who may be aware of their fate are locked into the logic of the post-9/11 hubris and are forced to play along as the saga reaches its ultimate consequences. Mayor Michael Bloomberg’s recent attempt to fix things could have been the miraculous deus ex machina of Greek tragedy, in which gods drop onto the stage at the end to avert tragedy and make a happy ending. But that didn’t happen and now Gov. David Paterson has volunteered for the rescue mission.

The latest turn in the drama suggests that it won’t be over any time soon. After the breakdown of negotiations with the Port Authority of New York and New Jersey, developer Larry Silverstein called for arbitration to settle a dispute over financing. Silverstein, the major leaseholder, wants $2.6 billion in loan guarantees from the authority to build two towers that it is estimated will cost $4.2 billion to build. The authority says it will guarantee $1.2 billion for one of the towers, but only if Silverstein raises $625 million privately.

Silverstein blames the authority for the financial deficit because it has fallen behind schedule in construction of the transit hub and the Vehicle Security Center on the site. For its part, the Port Authority says that it would be too risky to put so much money behind the construction of such a huge amount of new office space in the current market, where private lenders have withdrawn.

So while both public and private sectors are at an impasse, the press and public stand on the sidelines witnessing what may well be the second disaster at Ground Zero -- not just the failure to rebuild but the looming possibility that the whole plan will never be implemented and New York will wind up with a new set of twin towers on the site that will create for lower Manhattan many of the same problems that the World Trade Center once did.

Maybe it is time to go back to the drawing board, reconsider the original plan, buy out the private parties and start again by asking the question what’s best for both New York and world peace, as many civic groups did after 9/11.

The Failed Plan for Ground Zero

From the start, the logic of the World Trade Center plan was to put back on the site most of the 11 million square feet of office space that was lost on 9/11. After eight years of planning, disputes over insurance money and financing, battles among architects, and a regular drumbeat of assurances from the protagonists that things are moving forward, the market for office space has caved in. Crain’s reports a 44 percent drop in rents for Manhattan office space in the first half of 2009. Projects already in the ground face a troubled market and revenue shortfalls.

But the current market is not the only problem. The way the plan was devised has exacerbated the situation.

Short-term planning was in charge right from the beginning. "Rebuild the tower" was the rallying cry of Silverstein, who owned the largest long-term lease on the site, and it was raised to patriotic heights by then-Gov. George Pataki, with support from the Real Estate Board of New York. Despite reservations, the city’s new mayor, Michael Bloomberg, went along with that goal.

An initial burst of civic interest, discussion and debate following 9/11 produced many proposal for innovative alternative development of the site. In response, Pataki moved swiftly to approve a slightly scaled-down version of an office park with some 10 million square feet of office space. The international design competition managed by the Pataki-controlled Lower Manhattan Development Corp. was all about how to make it look good, with a memorial and cultural center thrown in to assuage the demands of the victims’ families to preserve the site as a memorial and the desire of the local neighborhood to make it a mixed-use development.

The reaction of architectural critic Ada Louise Huxtable to the first round of plans for Ground Zero was prophetic. She said they were dedicated to "the restoration of all the commercial real estate by dumping it back in the same place in a slightly different form." She concluded, "This is dĂ©jĂ  vu all over again for those who remember the urban renewal destruction of lower Manhattan in the 1960s.”

Back then, urban planners, architects, office workers and local residents objected to plan for the original Twin Towers because of the way the project was separated from everything else in lower Manhattan by its vast, barren and wind-swept plazas. While the latest design for the site features signature buildings by famous architects including Norman Foster and Richard Rogers, the recent collapse of the real estate market suggests that for the foreseeable future only two of them -- at most -- will be built.

The Revenge of the Twin Towers?

Only two towers? Are we looking at an historic repeat of the original Twin Towers? And the new buildings, with anti-terrorist design features including monstrous bases encased in steel and titanium, will make the pre-9/11 versions look like pastoral wonders.

With the rest of the master plan for the site postponed indefinitely, the towers could again be surrounded by vast empty spaces or, at best, a couple of lonely memorial sites and a small cultural center. And the office buildings could have lots of empty space. The original Twin Towers, which opened in 1973, had so many vacancies that public offices were brought in to fill them up. No wonder the Port Authority doesn’t want to subsidize Silverstein up front.

So after eight years of wrangling over exactly how to dump the office space back on the site, this may be a good time to stop and go back to the drawing board. Maybe the critics were right in the first place. Perhaps it would be better to look at the site as an opportunity to express the diversity of interests and needs of New Yorkers. Since most victims of the attacks were not New Yorkers and 9/11 had repercussions far beyond Ground Zero, the focus might appropriately move beyond those who happen to own the land. Maybe New York could learn from the leading examples of rebuilding on sites destroyed during war, like Hiroshima, Japan – a city that dedicated its plan to the cause of global peace and is today a destination for visitors from around the world.

Tom Angotti is Professor of Urban Affairs and Planning at Hunter College, City University of NY, editor of Progressive Planning Magazine, and a member of the Task Force on Community-based Planning.

Unlocking the Apartment 'Warehouse'

Photo by Joel Cook
Housing advocates and East Harlem residents rallied March 17 outside a vacant building on Madison Avenue. The action was meant to bring attention to warehoused property that could be used for housing, and to push for the City Council to adopt legislation to combat vacant property.

On a rainy June evening in the office of Rev. Billy Talen's mayoral campaign a group of New York activists, part of the Housing Not Warehousing coalition, discussed how to find housing for people who need it.

"What's the quickest way to get low-income people housing?" asked Rob Robinson, a housing organizer with Picture the Homeless, a grassroots group run by homeless and formerly homeless people.

Frank Morales, a housing activist, suggested direct action. Others agreed, saying they should take over vacant buildings. That is hardly surprising coming from a group who has taken "they say gentrify -- we say occupy" as a kind of slogan.

City lawmakers, though, are developing less confrontational ways to tackle the problem of vacant, or warehoused, property that could be used for affordable housing. The Housing Not Warehousing coalition, which consists of 30 organizations ranging from faith groups to anti-gentrification activists to public housing advocates, says that the legislation could be a major step in securing and sustaining affordable housing in the city.

Unused Space

In 2006, in tandem with Manhattan Borough President Scott Stringer, Picture the Homeless conducted a survey of vacant property in Manhattan, and found that 24,000 apartments could come out of the vacant buildings and lots they canvassed. The report noted that while the count only covered Manhattan, "highly visible clusters of boarded-up buildings in neighborhoods exist throughout the five boroughs." Picture the Homeless said that the vacant property could house the entire homeless population of New York City.

The vacant buildings found in Manhattan took different forms, the report explains. In wealthier neighborhoods, the exterior of vacant buildings is usually maintained, while in neighborhoods such as Harlem or the Lower East Side, vacant buildings tend to look dilapidated.

Why Warehouse?

Landlords keep property vacant for a variety of reasons, according to Frank Ricci, director of governmental affairs for the Rent Stabilization Association, a pro-landlord group.

Ricci said many buildings remain vacant because the property is tied up in an estate or the landlord might think that using the property would not be profitable. Other reasons include structural problems with buildings, or property owners who tire of managing, Ricci said.

Mario Mazzoni, an organizer with the Metropolitan Council on Housing, a tenants' rights group and member of the Housing Not Warehousing Coalition, sees another factor. According to Mazzoni, gentrification is the main motivator for landlords to warehouse buildings.

"Warehousing today is all about gentrification. That's all it’s about," he said. "If you're holding on to a building, paying and maintaining the cost of taxes, sitting on an investment you're not profiting from, it's for a reason, and it's because you plan on making more money in the future."

For decades, vacant property above 110th St. in Manhattan, where there is a high concentration of warehoused property, was taxed at a lower rate than properties elsewhere in Manhattan. That lower tax rate made it less costly for landlords to keep the vacant property. A bill proposed by state Sen. Jose Serrano and Assemblymember Herman Farrell Jr. that equalized the tax structure passed in June 2008 and took effect at the beginning of this year.

Legislative Solutions

The Bloomberg administration and City Council Speaker Christine Quinn have recently announced the Housing Asset Renewal Program, an initiative to turn vacant or stagnant condominiums into affordable housing. Other city legislators are looking for solutions to convert warehoused property into housing for low-income and homeless New Yorkers.

Councilmember Tony Avella, a Queens Democrat running for mayor, is working on a bill aimed at stopping landlords from keeping vacant property off the market.

Landlords "want to warehouse to [assemble] whole blocks for development," said Avella, a frequent critic of the real estate industry. "They don't want to be regulated. But they have to be, because if we're ever going to change the housing situation in this city, we have to regulate the real estate industry."

The legislation championed by Avella, currently in draft form, would empower the city Department of Housing Preservation and Development to fine owners who keep buildings empty and would create a fund to "provide capital for the rehabilitation of distressed vacant units." Half of the rental homes that come on the market as a result of this legislation would be set aside for homeless people.

The bill has not yet been introduced in the City Council, and, according to Avella's legislative counsel, has encountered potential legal problems raised by council staff. Avella's counsel said that these barriers may include the 1971 Urstadt Law, which prevents the city from enacting rent laws stronger than New York state's, and a 1989 decision by the New York Court of Appeals that struck down a City Council law that imposed a moratorium on the conversion or demolition of Single Room Occupancy hotels. According to the New York Times, the court ruled that the law was unconstitutional because it "deprived owners of the right to determine how their property would be used."

Avella plans to continue to work on the legislation and to introduce it as soon as possible to move the discussion forward.

Councilwoman Melissa Mark-Viverito, who represents East Harlem, Manhattan Valley and parts of Mott Haven in the Bronx, is working on a companion bill focusing on city-owned vacant buildings.

The Mark-Viverito bill would mandate a citywide census count of vacant property. In addition, Mark-Viverito indicated that, as part of her bill, city-owned apartments that become available would, in at least some cases, be set aside for low-income people.

Since Mark-Viverito's bill targets city-owned property, it has a better chance of passing than Avella's bill. The city, however, owns only 7 percent of the total vacant property stock, according to the Picture the Homeless survey. City-owned housing has dwindled significantly since the late 1970s.

Despite the relatively small amount of property involved, Mazzoni said, "It's strategically smart at this point to focus on city owned property. There's a great deal of ability to influence what the city does with property that it is controlling."

Mark-Viverito's bill "is a step in the right direction," Avella said. "Obviously, we need to do a lot more, but even if we take a baby step at this point, it's better than nothing."

Winning Passage

Andrew Doba, a spokesperson for City Council Speaker Christine Quinn, did not say whether Quinn would support either bill. "Affordable housing is a constant challenge in our city," Doba wrote in an email. "Warehousing is a complicated problem, and the Council is reviewing what can be done to ensure that decent and affordable housing is available to all New Yorkers."

At a meeting in April between Quinn, Mark-Viverito and members of Picture the Homeless, video provided by Picture the Homeless shows Quinn saying, "My goal is to get to a piece of legislation which Melissa [Mark-Viverito] will let me co-sponsor. ... And if I put my name on a bill, I'll do everything to move it. But I'm not going to put my name on it until I know that we can do it legally."

If the arduous legislative process does not produce anything, Robinson says the Housing Not Warehousing Coalition is prepared to take matters into its own hands by using direct action and civil disobedience.

During a period of economic distress, "the time is good for this type of thing to happen, but we really have to seize the moment," said Robinson.

Gold from the Faucet

Photo (cc) Shannon K

On the edge of Newtown Creek, which separates Brooklyn and Queens, eight giant egg shaped structures emit a blue glow into the night. But the complex is more than an architectural experiment. It is a wastewater treatment plant that extracts water from the sludge treated there and, as a result, helps improve the quality of surrounding waterways.

The plant's upgrade, already the largest wastewater treatment plant in the state, is one of the city's biggest long-term infrastructure projects ever. Although the federal and state governments ordered the upgrade, its expected final price tag of $4.8 billion will be almost entirely funded by the city.

To pay for projects like this as well as other components of a water system that delivers 1 billion gallons of drinking water and processes 1.3 billion gallons of wastewater daily, New Yorkers are charged for water.

Costs for that system are rising as revenue declines, so the price of water is likely about to go up once again. The Water Board will vote on a 14 percent rate hike on Friday. If approved -- as is all but certain -- the new rate will go into effect July 1. Together with past increases, the latest hike means the cost of water in the city will be 60 percent higher than it was four years ago. More increases are also expected.

But elected officials and activists argue that the water rate hike isn't fair and that the Water Board, which sets those rates, is in need of reform. They say the board could spend its money more efficiently. Furthermore, its efforts at recouping bills from those who have not paid have been condemned as anti-consumer by some. The board itself is also lambasted as insular and too close to the mayor.

"These water rate hikes have amounted to nothing more than a backdoor property tax increase," said Councilmember and comptroller candidate David Weprin.

The Water Board

The state government created the Water Board as a publicly owned, financially independent utility in 1984 when the city was still recovering from the 1970s fiscal crisis. "During the fiscal crisis, the State Legislature didn't want a utility as important as water to be subject to political pressures," explains Don Capoccia, a board member.

The board sets rates to support the system. It also creates rules and regulations regarding rate payments and access to water meters on private property. The board's seven members are appointed by the mayor for two-year terms. Rather than being financed by bonds backed by general tax revenues, the water system is funded mostly through the charges it sets on water usage.

While the board is supposed to be independent, critics charge it is accountable only to the mayor. "It's a sham. There's no independence," said Councilmember James Gennaro, chairman of the council's Environmental Protection Committee. "They get all the information they use to make their decisions from the mayor's office."

Last year, Jim Tripp, the board's chair at the time, was reportedly forced out because Mayor Michael Bloomberg viewed him as too independent.

The Rate Increase

A 14 percent increase in the water rate would translate roughly into an extra $100 per household annually. The board expects to raise an extra $330 million from the higher rates and new proposals to limit late payments.

The board argues that the rate increase is needed due to increasing costs and declining revenues. After a spate of construction, expansion and renovation -- most of it mandated -- the Water Board is now paying off bonds issued to pay for it all. The costs associated with the mandated projects are the largest driver of water system costs for this year and the next. Operating expenses -- such as electricity and chemicals to treat sewage, as well as pensions -- have also grown considerably. (See Gotham Gazette's features on the water and sewer systems.)

Added to all this, water consumption has dropped an "unprecedented" 6 percent, which the board blames on the economy, so less money is coming in. To make up for that, the board is raising rates and so, some say, penalizing people for conserving.

"Revenue has fallen in this recession because people are using less water and because residents are struggling to pay their bills as it is," said Councilmember Vincent Gentile. "I would suggest that raising rates in reaction to residents' proven financial hardship is not just nonsensical and insensitive. It's cruel."

Paying the Rent

Elected officials, activists and candidates contend the board could find other ways to solve its financial problems.

The biggest issue, some argue, is the rent paid to the city by the board for the use of its water infrastructure. Once debt service becomes large enough -- as it did starting in 2005 -- the Water Board pays the city rent equal to 15 percent of the money spent repaying debts.

This year, the rental payment – as it is called - was $160 million. Next year it is estimated to be $198 million. The idea is that the payment helps shore up the rating of the bonds used to finance the system's capital projects. The rent money goes into the city's general funds. Last year, $55 million of it went to reimbursing various city agencies, such as $30 million for the Sanitation Department to keep debris out of the sewers and $5.7 million to the Fire Department for hydrant inspections.

William Thompson, the comptroller and a mayoral candidate, has called for an end to the rental payment. Instead, he suggests investing half of that money back into the system, which he points out would save money in the long term. Thompson would use the other half to reduce rate increases.

The city says that the arrangement is common nationwide, like in Philadelphia and San Francisco, among others. "One of the things that the Water Board's ongoing rate study has determined is that most large water utilities make a similar payment to their municipalities," said Mercedes Padilla, a Department of Environmental Protection spokesperson. "In fact, many large utilities pay substantially more to their municipality than DEP does, and in most cases, they do not get as many services in return as we do."

But in Los Angeles, where the water utility there pays into the city's general fund, a state court issued a tentative ruling last month that called the practice unconstitutional.

New York City's Department of Environmental Protection will examine such arrangements, as well as alternative rate structures, in a study to be released at the board's June public meeting. The report itself has become a subject of criticism, with some officials saying it has taken too long to draft.

The rental agreement is not the only part of the board's operation that has sparked concern. The environment department, which operates and maintains the water system, has about $40 million in a holding fund to cover any unexpected water needs. The Independent Budget Office last year recommended cutting that fund in half.

At a recent hearing, City Councilmember James Vacca asked Steve Lawitts, the acting environment commissioner, what it was used for, he didn't get much input. "He had no answer," Vacca told the Observer. "I didn't think that holding codes were allowed in agencies"

Unpaid Bills

In 2007, a private consulting firm recommended the city place liens on property owners who don't pay their water bills. The move could collect over $400 million that had been overdue for more than a year.

The city began the process in December of that year. Property owners not paying their bills are now forced to settle up because the board places a lien on the taxes they owe, which, if unpaid, could eventually lead to foreclosure.

Although these efforts have brought in most of the missing funds and helped avert a mid-year hike, the prospect of putting thousands of properties -- many of them residences -- at risk of foreclosure during a housing crisis has become an issue.

To further pursue cheats, the Water Board has proposed two regulations to accompany the rate hike. It would impose large fines on customers suspected of stealing or barring access to water meters. But these have not been received kindly in some corners.

Hershel Weiss, president of the New York chapter of the American Society of Plumbing Engineers, called the proposals "two of the most anti-consumer documents ever written by the DEP." He says they will punish people with fees that could climb into the millions because the board suspects they are stealing. "There is no requirement for the DEP to prove that any theft is taking place."

Chinatown Looks for a Way to Survive and Thrive

Photo (cc) woohoo

A second-generation Chinatown native, Willie Rosado longs for the old neighborhood feeling of Chinatown. He misses getting a roast pork bun down the street where everybody knew everybody.

"It is not the old neighborhood anymore," said Rosado, the son of a Puerto Rican father and an American-born Chinese mother. "Many mom-and-pop restaurants are closed. The area is getting very crowded and all my friends moved out."

Rosado is not alone in his nostalgia. Christina Mei, a native of Taishan, Guangdong Province, moved to Chinatown in fifth grade. She attended P.S. 42 and I.S. 131, and frequented shops and restaurants in Chinatown.

"Now you see all the new condos," said Mei. "They are very expensive. Local residents don't have the money to buy them. Those non-Chinese people are paying over a million dollars for one-bedroom apartments."

Some 26 luxury residential buildings have recently been built or are under construction in Chinatown, along with 25 new hotels, and 118 new high-end boutiques and cafes, according to a report by the Urban Justice Center and Committee Against Anti-Asian Violence, or CAAAV. The report also pointed out that there were 195 commercial construction permits filed with the Department of Buildings in Chinatown between January and November 2008.

So, has gentrification finally arrived in one of New York's oldest ethnic neighborhoods?

Years of Change

Many said the transition began years ago. "Gentrification in Chinatown is not a new phenomenon," said Esther Wang, project coordinator for the Chinatown Justice Project at CAAAV. "What we have seen in Chinatown in the past few years is that development has really picked up."

"In the real estate market, Chinatown is probably the last frontier", said Justin Yu, president of the Chinese Consolidated Benevolence Association, popularly known as Chinese Community Center on Mott Street. "But most of the designs of the new buildings are contradictory to what we have."

"The gentrification of the New York Chinatown community has been going on for the past five years or so," said Paul Gong, who founded Friends of Columbus Park and is a former president of the Asian American Youth Center. "Only a few can afford this expensive living environment. So that means new tenants, new people other than Chinese, new stores and a whole new environment catering to our new neighbors."

"All this has resulted in many Chinese moving and settling in Brooklyn," said Gong, referring to the satellite Chinatowns in Sunset Park and Sheepshead Bay. "It has become harder to afford and live in Manhattan. Poor and recently arrived immigrants and low-income Chinese are being forced out of New York [Manhattan] Chinatown or are forced to live in overcrowded conditions where multiple families share a tiny apartment."

Residents worry that the city's recent rezoning of the Lower East Side next door could accelerate the process. That neighborhood, of course, has seen a major transformation as cafes, bars and boutiques as well as high-rise condos have sprouted in the area. In November, City Council approved a plan that limited the height of new buildings to no more than 80 feet and provided for affordable housing. The rezoning triggered fear among Chinatown residents that developers of luxury high-rise buildings -- now restricted in the adjacent Lower East Side -- will push their projects south to Chinatown.

Chinatown Unites

When the council approved the Lower East Side rezoning, the Bloomberg administration reportedly indicated it would try to protect the character of adjacent areas, particularly Chinatown. Meanwhile, in order to present a more united front and build consensus, more than 30 community-based groups, including Manhattan community boards 1, 2 and 3m formed the Chinese Working Group last year.

"One of the purposes is to speed up Chinatown's rezoning," said Yu. "The best thing is to preserve the characters of our community, protect the rights of the local residents to stay here, and we would also like to attract some new investors to build new construction."

The group holds a monthly meeting and has several sub-committees that specialize in various issues such as education, recreation, economic development, and transportation. In one to two years, it hopes to come up with Chinatown’s own community or 197-a plan, offering its own ideas for local development, improvement and growth. The Chinatown plan will include a rezoning proposal as well as other measures to improve Chinatown. The rezoning of the Lower East Side followed this model.

The community organizers said they want new development, but not at the expense of the low-income residents.

"Development is inevitable. There has to be development for progress to take place," said Charles Lai, executive director of the Museum of Chinese in America. For example, he thinks that dilapidated buildings constructed at the turn of the 20th century need to be repaired or replaced to be fit for human habitation. "But the flip side of development is who is allowed to work, live and play in the neighborhood," Lai continued. "When people are pushed out, it is not good."

Margaret Chin, a long-time community advocate who is running for the City Council, agrees. "There is a lot of history in Chinatown that needs to be preserved, but it doesn't mean that we should be living in dilapidated housing," she said. "We want new housing in Chinatown. But it has to be affordable so that people who live in the community can stay in there."

Some in the community say the new buildings do not fit in with the neighborhood's overall look. "We would like some new buildings but the condition is that the design has to be similar to what we have," said Yu.

Old Neighborhood, New Challenges

Starting from only a few city blocks in the late 1800s, Manhattan's Chinatown is one of the largest Chinatowns in the world. It has served as a neighborhood for working-class Chinese and recent immigrants -- and as a major tourist attraction.

"When you go to Chinatown, you'll see how vibrant it is," said Wang. "New York City is a city that is known for being diverse and cosmopolitan. ... When those values are trumped instead to favor real estate values, everybody loses something really important in terms of cultural vibrancy and the things that make a city a great city."

Still recovering from the economic impact brought by the devastating 9/11 attacks in 2001, Chinatown faces many challenges in addition to the current recession. But community leaders are optimistic.

"We have competition from Flushing, Sunset Park, Sheepshead Bay and New Jersey," said Yu. "But Chinatown is still the center of Chinese activities in the metropolitan areas. Most of the Chinese organizations are here, and most of the Chinese churches and temples are here, and people still come here to worship."

Meanwhile, the residents and New York's Chinese community seek to adapt to new conditions. Working to protect Chinatown involves "preserving the historical fabric of what is old Chinatown and what that means to people who are from here and grew up here, but also integrating the new generation of Chinese Americans," said Beatrice Chen, director of education at the Museum of Chinese in America. "That's why there are different types of shops and businesses that you wouldn't normally associate with the old-school Chinatown."

At the end of the day, unlike Little Italy which has few new immigrants, the steady streams of incoming immigrants from China will probably ensure Chinatown's growth.

"Chinatown is an established community," said Wang. "Immigration from China to New York City is going to continue and that's a factor will keep Chinatown a pretty vibrant community for a long time."

Home Shops: 'One Stop' on the Road to Foreclosure

Haydee Sanchez first learned about United Homes of New York in 2001. While riding the F train on her daily commute to her job on the Upper West Side, she saw an advertisement for the company with the slogan: "United Homes -We Make Your Dreams Come True."

Pregnant with her second child, Sanchez, a Honduran immigrant who worked in a clothing store, and her husband Freddy, then a manager at Restaurant Depot, wanted to move from their cramped one-bedroom rental apartment in Jackson Heights.

A few days later, the Sanchezes were in United Homes' offices on Queens Boulevard, where, they recall, they met the company’s president, Yaron Hershco, and an employee, who said they could buy a home with just 3 percent down. After making a $7,000 payment and taking out a $238,250 mortgage from Cambridge Home Capital, where they say they were referred by a United Homes salesperson, the Sanchezes purchased a freshly renovated two-family two-story house at 462 Chestnut St. in East New York.

Soon, though, their dream house became a living nightmare. About six months after moving in, the dining room ceiling collapsed, leaving termite infested piles of rotten sheetrock on the floor and table. Haydee said that after she called United Homes to complain, workers showed up to perform some perfunctory repairs. But they left behind termite-infested walls and rotted floors, which the family discovered after they looked under the carpets.

Haydee, who breaks into tears as she tells her story, said that, after repeated calls to United Homes that were not returned, she left a stern message for its owner, Yaron Hershco. "I told him that if he did not come and repair my house I would be on the news the next day," she says. "And then he called and told me, 'I have a lot of money and I can kill you and your family. If you do that tomorrow, you are not going to be alive.' "

Hershco adamantly denied the Sanchez’s allegations. “I wouldn’t threaten anybody,” said Hershco who said during a phone interview that he has sold thousands of homes over the past 15 years. “Quite frankly I don’t even remember even speaking to them -- I don’t know these people.”


The High Cost of Convenience

Housing advocacy groups and legal services corporations say that United Homes operates a business commonly known as a one-stop shop. Such companies simplify the home purchase process for their customers by providing a real-estate salesperson, financing, inspection and appraisal. In New York City, many one-stop shops buy a significant portion of the homes they then sell at foreclosure auctions and distress sales. Often these houses are in poor condition. After doing rudimentary repairs, one-stop shops sell the properties months later at significant profit.

Lawsuits against New York City one-stop shops charge that they engaged in various kinds of fraud including concealing damages in houses they sold, arranging appraisals that put too high a value on the home and setting buyers up with inflated mortgages. Housing activists and others say that one-shop stops have contributed to the growing foreclosure epidemic in the city's low-income neighborhoods by inveigling people into mortgages that they could not afford and selling them homes that were in disrepair.

The lawsuits also charge that one-stop shops engaged in "property flipping," in which a home is quickly resold for considerable profit at an artificially inflated price, often aided by collusion between a lender and an appraiser."

"The first time homebuyer was often taken advantage of by 'one stop shopping enterprises,'" said a July 2008 New York State Commission of Investigation Report entitled A Perfect Storm: Easy Money and the Mortgage Meltdown. "While this appears to be a convenient arrangement for the home buyer, it not only bears a significant potential for conflict of interest, but it can serve as a breeding ground for fraud."

So far, though, the government has only started to rein in the operations. The city apparently has little jurisdiction in this area, and while the state has passed a law that could limit the types of predatory loans that these one-stop shops have relied upon to make their sales, it does little to help homebuyers, such as the Sanchezes, who have already bought homes.

Fueling Foreclosures

Hershco has achieved prominence for developing projects such as the Oro, a 40-story luxury condominium in downtown Brooklyn, and he serves on the board of directors of the Downtown Brooklyn Partnership, a local development organization. He also operates a web of companies, a number of which are registered to 87-20 139th St. in Briarwood, N.Y.Many of these home his companies sold have been in predominantly minority neighborhoods hard hit by the foreclosure crisis such as Bedford Stuyvesant, East New York and Jamaica.

A substantial percentage of houses sold by several New York City one-stop shops, including those operated by Hershco, ended up going back into foreclosure, according to data compiled for Gotham Gazette by the California-based real estate data company, RealtyTrac. Two of the Hershco-controlled companies -- the Galit Network LLC and the United Property Group both of which are registered to the 87-20 139th Street address and are being sued -- have especially poor records. Out of 208 properties sold by the Galit Network during a four-year period between 2002 and 2006, at least 54, or approximately 26 percent ended up in foreclosure.

Customers of United Property Group had a similar foreclosure rate: Out of 64 homes that the company sold during the same four-year period, at least 18 or slightly higher than 27 percent ended up going into foreclosure.

The customers of Better Homes Depot of the Bronx and the Queens-based Better Homes Depot Inc., another one-stop shop that is the target of a lawsuit, also experienced high rates of foreclosure. Between 2002 and 2006, out of 522 houses sold by the two Better Homes Depots, 129 or approximately 25 percent, ended up going into foreclosure. Currently, Better Homes Depot is being sued in the United States Court for the Eastern District on charges of defrauding several first-time minority homebuyers. Repeated calls by the Gotham Gazette to Eric Fessler, who is listed as CEO od the Queens-based Better Homes Depot Inc., were not returned.

The rates of foreclosure on homes sold by the Better Homes Depots and Hershco controlled one-stop shops are extremely high comparison to annualized foreclosure data. The overall foreclosure rate for New York City was .71 percent for 2008, according to RealtyTrac. And in the Cape Coral-Fort Myers area of Florida, believed to be area in the country hardest hit by the foreclosure epidemic, the rate was about 12 percent in 2008. The rate for so-called sub-prime mortgages tends to be somewhat greater.

Even so, the high rate of subsequent foreclosures on properties sold by one-stop shops sold "sticks out like a sore thumb and indicates that there is something strange and out of whack going on," said Daren Blomquist, a spokesperson for RealtyTrac. "It would indicate that this is more than just a problem caused by the environment or location of the property," he said, adding that the numbers of foreclosure filings are probably even higher than the ones he cited because foreclosure databases tend to be incomplete, especially for foreclosure notices that were issued before 2005.

Hershco said that that there were a number of possible explanations for his customers ending up in foreclosure. “Maybe they got divorced, maybe they lost their job, maybe they are on disability, or maybe they cannot make their payments,” he said, “Can you check what the rate of divorce in those families?” he said adding that he didn’t think that the RealtyTrac data was accurate.

Behind the Renovated Facade

The Sanchez's story offers a case study of how the practices of the one-stop shops fuel the foreclosure rate. For months after the ceiling collapse, their home became a dusty construction site where workers, prodded by frantic phone calls from the Sanchezes to United Homes offices, would show up, only to disappear again. At one point, the family had to live in their basement, while workers opened up walls on the first floor to replace rotten beams.

Eventually, the workers stopped showing up altogether, leaving the Sanchezes with a house that, eight years later, still has rotten walls and ceilings in several rooms. The couple set about trying to fix the house on their own, but even though Freddy now has a better-paying job, they fell into debt. To pay for past renovation expenses as well as future ones, they refinanced their first mortgage in the fall of 2007 on terms they say they were deceived about. In February 2008, after falling behind on their payments, the Sanchezes were in foreclosure. They blame the expenses they incurred fixing up the house.

Then there is the case of Sandra Barkley of Brooklyn. An acquaintance referred her to United Homes and received $1,000 for her trouble. Barkley said that a United Homes representative told her that the company would take care of all aspects of the home buying process. According to Barkley, she and other customers were steered to the Olympia Mortgage Corp. to get financing. Two weeks later, Barkley closed on a two-story house in Bedford-Stuyvesant that was priced at $359,000, with a $10,000 down payment. Unbeknownst to her, United Homes had purchased the house only three months before at a foreclosure auction for $153,000.

An appraisal allegedly commissioned by Olympia from appraiser Thomas Messina had concluded that the house was worth $359,000. However several months after she purchased the house, Barkley hired her own appraiser who put the house's value at $260,000. A subsequent appraisal commissioned by Barkley’s attorneys found that the house was worth only $235,000.

According to court papers, at the time Messina conducted Barkley's appraisal, the federal Department of Housing and Urban Development had suspended him from doing appraisals on federally insured mortgages because he had overvalued at least one property. HUD officials confirmed the suspension. Messina did not return messages left at his Massapequa office.

The Legal System

There have been successful lawsuits against one-stop shops. In 2003, Better Homes Depot settled a lawsuit by New York City's Department of Consumer Affairs for allegedly misleading many first-time homebuyers. It paid more than $525,000 in restitution to 36 New Yorkers and a $100,000 civil fine.

Advocacy organizations say, though, that it is difficult for victims of one-stop shops to obtain justice through the legal system. The one-stop shops can intimidate people, and many low-income homeowners cannot afford legal representation for lengthy and complex court battle. The Sanchezes, for example, said that they considered taking legal action against United Homes but were deterred by the expense.

Some cases, though, are wending their way through the legal system. Barkley is a plaintiff in a suit brought by South Brooklyn Legal Services that has been in the courts since 2005. It deals with six homeowners who purchased houses from United Homes and its affiliated companies between 2002 and 2003. The lawsuit charges United Homes with being at the center of vast and far-ranging conspiracies to defraud low-income homebuyers that included appraisers, a lender, a lawyer and even a major financial institution, Credit Suisse First Boston.

Hershco dismisses the allegations. “We sold thousands of homes over the years and they came up with six lawsuits,” he said, "and some of the allegations they made on the complaint were false.”

The suit alleges that, according to forensic appraisals, United Homes and its affiliates sold houses to the Barkley and five other homeowners at prices based on over-appraisals ranging from 53 percent to 75 percent. The lawsuit also alleges that a review of 60 properties sold by United Homes and its affiliated companies in New York City between 2002 and 2003 revealed that, after purchasing and holding properties for only a few months, the company resold them for an average markup of over $165,000.

The inflated appraisal on Barkley’s house passed muster at Olympia Mortgage Corp., where Barkley and other homeowners were steered by United Homes. From 1991 through 2004, there were 54 complaints against the Olympia. In October 2004, a month before Fannie Mae initiated a lawsuit against Olympia alleging fraud, the state-banking department suspended Olympia’s mortgage banking license. The company, one of whose principals was recently sentenced to eight years in prison for defrauding Fannie Mae of $44 million, approved Barkley for two mortgage that required no verification of either her assets or income.

Hershco says that he is unsure as to whether or not United Homes referred Barkley or other customers to the Olympia. “I don’t know—I wasn’t involved personally in any of the sales,” he said, “I never met the buyers, never met the appraisers, I never met the banks, and this is on the record under oath. …. Maybe they saw me once at a Christmas party.”

According to court papers in 2005 Barkley's combined monthly mortgage payments under the two loans, with taxes and interest included, totaled $2,565. Barkley had a monthly salary of $2,332. But the attorney that she claims she was introduced to by United Homes, allegedly assured her that she would be able to afford the payments with a $1,600 monthly income from a rental apartment in the house.

The 'Establishment' Lenders

Whatever concerns there may have been about the unusually high appraisal on Barkley's house or her ability to pay her mortgages, Olympia appears to have had little trouble selling the Barkley's loans and those of her co-plaintiffs. A company called DLJ Mortgage Capital, a subsidiary of Credit Suisse First Boston, readily bought the mortgages.

Deals such as the one involving Barkley's home would not have been possible without the involvement of large financial institutions, according to Navid Vazire, a staff attorney, at South Brooklyn Legal Services. "It is impossible for me to believe that none of these banks knew that there was widespread fraud against borrowers," Vazire said, "and that all of these mortgages, which turned out to be unaffordable, were not being pushed onto people who were being deceived."

Josh Zinner, co-director of the Neighborhood Economic Development Advocacy Project, agreed. Investment banks, he said, both lent money to shady mortgage originators to finance their operations and purchased the shaky mortgages, which were then packaged into securities and sold to investors.

“ There was no regulation of the subprime mortgage market,” said Zinner, former director of the Foreclosure Prevention Project at South Brooklyn Legal Services “Federal regulators completely abdicated responsibility to regulate these markets. Unscrupulous lenders could make unaffordable loans with impunity and sell them on the secondary market at a big profit, and it made these one-stop shops -- these property-flipping schemes -- highly profitable. Speculators always knew that they could wildly over-appraise these properties and if they could find someone to buy them, they could always get financing for the borrower.”

On Barkley's house and others, Olympia allegedly tailored its loans to conform to underwriting guidelines for a "no asset no income program" and a similar "low documentation" program for lenders seeking to sell loans on the secondary market, both of which were allegedly advertised on a Credit Suisse Website until fall 2007. According to court papers, even before closing on Barkley's mortgage, Olympia had completed required the required Fannie Mae documentation to sell her loans on the secondary market.

DLJ Mortgage Capital purchased Barkley's loan from Olympia, despite the fact that an underwriter for the company had obtained an automated review of Messina's appraisal of Barkley house, which valued it at $236,000, an amount commensurate with the appraisal commissioned by Barkley’s attorneys. Barkley's loans were then sold by DLJ to another Credit Suisse subsidiary, Credit Suisse First Boston Mortgage Backed Securities Inc, which in turn sold Barkley's loan to a mortgage backed security called the Credit Suisse First Boston Home Equity Mortgage Trust. Yet another Credit Suisse subsidiary called Credit Suisse First Boston LLC then allegedly sold shares in the trust to investors.

Allan Taffet, a lawyer representing Credit Suisse, said that the company did not know Messina's appraisal of Barkley's home was inflated. "We bought the mortgages through the originator, and there were certain representations made about the mortgages," he said. Citing the pending litigation, a spokesperson for Credit Suisse, Duncan King, declined comment.

The 'Anything Goes' Era

The one-stop shops existed against the overall backdrop of the real estate boom and lax regulations. "It was the Wild West, and nobody had the ability to closely monitor these organizations," said Michael Hickey, executive director of the Center for New York City Neighborhoods, an organization founded by the New York City and non-profit partners to study the foreclosure crisis.

Here, as in so many other parts of the financial world, regulators, policymakers and advocates are considering if -- and how -- they can rein in the system and what answers they can offer the people who feel victims of the abuses of the last few decades.

The state agencies, along with local realty boards, knew what they had to do, Hickey said, but "were just outgunned by a fraudulent industry. The Banking Department has only 16 examiners of mortgage banks and brokers for all of New York State. Glorimar Perez-Gonzalez, press secretary for the banking department, said that her agency is working to add more.

The state's Banking Department and Department of State are both part of the state's Interagency Task Force to Halt Abusive Lending Transactions, or HALT. It has been examining the business practices of one-stop shops. Jane Azia, director of the New York State Banking Department's Non-Depository Institutions and Consumer Protection unit, said the task force is still in the midst of its examinations. So far, its reviews of one-stop shops have led to a total of $250,000 in customer restitution.

There are, she said, state laws that regulate one-stop shops and the department will consider whether the shops complied with these rules. "We are looking to see whether they [mortgage brokers] disclose to consumer the relationship with the realtor," Azia said, "That there might be a conflict—that you [the consumer] are giving up your right to undivided loyalty."

Fixing the System

Last summer, Gov. David Paterson signed a sub-prime reform lending bill that would prohibit state chartered institutions from issuing the kinds of mortgages that were made to Barkley and her co-plaintiffs. It requires verifiable income guidelines and establishes stricter underwriting standards to address the borrower’s ability to repay the loan. However, a lot of federally chartered institutions are preempted from having to comply with the state law, according to Zinner.

The state law also provides some relief for homeowners who took out sub-prime mortgages. It requires companies that service mortgages give any homeowners who took out sub-prime or nontraditional mortgages between Jan. 1, 2003 and Sept. 1, 2008 90-days notice before initiating a foreclosure proceeding. And before launching a foreclosure, mortgage servicers must appear at a court-monitored settlement hearings with the homeowner to explore the possibility of loan modification.

That only goes so far however, said Zinner. The settlement conferences do not require companies to modify mortgages. Furthermore, in New York City, where property values haven't fallen as drastically as they have in other parts of the state, mortgage firms have been willing to reduce the interest rates but loathe to write down the mortgage principal.

The lawyers at South Brooklyn Legal Services want the mortgages of the homeowners they represent to be voided. "They [the new mortgages] should be written down to the actual value of the house at the time it was purchased," and the homeowner should get credit for they inflated payments already made, said Meagan Faux, co-director of the Foreclosure Prevention Project at South Brooklyn Legal Services, "Right now the mortgages are inflated because the purchase price of the house was artificially inflated due to fraud."

The most significant change cannot be made in City Hall or in Albany, according to Zinner, but in Washington. There, he said, federal legislation that would allow bankruptcy judges to reduce the principal on mortgages remains stalled in the Senate.

He sees this as an essential reform. "There are many people out there who cannot afford their properties because of the one-stop shops and the over-appraisals," Zinner said, "If this law goes through it will help a lot more people than just those who go into bankruptcy court -- it will be the stick to push mortgage servicers to do loan modifications by cramming down the principal balance of the property, whereas right now there is nothing to really push them to do that."

Alex Ulam is a freelance writer who covers urban affairs, architecture, and real estate.

Small Business: Suffering in Good Times and Bad

Photo (c) Gotham Gazette
Restaurants and small businesses are folding along Prospect Avenue.

You only have to walk along any city commercial strip to notice the myriad of "for rent" signs. They are popping up on storefronts across New York, as merchants of all types struggle to survive. The faltering economy deserves some of the blame, but many small business owners maintain the uptick in those signs preceded the current fiscal crisis.

In fact, they argue, the real estate boom did as much if not more to cause the closings of New York's mom and pop shops as the current recession has. Landlords, they say, realizing the market would support almost any amount asked, hiked rents, sometimes by astronomical proportions. Long-time tenants were often pushed out.

Earlier this month, U.S. Rep. Anthony Weiner issued a report finding that more than 12 percent of the small businesses surveyed had closed. Brooklyn had the highest rate of vacant storefronts -- more than 14 percent -- but press reports reveal even Manhattan's upscale Madison Avenue isn't immune. Its retail store vacancy rate rose from 8 percent at the end of 2007 to above 12 percent in 2008. While not all of these vacant spaces once housed mom and pop operations -- the empty store at Brooklyn "junction" of Flatbush and Nostrand Avenues, for example, used to have a Circuit City -- many did.

Thriving local businesses are "barometers of the health and vitality of a neighborhood," said Ron Shiffman, a city planner who teaches at Pratt's Graduate Center for Planning and the Environment.

The empty storefronts leave a void in a community "especially when there are multiple vacancies on a single stretch," said Quenia Abreu, president and CEO of the New York Women's Chamber of Commerce. "The community shops someplace else, [taking] money out ... employment is taken out. Then [we] start seeing a problem with increasing criminal acts," such as vandalism, she said. "It's sad to see the start of community deterioration when we worked so hard to revitalize" these neighborhoods.

To stem the tide of closings, City Councilmember Robert Jackson has proposed the Small Business Survival Act. With 18 sponsors, Intro. 847 would give commercial tenants rights they do not currently possess when renewing a lease.

The bill continues a debate that has gone on in New York City at least since the 1980s. What, if anything, should government do to help and preserve the city's small businesses?

A Lost Cause?

Certainly many could use some assistance. A recent survey released by the U.S.A. Latino Chamber of Commerce based on data collected from all five boroughs between November 2008 and January 2009 underscored the gloomy situation. Of the 927 Hispanic businesses included, 53 percent said they are in danger of closing, with 74 percent reporting "high rents and unreasonable lease terms" as the main culprits. Two-thirds cited the "rising costs of doing business" in New York, followed by 65 percent who said municipal taxes and fees are excessively costly.

More than 90 percent described having had a "negative experience" while attempting to renew a lease because owners abused their power; 87 percent felt they had no rights at all during the renewal process. Moreover, a third of respondents reported a landlord demanded money in order to renew their lease, which is illegal. The owner made it clear to the merchant that there would be no renewal unless the storeowner paid an additional fee, off the record, off the books and outside the purview of the lease terms.

Although the issues extend beyond the Hispanic community, there is, said Abreu, "a disproportionate effect on minority and women-owned enterprises... such as beauty shops and bodegas." This is especially true in areas like Harlem and Washington Heights in Manhattan and Jackson Heights in Queens.

Setting Controls

The threats to these businesses are hardly a new phenomenon. Twenty-five years ago, in the face of the first great wave of modern gentrification, Manhattan's Upper West Side witnessed a slew of closings of neighborhood staples: bakeries, hardware stores, bodegas. What makes this round unique, according to merchants, is city government's attitude of indifference and a climate of in-hospitality -- even hostility -- toward them. Business owners point to uncontrolled escalating rents, countless neighborhood rezonings and the creation of more Business Improvement Districts (BIDs) as evidence.

Steve Null, who founded the Coalition for Fair Business Rents in 1984, wrote in an email, "A perfect storm has arrived with decades of rent gouging, abuses and corruption with no hope for a better future -- in a major down economy with the highest rents, landlord passalongs, taxes, utilities, insurance etc. All hell is about [to] happen on Main Street NYC if someone does not quickly regulate these out of control greedy landlords."

Jackson's bill attempts to address some of these challenges. "The absence of legal protection... has unnecessarily accelerated the closing of small businesses and resulted in lost jobs, tax revenues and community instability," the legislation states. In response, it attempts to create "a fair negotiating environment."

Specifically, if an owner and tenant cannot successfully negotiate renewal terms within 90 days, a mediator would intervene. Then if that fails, an arbitrator could be brought in to establish the new rent, based on various criteria such as the market value, longevity and location of the business, and the cost of maintaining and operating the property.

Currently, there is no regulation of rents for commercial property. Once a lease expires, landlords have sole discretion to charge whatever they please, or even to refuse a renewal for no cause.

Being forced to move can be disastrous for a small business. Shiffman, who sat on the first ever small business task force in the early 1980s, said remaining in the same place is crucial for small merchants. "Once a business is started, its location is critically important... because they [build up] their customers." Rent speculation ends up "driving businesses out" who, in turn, rarely succeed in a new place without their original patrons, he said.

Saying his bill is "about survival," Jackson said, "It's imperative that it's put into place. It's like a patient on a respirator who needs a doctor to rescue [them]. Under the measure, he said, storeowners could get a reasonable deal on renewals, while landlords would still turn a profit.

Jackson expects the bill to move by September, just in time for the Democratic primaries. He hopes to put pressure on local candidates -- if they don't support the bill, "small businesses won't support you."

As it stands now, the whole rent renewal process " is anti-democratic," said Queens Councilmember Tony Avella, a co-sponsor of the bill. "Why is the real estate industry allowed to control the agenda?... We have to protect these mom and pop stores who provide local jobs."

(The Real Estate Board did not return repeated requests for comment.)

Critics of increased controls argue they could do more harm than good. Restrictions on commercial rents "could be a big mistake, both hurting business and reducing tax revenues," said Stuart Saft, a real estate attorney who has represented landlords, told the Real Deal.

Meanwhile, other officials have offered additional proposals to help small businesses. City officials have suggested a number of solutions, including using zoning to discourage huge storefronts (almost always occupied by chains), providing more microloans and encouraging large developments to include small, independent stores.

The Administration's Role

In a Latin Chamber of Commerce survey, 59 percent of respondents believed the relevant local government leaders "don't understand" the particular needs of small businesses. And, 43 percent predicted a continuation of the city's "anti-[small business] environment."

"The city's tone [to merchants] is a major problem, and has been during previous administrations," said Shiffman, who also is the former director and co-founder of the Pratt Center for Community Development. "There's a sense in New York City that gentrification is a good thing... rather than [having] stable businesses."

For their part, administration officials cite the services they offer. "There is a lot of support being provided to small businesses and jobseekers through our agency," said Laura Postiglione, press secretary for Small Business Services. She highlighted the department's Business Solutions Center, which offers courses on business planning and related topics, and provides training funds for entry-level employees and pro-bono legal services to review contracts and leases. According to its Web site, the center helped 170 clients secure more than $11.8 million in financing and assisted more than 5,000 entrepreneurs in developing their business plans.

In his weekly radio address on March 22, Mayor Michael Bloomberg focused on the plight of small businesses and detailed the city's efforts at worker training. "During the past 12 months alone, we've distributed some $3 million in grants, coupled with funds from more than 30 employers, for training nearly 2,000 workers," Bloomberg reported.

According to Avella, who is running against Bloomberg for mayor, many independent merchants do not think Small Business Services meets their needs. In a recent letter to the mayor, Avella wrote, "I have been meeting with small business owners, who feel that [the Department of Small Business Services]... intentionally or unintentionally, prioritizes the needs of property owners/landlords and other moneyed interests, above the interests of individual merchants."

New York's land-use policies have also come under fire, particularly in traditionally ethnic communities. A joint report issued by Good Old Lower East Side, a tenants rights organization, and the Urban Justice Center, called "NO GO for Local Business", concluded the administration's push to rezone that area has led to small businesses "getting evicted in record numbers."

An analysis of Chinatown criticized government agencies like the Lower Manhattan Development Corp., the city's Department of Housing Preservation and Development, and planners for trying to attract luxury development and using "processes like rezoning and the use of eminent domain to remove low-income communities and communities of color."

"Property owners sense there will be more money in the future [from the rezonings], so they don't mind holding" on to their vacant properties, said Pratt's Shiffman.

The Roles of BIDs

A key part of the Bloomberg administration's small business strategy is the city's Business Improvement Districts. BIDs are state-authorized public/private endeavors designed to "supplement" municipal services such as sanitation and security in commercial areas. They are funded by fees assessed on local property owners and merchants.

The Bloomberg administration has created 18 BIDS for a total of 63. According to Postiglione, BIDs serve approximately 16,000 retail businesses and invest approximately $98 million in these districts.

Null believes the administration relies too much on the BIDs and that there is an inherent conflict between the interests of those running the district -- the majority of whom must be property owners -- and the needs of commercial tenants, who primarily rent space.

In his letter to Bloomberg, Avella noted the mayor has " often touted the ways in which BIDs bolster local economies," but, he continued, "Unfortunately, too many small BID members... feel the system is not addressing their needs."

The BIDs can be a useful tool, Jeremy Waldrup, Small Business Services assistant commissioner for district development, said in an email. The districts "have catalyzed neighborhood revitalization and economic development... The programs and services provided by BIDs work to strengthen the local commercial corridors and impact the everyday lives of those who live, work and shop in these districts," Waldrup said.

In 2007, NYU's Furman Center for Real Estate and Urban Policy analyzed the efficacy of BIDS, determining that while larger BIDS increased property values, smaller BIDS proved to be a wash. With more than 50 percent of their budgets often eaten up by administrative costs, the study says, little remains to benefit local businesses.

Looking to the Future

As small businesses shut their doors, many of the tenants that move in are national chains that can afford higher rents. A recent count by the Center for an Urban Future found, "At least 32 retailers have 50 or more stores throughout the city, a list that includes everything from CVS and GNC to GameStop and Payless. Dozens of other companies have more than 10 outlets here."

Shiffman sees this as a disturbing trend -- and thinks the city should too. When it comes to chain stores and large franchises, he said, there should be no contest in public policy. "First and foremost, [small businesses] circulate money in the local economy, more than any other enterprise ... and, they employ local people and professionals, far better than do franchises. We need to nurture [these] businesses and manufacturers."

Jillian Jonas is a freelance journalist focusing on local and national politics, government and public policy.

Offering New Businesses a Place to Grow

To view our community incubator Google map, click here To add to the map, go here

When Michael Bloomberg was fired from Salomon Brothers in 1981, he used the opportunity to create his own business and become one of the richest people in America. Now, with an estimated 65,000 Wall Street employees facing the ax, he is encouraging them to follow in his footsteps.

"Time and time again, history has shown that our city rewards those who have the courage to pursue their dreams and launch new ideas," the mayor said when he announced his plan to revive the financial industry last week.

The plan would provide retraining for those who lost Wall Street jobs, offer seed funds for start-up companies, and attempt to woo banks and financial firms from other countries. To help new businesses thrive and grow, the city would create incubators, spaces where entrepreneurs could find affordable office space and have access to basic services and administrative support. Also announced was a network of available space for incubator clients called the Coalition of Space Providers.

For years, advocates in New York have been seeking official recognition of the contributions they think incubators can make to economic growth. And the city already is home to many incubators of different types and sizes. So how effective are they, and what is the best way to harness their potential?

(Go here for a map of all the city's incubators. Do you know of any incubators in New York City that should be on our map but aren't? Go here to add them.)

The Idea Hatches

Incubators generally offer management guidance, technical assistance and consulting to small companies. Often they provide cheap or free space, but "virtual" incubators that provide services remotely -- and do not offer space -- also are common. Once viable, businesses will usually "graduate," moving out into the world.

The business incubator concept is credited to Joseph Mancuso. In the mid-1950s, he was in charge of filling a large complex in Batavia, a small upstate city, but had trouble finding a tenant. So he divided it into small parcels for different businesses that shared office costs. He also provided business advice and helped raise money for them.

One of his original tenants was a chicken company. "In a joking way, because of all the chickens, we started calling it 'the incubator,'" the National Business Incubation Association quoted Mancuso as saying.

Chicken jokes aside, the idea offers special appeal now when so many large, established companies are failing.

"We need to help little saplings grow where the oaks have fallen," said John Tepper-Marlin, a former chief economist for the city comptroller who once used an incubator to launch a company.

"Business incubation is only one aspect of a well rounded economic development policy and not necessarily even the most important one, but it is a strategic one," said David Hochman of the Business Incubator Association of New York State.

The city's and state's environmental sustainability goals have also spurred the push for incubators and led to the creation of the City University's new Sustainable Business and Technology Incubator. "The challenge is now to implement the visions, the policies and the plans into American society," said Tria Case, who is leading the incubator team.

This isn't the first time the Bloomberg administration has looked to incubators to generate new jobs. In 2007, the city offered low cost land, subsidies for infrastructure construction and tax abatements to the developer of the East River Science Park so it could keep its rent low for biotech start ups.

Not Just Business

Some have criticized the mayor's current approach to helping the Wall Street set as one that unfairly benefits those who may already have the funds to start their own businesses and who helped create the current financial mess.

"What about the countless small businessmen and women ... who were running second- and third-generation shops," an incredulous Jeremiah Moss asked on his blog. "They weren't paying down million-dollar mortgages on luxury condos, ordering bottle service, and running up tabs at Bergdorf's -- they were supporting their families and paying the rent."

Some incubators already exist to help these more "Main Street' types.

The Industry City Art Project, for example, is an art incubator in an industrial complex that seeks to shield artists from commercial pressures. "We want to offer artists low-cost space so that financial pressures don't influence their production, which is particularly important for artists whose work may not be commercially viable," said Lise Soskolne, who works for Industry City's landlord in Sunset Park. The landlord funds the project.

One of the oldest incubators in the city assists only non-profit businesses. The Incubator/Partner Project Program at the Fund for the City of New York -- entirely funded with private money -- currently houses 25 small non-profits. Program enrollees receive financial, technical, managerial and legal assistance. Some never leave the program and instead become partners with the fund. "We choose projects based on our belief that they will create value for the city," said Jill Schumacher, the program coordinator.

The Food Bank, a non-profit that got its start at the fund, now distributes 200,000 meals a day to hungry New Yorkers. "The Fund for the City of New York was pivotal in helping to raise money, find space, develop a network for food distribution and assume back office operations," Lucy Cabrera, the Food Bank's president, said in a statement.

Many incubators aim to jump start businesses with social aims.

New York Women Social Entrepreneurs' incubator program pushes to get female social entrepreneurs up and running. Founded in January, it will provide a support team of apprentices and mentors to six women with businesses that have a mission to address a social need in the community. One of its partners is Baruch College's Zicklin Business School.

Green Spaces offers help for green businesses in its Downtown Brooklyn incubator. The project offers affordable office space and services, access to interns, and provides networking opportunities and workshops for small start up companies with staffs of one to five people. Existing small companies that would like to become environmentally friendly also can receive benefits and assistance. Green Spaces, which gets some funding from its building's owner, has only been open for about eight months but already houses 15 businesses.

Economic Impact

There is no hard data on the impact of incubators in New York City, but David Lewis, an assistant professor at the University of Albany, has studied the economic impact of incubators and found positive results. His research shows that nationally, 84 percent of "graduates" stay local once they outgrow an incubator's services. He points to another report from 1998 that studied six technology incubators in New Jersey and found each job created cost only $3,000.

The Virtual Incubation Program at the Industrial + Technology Assistance Corp. generated at least $34.3 million in economic impact within the five boroughs between 2002 and 2008, according to its spokesperson.

And a recent federal report also found incubators to be especially effective. "Investments in business incubators generate significantly greater impacts in the communities in which they are made than do other project types," the Economic Development Administration concluded.

Although they praise the positive impacts of incubators, advocates stress that they are only as successful as their management. To get the most bang for its buck, Lewis says business incubators should conduct feasibility studies before starting their programs, establish client entry and exit criteria, collect outcome data and provide networking opportunities between client firms.

Large incubators are best able to offer synergy among their clients, Tepper-Marlin, the former comptroller economist, noted. He also emphasized the importance of being located near universities. "You need the three-way mix of government support, deep knowledge and entrepreneurial skills," he said.

Government support for incubators should be "offered competitively, with incentives for best practices and accountability," said Hochman of the state incubator association. It should also be programmatic, covering all aspects of an incubator's programming, he adds. As a model, Hochman points to the New York State Energy Research and Development Authority's early stage renewable and clean energy technology program, which offers grants to incubators supporting clean energy companies.

Confronting the Condo Glut

Photo adapted from Brownstoner
The Oro Condos in downtown brooklyn

When the Oro Condominiums building in Downtown Brooklyn was still under construction in 2007, the Brooklyn Paper branded it as a "deluxe singles bar in the sky." Now, though, the glitter has apparently faded. On a recent winter night, only a smattering of light emanated from the otherwise eerily dark (though now completed) 40-story luxury tower on 306 Gold Street, not far from the Manhattan Bridge. A hip-looking young woman entering the building, who identified herself as an owner of one of the 300 homes but who preferred to remain anonymous, said the building "feels empty."

A similar picture is emerging across much of the city. In recent years, ordinary New Yorkers saw new condo construction transform their neighborhoods. This is especially true in hotspots like Downtown Brooklyn, Williamsburg and Long Island City, where large rezonings by the Bloomberg administration have spurred the rise of sleek luxury residential towers seemingly overnight.

But as New York City's economy rapidly worsens, people wonder how many of these new condo apartments will languish vacant. Precise numbers are difficult to come by, but government leaders and housing industry experts agree: The condo market is in serious distress.

It is not just the vacant units that are worrisome. In many neighborhoods, half-built projects sit stalled and land cleared for development shows no signs of activity, creating a nuisance for residents who now must live indefinitely with deserted construction sites.

All of this is expected to have a dramatic impact on New York City. But how bad is it, and how might policymakers, housing advocates, developers and financial institutions respond?

The Current Picture

Photo adapted from Brownstoner
The Avalon (left) and the Toren (right), in downtown Brooklyn

It was not long ago that the condo boom seemed unstoppable, with visions of "botoxing Brooklyn" -- as Faith Hope Consolo, chair of the Retail Leasing and Sales Division at Prudential Douglas Elliman Real Estate, put it -- threatening, or promising, depending on your outlook, to transform the borough's character on a grand scale.

Now, banners hanging from unfinished projects with names evocative of a sleek modernism like "Edge" and "Toren," touting a roof deck, fitness center and library, have, amid talk of a second Great Depression, acquired a surreal air.

New condo development tapered off in the summer of 2007 when the credit crunch began, according to Jonathan Miller, president and chief executive officer of Miller Samuel, a residential appraisal and consulting firm. Initially, this was good news for existing projects because it meant less competition. As time went on, though, the crunch affected buyers, which in turn has lowered sales.

"In general activity is down significantly in terms of number of sales, which is primarily from the credit problem and related to the recession," said Miller.

Bill Staniford, chief executive officer of Property Shark, a firm that provides real estate information, echoes Miller. "Right now we have a glut of supply and no demand." Staniford added that it's not just credit problems that are to blame, but also the downturn in the city's local economy, which relies heavily on the financial industry.

"I have a feeling the financial sector is not going to come storming back to NYC – a lot of those jobs are gone for good," he said. This is potentially devastating for a housing market that boomed in tandem with Wall Street profits. "The bonuses were really the drivers," noted Staniford, "because the bonuses were the down payment."

Tens of thousands of individuals who once got those big bonuses are now out of work and are struggling to keep their existing homes, let alone buy new, more expensive ones. Their parents may help pay the mortgage for now, Staniford said, but eventually these people may decide to leave the city. In that event, their homes will go onto the market, further adding to the glut.

"These people are of means, and they may be running through their savings right now and therefore you won't know they are in distress yet," Staniford added. "I've got a lot of friends in the finance industry – you lose your job and when reality sets in you say I've got to go back to North Carolina or Virginia or wherever I came from."

A Bottom In Sight?

Experts say the worst effects of the economic crisis on the condo market are still taking shape. Staniford projects another 15 to 20 percent drop in value before the end of 2009. "I keep looking at it and I don't see how it stops. I don't think we have seen the complete repercussions of this," he said.

The outer boroughs face particular challenges, according to Miller, because new development there was fueled by the high prices in Manhattan. The notion was that developers would be able to successfully market homes in Downtown Brooklyn or Williamsburg to buyers who wanted a luxury residence but who couldn't afford Manhattan prices. Now, declining prices in Manhattan have undercut that. Many buyers simply no longer need to look to Brooklyn or Queens.

For his part, Staniford worries about the ripple effects of an economy in distress. An increase in crime, for instance, would diminish the quality of life in the city – a recipe for "a perfect storm of negativity for the real estate industry."

"If you have a city that takes a 33 percent cut in revenue from the financial sector, if you keep walking down that path, it just keeps getting scarier and scarier. No one really imagined what is happening now," he said.

Reality Check

Not surprisingly, developers resist painting such a gloomy picture.

Don Capoccia, developer of Toren Condos at Flatbush and Myrtle avenues in Downtown Brooklyn, which is on schedule for completion this spring, says the biggest challenge now is to get prospective owners to sign a contract. "Buyers are spending a lot more time deliberating and comparing and contrasting properties," he said.

While he admits that things have slowed down significantly in the past several months, Capoccia said he has closed two contracts since the beginning of the year at his asking price and without making concessions. He also played down the concern that falling prices in Manhattan are an issue. "Toren has been averaging $750 to $775 per square foot, which is still a great deal even if Manhattan's prices do drop," he said.

But Miller of Miller Samuel says that $750 to $775 per square foot, while still below the rate for a comparable place in Manhattan, does not reflect the market corrections that have taken place since September, when there was a 20 percent drop in values after AIG and Lehman Brothers collapsed.

According to Miller, in September, prices in Manhattan fell from roughly $1,500 or $1,600 a square foot to $1,200 or $1,300. "Apply the same proportional drop – at least half of what it was for Manhattan – to developments (in Brooklyn) priced in the mid $700s (per square foot) and you're talking in the $600s," Miller said. "Brooklyn developers who have not adjusted their prices are receiving little contract activity."

Still, Capoccia insists, his apartments will sell. Citing the quality of the finishes in the condos, he said, "Toren looks a lot different than anything that's coming up right now."

Some experts question, however, whether luxury amenities alone will lure enough affluent buyers to keep these developments financially afloat. In the boom days, Miller said, "If you had the pet spa or the on-site sommelier, that meant something to people," but, he said, it's hard to imagine that dialogue today. "It's the age of austerity now. People are looking for shelter as opposed to lifestyle."

Staniford is matter-of-fact: "Say you have to move to New York City – are you really going to be thinking, 'I need that new fangled pool or gym' or whatever? No you're going to be looking for the best deal you can find."

Holes In the Ground

As bad as things may be for developers with finished apartments to sell, the situation can be even more calamitous for those whose projects have yet to get off the ground.

Developer John Catsimatidis, who is also a potential mayoral candidate, owns a vacant parcel of land on Myrtle Avenue in Downtown Brooklyn, which previously featured a modest retail strip, including an Associated Supermarket that served hundreds of public housing residents across the street. These businesses were torn down in 2006 to make way for a project that was originally supposed to include 1.4 million square feet of new development, of which 250,000 square feet was to be commercial space. The remainder of the project was slated for residents, including 200 affordable units and 600 luxury condos in a 38-story tower and a smaller building.

But nothing has been built yet, and now, with the economic crisis, Catsimatidis, a billionaire, has had to scale down his plans considerably. "We were supposed to build a $500 million dollar project with four to five large buildings and one smaller one," he said, "but banks don't have it. So right now, we're just building the smaller one."

But even for this severely scaled-back version, which will contain 100 market-rate residential units, the financing wasn't easy. Securing a construction loan meant putting up additional cash guarantees, something Catsimatidis says other developers are not willing -- or cannot afford -- to do.

"Banks are saying they want developers to take equal risk now," he said. "We have taken on more risk than we would normally take so that we can get this built."

Catsimatidis has been under fire from residents, advocacy groups and the local Councilmember Letitia James for tearing down amenities such as a supermarket, leaving a hole in the ground and abandoning the idea of affordable housing on the site. Catsimatidis claims that he has had difficulty obtaining bonds that would enable him to build the affordable component. He also indicated that he is seeking alternative options for the land that remains undeveloped, saying he is in conversations with institutions such as Pratt and Brooklyn Law School about building dormitory space.

"The financing is the same as any other project," he said. "But if you have the signature of an institution like NYU, that goes as additional collateral on credit and it's easier to finance."

Policy Mistakes?

Img from Rev. Santino
Condo construction in Long Island City

While developers are paying the price for the luxury-building binge, they had help in creating it. Many appraisers over-assessed the value of condo properties due to pressure from brokers and owners, which contributed to overdevelopment, according to Staniford. The city is at least partially responsible in the view of Councilmember James, who represents parts of Downtown Brooklyn where new condo construction has proliferated.

"In fairness to the developers, it was a bull market, and real estate was the hottest thing in town. No one anticipated that the economy would crash and that all these toxic mortgages would explode," she said.

James believes that Mayor Michael Bloomberg should take responsibility for the condo crisis. "His policies have been tilted toward the benefit of developers, and not enough towards working class residents. He was basically giving away the house for the purpose of generating revenue from the sale of these high-end luxury condos, not recognizing that it was disrupting stable communities and causing the displacement of long-term residents," she said.

James cited the mayor's zoning policies, which she said should have been designed to produce more affordable housing and jobs citywide. Under Bloomberg, the city has pushed through a historic number of large rezonings that have increased the value of land and fueled speculation. In many cases, such as Downtown Brooklyn, the original intention behind these zoning measures was to promote office space, but instead neighborhoods received an overabundance of luxury housing because of the boom market. The city did not have any policies in place to prevent such an imbalance.

In downtown Brooklyn at least, this new housing was beyond the reach of many longtime residents. At the same time, James said, the rising costs forced out manufacturers who had provided industrial jobs for residents who lack college educations. Such arguments have been echoed in other parts of the city from Williamsburg to Long Island City to the Lower East Side.

City officials have contended that changing obsolete zoning has been key to unlocking the potential of underutilized land and to stimulating the creation of new housing, jobs, public space and other amenities. Attributing the city's loss of industrial jobs to larger economic changes, they argue that rezoning measures combined with investment in public infrastructure has drawn private investment and resulted in economic growth, including an increase in affordable housing construction.

Lost Revenues

Whatever its role in creating the current problem, the city is feeling its effects. The administration has already started bracing for the revenue consequences of a dramatic slowdown in residential property sales and has proposed budget cuts and increases in taxes to close the resulting deficit.

"We're already seeing property transfer taxes and mortgage reporting taxes plummet," said City Councilmember David Yassky, whose district includes the condo-dense neighborhoods of Downtown Brooklyn and Williamsburg. "The city will definitely lose out."

Revenue from these two types of taxes depends exclusively on property sales. (Renters are not required to pay taxes for leasing space.) In the current climate, developers are being forced to convert units that were once for sale into rentals in order to pay their loans. This translates into revenues that, rather than just being delayed due to a slow sales pace, are permanently lost.

According to the mayor's Financial Plan Summary released in January, real property transfer and mortgage reporting taxes combined declined by 57 percent from December 2007 to December 2008. The Office of Management and Budget projects these revenues will fall by hundreds of millions more dollars in 2010 before stabilizing and moving up in 2011.

While the OMB calculates these revenues as a relatively small percentage of the total budget – only 4.2 percent for fiscal year 2009 – they still represent hundreds of millions of dollars the city won't see. This percentage is expected to shrink to 3.2 percent for 2010, with the gap being filled by increases in property and sales taxes.

From Crisis to Opportunity

With general agreement on the existence of the problem, if not its magnitude, government officials, real estate experts and housing advocates are currently debating solutions.

One small step forward occurred on Feb. 12, when City Council Speaker Christine Quinn, in her annual State of the City address, put forth a proposal that would help convert thousands of vacant condo units to affordable housing.

"Capitalizing on New York's recent development boom," she stated, "the Affordable Housing Recovery Program will work to make unsold condominiums affordable to middle income New Yorkers to buy or rent."

According to Andrew Doba, a council spokesperson, the initiative is the result of efforts by a special housing task force created by the speaker a year ago that brought together developers, affordable housing advocates and other stakeholders.

At this stage, the program is still just an idea with few specifics. Before it can move forward, the City Council and the mayor will have to hammer out possibly controversial policy questions and craft a plan acceptable to both. For instance, while Doba emphasized that the goal is to stabilize communities, it is unclear whether the program would include rental units or only those for purchase. According to Doba, the Bloomberg administration has signaled that they like outlines of the proposal so far, which is designed to use capital funding that has already been budgeted.

If the Affordable Housing Recovery Program is implemented, individual developers would have the option to negotiate with the city to make apartments available to middle-income residents, who would qualify based on income. The amount of the subsidy would be determined on a case-by-case basis and would depend on a number of factors, including the original asking price of the units, the debt structure of the project, and whether or not the development is in foreclosure, to name a few.

No one has yet specified even a range of how much money developers might be awarded, but Doba states that it is not intended to bring them windfall profits. But should the city take resources that could go to other programs and use them to fix this problem that developers at least partly brought on themselves?

Brad Lander of the Pratt Center for Community Development, who also participated in the speaker's task force and is a candidate for City Council, supports the idea, as long as the per-unit cost does not exceed the amount designated for other homes in the city's affordable housing program. This, he said, would safeguard the city from over-subsidizing developers and ensure there is more affordable housing in the long run.

"You're talking about developers who speculated in a boom marketplace, who had unrealistic expectations that included no affordable units and who were taking advantage of the 421-a tax break [for housing development]. I do not think we should bail out failed speculators," he said

Lander acknowledged that a lot of discussion needs to take place before the speaker's program can move forward. "It's an idea more than a fleshed-out program," he said, predicting that the implementation process, which will involve looking at buildings one by one, is bound to get messy. "If you're building a totally new development and are interested in taking advantage of one of the city's programs, it's a lot easier because it works the same for everyone," he said.

But will developers come to the table? Yassky believes they will. "You will see the city working with developers to get buildings filled at affordable rates," He said.

This could turn into something of a waiting game, however, as officials calculate the precise conditions needed to justify intervention. "There are some big issues here," said Yassky, "and I think that Housing Preservation and Development and the mayor will want some sense of where the market has ended up." Housing Preservation and Development is still waiting on its new commissioner, Rafael Cestero, who is scheduled to take over in March.

Not everyone feels the city should intervene. "Whenever the city has become involved in the property ownership business in the past, it has been a failure," said City Councilmember Peter Vallone, whose district includes Astoria, where there has been significant new condo development. "People need to relax. This is very cyclical and the economy will soon recover."

Staniford agrees government involvement will only make a bad situation worse, adding that until the market reaches the bottom, gridlock will persist. "What I'm most concerned about is that the pricing becomes accessible for the market again," he explained. "We are still priced too high, and until prices get down lower transactions won't occur."

Beyond Damage Control?

The speaker's press release announcing the recovery program stated, "New Yorkers who were once nearly priced out of their communities will now have a chance to buy or rent one of the new homes that were built in their own backyards."

To affordable housing advocates focused on the effects of gentrification and displacement, this statement surely reflects a certain backward logic. Still, many support the basic spirit of the program. Ismene Speliotis of New York Acorn's Housing Here and Now initiative participated in the city's housing task force. She views the current crisis not only as an opportunity to increase levels of affordable housing, but also to adjust policies that were skewed in the first place, which will promote more equitable approaches to development over the long-term.

Speliotis says the Affordable Housing Recovery Program is a good idea, but the city should not have subsidized these developments to begin with. "Acorn had done a study when these buildings were being built -- Sweetheart Development -- and was completely outraged because developers were getting an automatic 10-year tax abatement, " she said. Affordable housing advocates have long objected to what they view as an extraordinary level of public subsidy for market-rate housing that would have been built anyway and criticize the city for not extracting greater public benefit in exchange for such subsidies. The rules on the subsidies have been tightened somewhat, but for years they went to anyone who built housing -- regardless of how expensive it might be.

Putting together a program that does not reward developers for having built vacant housing poses difficult challenges, Speliotis acknowledged. "You've got legal, financial, and then kind of just the psychological hurdles, the perception of the market and what is going to happen," she said. "But in our view, if developers convert some of these empty units to affordable housing, people lose less money. They make less profit, but still, one could define that as an opportunity."

Amid all their disagreements, though, experts do seem to agree on the resilience of New York City's real estate market. For Miller, it's just a question of time. "People are anxious to get things back to where they were, but unappreciative of how long it's going to take," he said. "Time is a four-letter word right now."

Staniford concurs, albeit from a slightly different angle. The real question, he said, will be what's going to replace all the financial sector jobs. But he remains certain something will: "There is no doubt in my mind that New York City will come back again. The place is just way too unique. There is great energy here."

Allison Lirish Dean is a journalist, urban planner and filmmaker. She lives in Brooklyn.

Bike Lanes Run into Opposition

Protesters showed up in clown suits. Their opponents threatened to barricade a major thoroughfare with school buses. A respected community board member was fired from her leadership post. The debate has involved lost jobs, injury -- and even sex.

The source of all this controversy and activism? A bike lane.

With concerns about pollution, congestion and energy consumption, encouraging people to cycle instead of drive could be seen as a kind of motherhood and apple pie issue. But as the Department of Transportation greatly expands New York's bicycling lanes, it has encountered opposition from local small manufacturing businesses, the Hasidic community and shop owners, among others.

"We would never have predicted that bike lanes could provoke so much upset," Gowanus Lounge once observed after a community meeting on bike lanes, adding that a member of a local civic group said the issue "led to the most contentious meetings they have experienced, including discussions of Atlantic Yards."

Some of the controversy undoubtedly stems from the frenzied competition for New York's streets with motorists, cyclists, trucks, pedestrians, skaters and baby strollers all jostling up against each other for safe passage. Some critics, though, say the city, in its drive to expand bicycling, has not always consulted sufficiently with the affected communities .

Birth of a Bike Lane

The fight over the bike lane on Kent Avenue in Williamsburg has proved particularly contentious and shows no signs of abating.

Photo from the Department of Transportation

Like many thoroughfares near the waterfront in the outer boroughs, Kent Avenue can feel like a desolate concrete valley. Big trucks gun their engines as they make their way to and from downtown Brooklyn, creating a noisy, dusty and dangerous situation for pedestrians and cyclists.

Mayor Michael Bloomberg's administration has sought to change that, and transform the area, along with other parts of the city's waterfront, into a vibrant ribbon of accessible open space and new high-rises. To achieve this, the administration sought to rezone the neighborhood in 2005. When elected representatives and residents balked at high-rises along the waterfront, the city offered three major incentives: open space with access to the river, affordable housing and retention the manufacturing jobs that have long sustained the neighborhood's working-class population. The rezoning was approved, and two years later, the city added the bike lane to the mix

In April 2008, Department of Transportation officials appeared before Community Board 1 to present the local segment of a greenway that would eventually stretch from Sunset Park in the south all the way to Greenpoint. Their drawings showed both lanes of bike traffic together, separated from cars and trucks by a planted divider. Until funds were available to build that, the transportation department representatives said, Kent Avenue needed a temporary bike lane because the street was dangerous without one.

That temporary design would involve a bike path along Kent, from Clymer Street to Quay Street. It would eliminate about 500 parking spaces, but the officials said parking on side streets and at new developments on the waterfront would replace them. These private buildings, when complete, would provide about 3,500 new parking spaces.

Originally, many residents were excited about safe bike routes along the river. In April, the community board voted 39 to 2 in favor of the long-term plan. But when the bike lanes were finally painted, problems appeared almost instantly. The lanes did not look like the ones in the pictures. They ran along both sides of the street, surprising even cyclists. And the signs that accompanied them did not just forbid parking, but all stopping at any time. Hasidic Jews charged the city first posted the laws banning parking on Kent at 6:30 a.m. on Saturday, when observant Jews are forbidden to drive and that traffic agent ticketed their cars.

Block the Dock

Businesses charged that the new bike paths prevented them from legally using their loading docks. David Hollier owns a high-end furniture shop that employs 10 people, most of whom, like Hollier, bike to work. The business requires Hollier to load and unload heavy pallets of fine wood almost every day. He does not see why he should lose access to his loading dock because of the bike lanes.

About 20 businesses on Kent raise similar concerns, including the glass producer Goldray Industries and Acme Smoked Fish.

The business owners say they were surprised by the new signs forbidding stopping in the bike lanes adjoining their loading docks. "They didn't even put a flyer on the door," Hollier said.

Karen Nieves, business services manager for the Greenpoint Williamsburg Industrial Business Zone, said she is "deeply disappointed in the lack of outreach for this plan." She thinks it could threaten the very survival of some of the manufacturers, all of whom together employ about 300 people.

The Department of Transportation insists it did all the outreach required when it addressed the Community Board on three separate occasions. If any groups didn't know enough about what has been going on the past two years," said Teresa Toro, who headed the Community Board's Transportation Committee until she was ousted late last year, "they should reach out to their representatives on CB1 and ask why they haven't kept you properly informed."

Living on the Lanes

The residents offer a different set of concerns. Most are Hasidic Jews and Latinos who live in "affordable" apartments set aside in new high-rise buildings. Since the area is not well served by public transit, many families rely on cars, and the parking spaces in the basements of their buildings are beyond their means at about $325a month. Now, residents complain, street parking is hard to find, and the ban on stopping in the bike lans means they cannot drop off or pick up family members anywhere near their homes.

The residents, like the business owners, say they did not receive adequate warning about the full effects of the bike path. At a Nov. 24 town hall meeting on transportation issues, Hasidic members of the Community Board said even they had not understood what was coming. Isaac Abraham, a Hasidic activist running for City Council, reminded representatives of the Department of Transportation that he helped organize a blockade of the New York marathon 20 years ago to protest a temporary closure of the Brooklyn Queens Expressway. If the lost parking spaces were not restored, he said, he might consider a similar move, blocking Kent Avenue with school buses.

Reaching a Compromise?

So far, the bike lanes remain. At a community board meeting in January, bike lane supporters showed up in force. City officials have not shown any public sign of wavering, although the Department of Transportation's borough commissioner, Joseph Palmieri, has tweaked the plan a bit. The department now allows bus pickup in front of the Zafir Jewish Learning Center. It temporarily eased up on issuing tickets for blocking the bike lanes and installed a loading dock for one manufacturer, Carriage House Papers. The owner of Carriage House, though, said the loading dock is useless because she has to circle the block to use it.

Meanwhile, discussions continue. A number of local leaders and politicians have written to the transportation department demanding the bike lane on the east side of the street be removed and parking restored. Councilmember David Yassky has put together a committee to consider alternative solutions, including the possibility, endorsed by some neighborhood activists, of making Kent Avenue into a one-way street.

Fueling the Opposition

Kent Avenue isn’t the only place where the city’s transportation planning has run up against the concerns of local business owners and residents. Wiley Norvell, communications director at the cyclist advocacy group Transportation Alternatives, sees people come out to fight nearly every mile of bike lane the city builds.

In Fort Greene, for instance, residents opposed five miles of lanes, marked by striped pavement, along Carlton and Willoughby streets in June 2006, and the community board voted against the plan 16 to 15. But the Department of Transportation went ahead and implemented the plan anyway, and few residents have complained since.

That case was typical, Norvell said, in that the opposition to the bike lanes was not so much about local issues but rather "a referendum on cycling as a form of transportation." About 80 percent of the negative comments about bike lanes, Norvell said, simply criticize bikers as jerks who don't follow the rules.

The lack of a true consultation process with affected commuities, though, makes the bike lanes a harder sell, Lower Manhattan offers another example of how the city's transportation planning can run up against the concerns of local business owners.

Last fall the Department of Transportation began installing a new bike lane on Grand Street between Varick Street and Chrystie Street through Soho, Little Italy and Chinatown. Presenting the bike lane as an important connection from the Manhattan and Williamsburg Bridges for commuters into Lower Manhattan, the department's plan consisted of an northern lane for commercial loading and unloading, a lane for motor traffic, a parking lane, a buffer and a bicycle lane along the southern curb. In July the proposal passed the board with a vote of 33 in favor, 1 against and 1 abstention.

Opposition from some business owners materialized, however, as the bike lane was installed. A few in the business community felt they had not been sufficiently consulted or educated about the changes.

The protected lane with the buffer between car and bicycle is intended to make bicyclists safer and keep the bike lane clear of double-parked cars and other vehicles. It also has narrowed the street, though, and some business owners contend this makes it more difficult for large tour buses to navigate. As a result, they say, fewer tourists have patronized their businesses.

Others dismiss any correlation between the bike lane and decreased businesses, attributing any falloff in customers to the declining economy rather than the bike lane. In a December op-ed article for the Villager, restaurateur and Soho resident Florent Morellet wrote the Grand Street bike lane creates a more orderly and a safer thoroughfare.

Transportation Alternatives’ Norvell agrees. "It is a much more orderly environment," he said. "I think overall the street configuration is in really good shape." Grand Street was remodeled from one and a half lanes of traffic, which led motorists to jockey for position, exacerbating congestion, to a single lane of motor vehicle traffic.

A bike messenger, though, was less enthusiastic about the lane. "It doesn't keep pedestrians out of the street. People see it as another place to walk," he said. On a recent afternoon postal workers and a deliveryman pushed carts through the lane.

Concerns raised earlier this winter over congestion and an overly street maybe easing. "I wouldn't worry about all that gossip," said a part-time worker at Ferrara Cafe. Concerns that the bike lane has made tourist access too difficult were played down. "This is a very well known place, known all over the world."

The current attitude on Grand Street seems to indicate that, in general, business owners, residents, and cyclists agree that bike lanes are a good thing for safety and for the environment. The problems many have is the way the city goes about implementing its policy to expand bike lanes.

"How are you going to make it 'no stopping at any time' and not let them know?" asked Nieves of the Greenpoint Williamsburg Industrial Business Zone. Taking consultation beyond the community boards and doing some more direct outreach might make for a far smoother ride.

Can Private Methods Save Public Housing?

Photo (cc) minusbaby
What's the future of NYCHA?

Tino Hernandez, who recently resigned after seven years as chairman of the New York City Housing Authority, was a low-key figure who competently steered the authority through Bush administration cuts designed to kill public housing. While Hernandez may have been a quiet leader, and left under a cloud of bad press about elevators, his impact on the authority's direction was significant. Under his tenure NYCHA administrators initiated wide-ranging management reform -- adopting some private sector methods and emphasizing non-governmental sources of revenue -- in the hope of saving this massive housing system.

Tenants, employees and many housing advocates have expressed legitimate concerns about outsourcing work to private companies and rent increases, but taken as a whole this "new" direction looks a lot like the original vision of public housing. NYCHA's founders in the 1930s never intended to isolate public housing residents from market forces or private sector management. They envisioned a vast system filled with working people paying a reasonable rent for quality, moderately subsidized housing.

Public housing was also a key element in rebuilding neighborhoods to attract private investment; private contractors built the projects; and private entities often played a role in upkeep. New York's system was largely built under this model, making it dramatically different from troubled public housing in cities like Chicago and St. Louis.

Reinventing Public Housing, New York Style

From the late 1960s to the 1990s, however, politicians forced NYCHA administrators to accept a welfare state model of absurdly low rents, more welfare tenants and skyrocketing labor costs. NYCHA projects became isolated from the mainstream of New York life. New York still did better a better job managing its projects than other cities, but social problems and management challenges multiplied.

Since the mid-1990s, and mostly under Hernandez's guidance since 2001, NYCHA began to embrace the notion that public housing cannot survive in America without some market discipline and private sector participation. The hubbub over elevator outages and budget shortfalls at NYCHA has obscured not only the decent state of NYCHA housing as a whole, but also a more important shift in philosophy. Economic reality matters once again to NYCHA.

New York's new direction does not include the dramatic demolition and private redevelopment that has accompanied outright privatization of housing projects in cities such as Chicago. Nor are NYCHA's projects likely to be sold to tenants or investors. The 178,000 apartments managed by NYCHA will remain as comparatively affordable housing into the future. Declining subsidies, and an ideological preference for private sector approaches, have nevertheless inspired so many distinct reforms that the system as a whole is quite different from what it was just a decade ago.

What does market-based reality in New York's public housing look like? It starts with moving toward realistic rents. Rents became so out of line with operating costs that they threatened to sink the authority in the long term. Even after recent increases, average apartment rents are still only $378 per month.

At long last the top earners in the current tenant population (about 25 percent of tenants) pay more and will pay more in the future. A "working family preference," which favors working families in the admissions process, has so improved the mix in New York's projects that the authority can now turn to these families to make up, in part, for declining subsidies. In 2008, for instance, NYCHA collected $788 million in tenant rent and only $803 million in federal public housing subsidies. This robust collection is possible because, contrary to popular perception, only 12 percent of current NYCHA families subsist on welfare and over 45 percent are working families. (The other 43 percent are seniors and the disabled.)

NYCHA isn't going upscale overnight. By federal law, rents remain capped at 30 percent of income; average family income is still only $22,000; the state government is increasing payments for welfare families; and the federal Department of Housing and Urban Development has approved the use of Section 8 vouchers in some projects.

The working family preference, however, is likely to tilt the balance from the very poor. New York is moving from a model of welfare state public housing, where public housing serves the neediest as a government social program, back to its roots as a system of partly self-supporting affordable housing for the city's working class. This shift certainly raises the question of what is to be done with the very poor, but we know for certain they should not be concentrated in NYCHA projects.

Changes in the Projects

Tenants paying more rent will also demand a level of service equivalent to that found in private housing. Some already are. The $107 million plan to replace and maintain elevators may reflect the rising expectations of residents. Working families also can create a culture of achievement and decorum. Respect for buildings and equipment, more common in private housing where tenants understand the relationship between vandalism and rental costs, will hopefully reduce the burden on NYCHA budgets and staff in the long run.

Another sign of the declining public character of public housing is the closing of many community centers and shifting of community programs (for youth, seniors, the unemployed, etc.) from NYCHA's purview. The federal government never provided much support for this mission, leaving NYCHA to shift funds around to cover its community operations.

Those days are coming to an end. Many community centers and programs will, in 2009, either close or be signed over to city agencies and non-profit organizations; hundreds of positions are being eliminated to save millions annually. The long-term effects of these changes will depend entirely on the degree to which already strapped public and private agencies pick up the slack. NYCHA's retreat from running social programs has been widely criticized but it is in line with the original intent of NYCHA's founders who welcomed nonprofits into public housing and never intended to run social service or community programs from the top down.

Private sector approaches are evident in labor policies generally. Private contractors have always been a key element of NYCHA's management style, but the scale is changing. The number of direct, public housing employees has shrunk dramatically over the last few years. Today 12,400 staff members maintain a system of housing for over 400,000 people, down from a high of 15,000 employees. NYCHA administrators have largely preserved field staff on the grounds (janitors, elevator repairmen, etc.), but management offices at many adjoining developments have been merged and private sector contracting is on the rise. Private contracting now includes much construction and renovation work, technology upgrades, and even legal services. Many of the small, scatter site developments are entirely managed by private contractors.

Private employees are more economical in the long run than unionized employees who receive high wages and generous benefits regardless of financial conditions. Unionized staff is good for the city's financial health, but only made sense in the context of strong subsidies. No one knows, however, if fewer people and further innovation will yield better maintenance in the long term. New York sorely needs a non-partisan Straphangers style evaluation system that can make sure NYCHA lives up to its stated standards. (is a sample of what this might look like).

A promising aspect of the private sector management model is the introduction of a centralized call center for tenant complaints staffed by NYCHA employees. This service has proved extraordinarily popular with tenants and gives reason to hope that more can be done with less.

Wide Open Spaces

The disposition of NYCHA's vast land rights is the least advanced but potentially most dramatic change initiated during Hernandez's tenure. This process also harks back to NYCHA's founding years when public housing was a key force for leveraging private investment in tenement slums. Many of NYCHA's traditional public housing complexes are mostly open space, and this land has been underutilized, for decades. The buildings of Riis Houses on the Lower East Side, for instance, cover only 20 percent of the land. Middle-income and affordable housing, built through a partnership of different housing agencies, already is under construction on the grounds of some developments. Pressure is also being felt to sell air rights, valued in the millions, to brighten NYCHA's balance sheets.

The upside of this process, should it gain traction, will be more revenue for renovation and daily operations as well as greater social and architectural variety. New construction, if creatively considered, offers the opportunity to knit NYCHA towers back into the city as a whole.

What could public housing look like in the long term if these methods are successful? Housing projects still will be affordable compared to their neighbors, but not as cheap as they are today. More working and lower middle-class families, and new developments on NYCHA land, will help break up remaining concentrations of poverty. Standards of maintenance and upkeep will be higher in spite of fewer employees. Non-profits and city agencies will run great community centers. Far less subsidy will be demanded, and NYCHA will balance its budget. Such a system would, in fact, be the realization of the founders' original intent.

Less rosy scenarios are quite possible, and questions of equity remain for both tenants and workers, but applying private-sector approaches in New York could actually preserve public housing. If it does, this will, in no small measure, be part of Tino Hernandez's legacy.

Nicholas Dagen Bloom is an associate professor at New York Institute of Technology and author of "Public Housing That Worked: New York in the Twentieth Century."

Working for a Greener Harlem

Photo courtesy of WE ACT
Photo (c) WE ACT
Since the late '80s, environmental activist group WE ACT has been working to improve environmental health in northern Manhattan. Here, they partner with Community Board 9 to organize the Harlem-on-the-River Project.

At 7 a.m. on Martin Luther King Day, 1988, the founders of the soon to be formed West Harlem Environmental Action (WEACT) donned gas masks and placards, and held up traffic on the West Side Highway in front of the North River Sewage Treatment Plant. For the two years since it opened, the sewage plant had plagued the Harlem community with foul odors and noxious emissions that residents blamed for their respiratory problems.

Twenty years later, WEACT has 17 staff members dedicated to mitigating the disproportionate environmental burdens that Harlem residents bear and, more recently, to fighting for climate justice. Since PlaNYC2030's launch in 2007, WEACT has lobbied to make sure the proposal's benefits extend all the way uptown. Now it sees the effort as paying off in a variety of ways that could improve public health and the environment in Upper Manhattan.

A History of Activism

WEACT's fight against the sewage treatment plant did not end with a demonstration. Four years later, the organization sued the Department of Environmental Protection for operating that plant as a public and private nuisance. After six years of litigation, the city settled the North River Sewage Treatment Plant suit and established a $1.1 million fund to address community concerns. The fund enabled WEACT to hire three full-time staff members and allowed the group to ensure that the city completed its $55 million renovation of the plant.

WEACT filed a complaint against the Metropolitan Transportation Authority for locating a disproportionate number of its bus depots and other facilities in northern Manhattan. The area still houses six out of the city's seven diesel bus depots. In 2004, the Federal Transportation Authority validated the MTA complaint. Also that year, WEACT successfully blocked the reopening of the 135th Street marine waste transfer station on the grounds that the station would bring even more pollution into an area that already had more than its fair share. All the while, WEACT staff continued to educate Harlem residents about the environmental issues that threaten their health and well being.

Photo by WE ACT

A decade ago, the organization began lobbying the MTA and the state to use cleaner fuels and added global warming to its agenda by joining national and local climate justice initiatives such as the Environmental Justice Climate Change Initiative, and the Campaign for New York's Future. "The most vulnerable communities even in the richest nations will be those who are first and worst impacted," explained WEACT deputy director Cecil Corbin Mark. "So we have begun in the last three years to work on increasing our community's awareness of the health impacts of climate change and to have them understand some of the policy issues that are involved."

As the effects of climate change become increasingly apparent, WEACT has geared its local efforts toward adaptation. For instance, Corbin Mark said that WEACT is addressing questions such as, "How does our community adapt to this? If we know that climate change is coming, how do we as communities become prepared to deal with that reality? Part of it is reducing our carbon footprint, reducing our impact on this moving train of global warming."

That, of course, is also one of the key goals of PlaNYC2030.

Sustainability in Harlem

In 2006 Mayor Michael Bloomberg invited WEACT founder, Peggy Shepherd to participate on his Sustainability Advisory Board and help draft PlaNYC2030. Shepherd and her organization saw a golden opportunity to ensure that the plan addressed justice issues.

One example is the city's Million Trees Program. According to Corbin Mark, WEACT has "been very focused on ... trying to make sure we get as many of those million trees as possible planted in northern Manhattan. ... The more trees we can get planted – and hopefully they grow quick and fast and big and tall -- the more we are able to offset the heat effect that we have going."

Another of PlaNYC's strategies to offset the "urban heat island effect" is to encourage green roofs, roofs that are at least partially covered with vegetation to absorb storm water, reflect sunlight and insulate the building. To launch that effort, WEACT is raising funds from private donors for its "From Tar Beach to Green Roofs" initiative to create green roofs all along 125th Street. It plans to start with some of the public buildings, including two schools where students will be involved in the design process.

WEACT also intends to capitalize on PlaNYC2030's attention to greening buildings through retrofitting. Here again, the plan offers the group an opportunity to further long-standing goals of educating Harlemites about indoor toxins such as lead paint, mold and rat poison.

"I think that is a real frontier for us as we think about healthier homes and a better housing stock for our community," said Corbin Mark, "One of the things we constantly deal with in northern Manhattan is landlords using dirty grades of oil" in their boilers. Accordingly, WEACT is working to fund programs that will help landlords not only to retrofit their boilers to require less oil, but also to use cleaner, more renewable energy sources.

Finally, according to PlaNYC2030, no New Yorker should live more than a "10 minute walk from a park." WEACT would like to see those new green spaces in Harlem serve multiple purposes. The organization wants to green local school yards with vegetable gardens. The gardens would be accessible to community members, and would involve students in growing their own food, while teaching them about healthy food choices.

Thus, this initiative addresses green space as well as childhood obesity rates and diabetes. In 2007, the East and Central Harlem District Public Health Office reported that more than one in four children in the area's Head Start programs and public elementary schools are obese, and the New York City Department of Health and Mental Hygiene estimates that adolescents account for 45 percent of Harlem's diabetes cases.

Meeting Community Needs

If PlaNYC2030 is to improve the ecological and social environment in Harlem, the community will have to work with city officials. This can take effort on both sides.

As an example, Corbin Mark cites the city's climate change training session in East Harlem last spring. "The mayor's staff reached out to us and worked with us to develop something," Corbin Mark said. But Corbin Mark advised city officials that their one-size-fits-all approach would not work. Rather, the training had to be culturally and geographically sensitive.

"We literally had them redo what they thought was their very glorious standard training piece," Corbin Mark recalled. "I said ‘no, maps need to be focused on East Harlem; pictures need to be focused on East Harlem; concepts need to be focused on what does this mean to East Harlem.'" To Corbin Mark's pleasure, the city was receptive. "In the process I think they began to really understand what it means to think about these concepts from a local perch, a local perspective," he said.

But Corbin Mark also recognizes that he and his colleagues will have to maintain their vigilance. "You've got this blueprint out here [in PlaNYC 2030] and either some of these initiatives die on the vine, or they get implemented from a very top down kind of approach," he said. "We don't want put in all this thinking and labor and effort to make this blueprint, and then have the plan not come to our communities."


Melissa Checker is assistant professor of urban studies at Queens College, City University of New York. She is the author of Polluted Promises: Environmental Racism and the Search for Justice in a Southern Town,



Print Friendly and PDF

Editor's Choice

Gotham Gazette: ‘I Actually Have to Negotiate a Budget’: Corey Johnson and the Challenge of Running for Mayor as City Council Speaker
‘I Actually Have to Negotiate a Budget’: Corey Johnson and the Challenge of Running for Mayor as City Council Speaker
Gotham Gazette: Black Business Owners Hang On Through Covid Crisis as Black Lives Matter Movement Surges Black Business Owners Hang On Through Covid Crisis as Black Lives Matter Movement Surges Gotham Gazette: How 2021 Mayoral Candidates Have Responded to the Coronavirus Fallout and Cries for Police Reform How 2021 Mayoral Candidates Have Responded to the Coronavirus Fallout and Cries for Police Reform Gotham Gazette: The Max & Murphy Podcast The Max & Murphy Podcast