ON JUNE 16, 2006, 305 West 150th Street, a rundown 84-unit apartment building in the Harlem neighborhood of Manhattan, sold for $6.95 million. The City of New York has documented 274 housing maintenance code violations on this property, reflecting the presence of leaks, broken front door locks and exposed lead paint. The tenants are mostly poor and working class Latinos from Puerto Rico and the Dominican Republic; many depend on subsidies, such as Section 8, to pay rent.
Only 11 years earlier this same building sold for $700,000. The new $4 million mortgage — which includes a provision explicitly allowing for condominium conversion — would have seemed like a joke in 1995. The landlords formerly associated with the building —the Gutfreunds, Manny Stein and Jacob Finklestein — are career landlords known for poorly maintained buildings in Manhattan and the Bronx. The new owners are Rodney Propp and his partner Joseph Tahl, a former real estate lawyer who attributes his passion for his trade to a meeting with Donald Trump. (1)
This article discusses how the most recent surge in real estate prices has affected the multifamily housing market in New York City, and in particular, what has happened to landlords and tenants as building prices have increased. Although tenants in New York have fought for affordability and good conditions for over a century, it is only recently that slick developers like these have played a key role in controlling housing in poor neighborhoods. Is this an effect of the much-discussed “housing bubble?”
In the mainstream media, discussion of the bubble focuses on suburban homeowners: Does the increase in home prices signal a permanent age of easy cash as suburban home owners refinance their mortgages to go on vacation and pay off credit card debt? Is it true, as Chairman of the Federal Reserve Bernanke said, that the rapid increase in home prices does not constitute a bubble because it’s supported by high incomes and a growing population? (2)
But urban renters have at least as much at stake — their ability to pay rent and secure repairs from their landlord depends on the sale price and financing of the building they live in. But how exactly is the fate of tenants in buildings like 305 West 150th Street connected to broader real estate trends, and what sorts of struggles are needed to move us towards a truer vision of housing justice?
New York City’s housing stock is unique in several important ways. First, despite a trend towards rent deregulation and gentrification, a majority of New York City residents continue to live in privately owned, rent-regulated apartment buildings. Second, New York has an extremely low vacancy rate (which never rises above 5%), a densely packed population constricted by natural geography (Manhattan is an island), and a relatively strong system of rent regulation. Equally important, th city has a history of tenant activism that has, over the course of the past century, forced some level of accountability from landlords, mortgage lenders and city officials.
New York City is similar to other U.S. cities in that poor and working-class residents have been pushed to the outer neighborhoods and suburbs as wealthier white residents settle in downtown areas. The effects of the dot com boom on the Bay Area are a dramatic example from the west coast. In New York, displaced residents are moving to the Bronx, the outer reaches of Queens and Brooklyn, and Yonkers. (3)
Like Chicago, Los Angeles and other cities, New York attracts large numbers of new immigrants, especially Latinos; its public education system is, at least in practice, racially segregated. So while the city has some characteristics that set it apart, it still carries important lessons for other urban areas.
In the recent past, New York’s residents have confronted problems similar to those of tenants of buildings like 305 West 150th Street. What I describe below are some important examples of tenant activism from the past three decades rather than a comprehensive account.
In the 1970s, tenants in poor neighborhoods of color, especially in the Bronx, faced the policy of redlining — the red line bankers and insurers drew on maps to indicate neighborhoods with high perceived levels of risk where they would not do business. Redlining, combined with closing of fire stations, police stations and other public institutions, created an environment in which it was more profitable for a landlord to aggressively collect rent and withhold repairs for the short term than to establish a stable tenant population and invest in basic maintenance for the longer term.
After “milking the building,” as this practice was called, some landlords burned their properties to collect the insurance money. Tenants were forced to squat illegally in decrepit buildings, pay rent for poorly maintained apartments, move, or become homeless.
Community groups in the Bronx and other affected areas fought back locally and nationally — simultaneously targeting individual banks, local government and landlords and working with organizations throughout the country to pass the Community Reinvestment Act, a law which requires that banks reinvest in the communities they serve, ending banks’ ability to redline as policy.
In the 1980s, these same communities faced a different problem, one which more closely resembles the one that tenants confront today. As real estate prices climbed in traditionally “undesirable” neighborhoods, rents increased, but conditions rarely improved.
Landlords eager to increase income secured Major Capital Improvement (MCI) rent increases. These are permanent rent increases granted by New York State for some types of building improvements. The amount of the increase is based on the cost of the improvement. In order for a repair to qualify as an MCI, it must benefit all tenants and involve a new installation as opposed to a simple repair. For example, new windows installed throughout the building might qualify, but replacing glass panes on old windows does not.
In the 1980s, as today, tenants often complained that landlords were granted increases even though they did not meet MCI requirements, that landlords exaggerated costs of the improvements while refusing to ensure other basic building services, or that landlords did not complete the improvement according to a timeline. Even today, many community organizations convincingly maintain that the state rubber stamps MCI rent increase applications without evaluating their true legitimacy.
Finally, because MCI rent increases are permanent additions to each tenant’s rent, they threaten tenants without rent subsidies or with subsidies that do not cover increases. The increase also pushes rents towards the $2,000 threshold at which the state removes the building from rent stabilization, allowing the landlord to raise the rent at his own discretion.
The organization where I worked, the Northwest Bronx Community and Clergy Coalition, identified the Federal Home Loan Mortgage Corporation (Freddie Mac) as a major part of the problem. Freddie Mac lent large amounts of money to landlords who inflated their rent rolls based on anticipated rent increases and continuation of the real estate market boom. Many of these landlords counted on future MCI rent increases when they secured Freddie Mac loans.
If the landlord did not secure the rent increase as planned, he dipped into another pot of money to service his mortgage debt. Building maintenance funds — as opposed to his own profit — were usually the first to be rerouted towards the mortgage debt.
By targeting Freddie Mac’s top officials and stockholders with street actions and conducting detailed research on the effected buildings, this campaign accomplished changes in Freddie Mac’s lending policies and physical improvements in buildings, especially those with active tenants associations. (4)
Today, tenants confront a similar situation in which well known banks such as Washington Mutual lend hundreds of millions to high end developers to purchase dilapidated rent stabilized apartment buildings. These new landlords, many of whom approach property ownership as a short-term investment rather than a career, have become more common as the current housing bubble has inflated.
The University Neighborhood Housing Program, a Bronx-based non-profit that works to create well maintained affordable housing, has conducted research on the local housing market. UNHP found that from 1996 to 2001 there was a 123.6% increase in real sale price per unit of multifamily buildings in the Bronx. By contrast there was only a 64.4% increase between 1985 and 1999. (5)
My own experience as a tenant organizer in New York City over the past five years is that dilapidated buildings usually carry large bank loans that push landlords to cut maintenance expenses to pay their mortgage debt. There are different ways to evaluate the character of a building’s debt. One is to divide the sale price by the rent roll; another is to calculate the sale price per unit in a particular area over time, and compare that to changes in landlords’ net operating income in the same area.
According to the UNHP study, housing in the Bronx is becoming more speculative by most of these measures. In other words, building sale prices — and by extension the loans that the landlords receive — are increasing faster than rent rolls. These speculative mortgage lending practices are compounded by the following government failures:
Confronting these problems effectively requires a broad program with specific long- and short-term demands, a willingness to engage in multiple and creative strategies, a commitment to connect with other issue campaigns, and initiative from those most effected by these problems, not only from paid organizing staff.
Unfortunately, the severity of the housing crisis and the prevailing political climate has often resulted in reactive, short-term organizing as opposed to broader movement building. With this in mind, tenants and their allies can and should claim significant recent victories — such as increased quantities of sympathetic coverage in mainstream media and competition among local politicians for the title of “pro-tenant” — while planning for the future with a critical and evaluative eye.
The above-cited 305 W. 150th Street is one example of a building where lack of government enforcement combined with speculative lending for poor housing conditions and the threat of displacement. 552 Academy Street, located in the Inwood neighborhood of Manhattan, is another. It was sold for $5.565 million in April 2005 and suffers from structural deficiencies so severe that tenants were temporarily evacuated when a floor collapsed in June 2006.
A large majority of the tenants of 552 Academy Street are first- or second-generation immigrants from the Dominican Republic. Many have lived in same apartment for over 20 years, know their neighbors well, and are deeply attached to their building and their block. When the current landlord tried to relocate tenants to newly renovated apartments about 40 blocks away, tenants insisted they would rather endure the inconvenience of major rehab work and service interruptions rather than leave their apartments.
In summer 2005, the 552 Academy Street tenants organized with ACORN and Housing Here and Now, the housing coalition where I currently work. This effort involved a press conference in the building, followed two weeks later by an interfaith vigil in which faith-based and secular leaders committed support to the tenants’ fight and reflected on the meaning of housing justice. The summer of action culminated in a protest in the lobby of the luxury residence of the then-landlord Gadi Zamir in Battery Park City.
These actions drew support from several other organizations involved with Housing Here and Now, demonstrating the city-wide nature of the problem. To avoid negative press attention, Citibank — the mortgage lender — entered into negotiations over a repair plan for 552 Academy Street and their multifamily lending policy in general. Gadi Zamir eventually sold the building.
Since summer 2005, significant repair work has been completed by a new landlord, including the installation of a new stoop and structural stabilization of the building. However, the challenge of maintaining affordability while securing high quality maintenance remains. Many tenants are frustrated at the slow progress of repairs, and will likely soon be confronted with the Major Capital Improvement rent increases.
The successes of 552 Academy Street depended partly on the force of the citywide coalition behind it. Paid staff were able to spend time researching the history of the building, its ownership and financing, and recruiting other organizations to join in street actions. Professional media consultants worked on securing sympathetic press attention. However, grassroots-initiated actions, such as the persistent coordinated resistance to the landlord’s efforts to relocate tenants, were key to victories.
Tenant unity — whether or not with the involvement of groups like Housing Here and Now and ACORN — will be crucial to the outcome of this story.
Another current organizing effort is being waged by tenants of the Pinnacle Group LLC. This realty group that has gained notoriety for purchasing over 400 buildings in the past several years — some of which were acquired from abusive landlords (including Baruch Singer) and in poor condition — and aggressively displacing rent-stabilized tenants. The company has filed eviction proceedings against approximately one of every four of its tenants.
Pinnacle has managed to leverage top dollar for these buildings. A package of 11 west Harlem properties, for example, secured them a $35 million mortgage from Wells Fargo. In response, Harlem Pinnacle residents formed Buyers and Renters United to Save Harlem (BRUSH). This organization is unique because it lacks paid staff and is completely tenant-driven.
BRUSH has worked in concert with several other local community groups to hold tenants’ rights forums, reach out to Pinnacle tenants and enlist the services of pro-tenant lawyers. As a result of these organizing efforts, New State Attorney General Elliot Spitzer has subpoenaed Pinnacle’s records, the issue has received ongoing coverage in the Daily News and was the subject of a major New York Times article. Several local politicians have publicly denounced Pinnacle’s tactics.
New York’s tenants face enormous obstacles. With the threat of unaffordable rents looming larger and larger on the horizon, it takes guts to complain about a leaky ceiling or a cracked window.
The 552 Academy Street tenants were able to force the sale of their building to a new landlord and win major commitments for repairs; one year later, however, maintenance issues are painfully present and the tenants will likely face a serious fight to maintain affordable rents. The Pinnacle tenants managed to organize independently and without the help of paid staff, yet they have not evolved into a movement that addresses abuses other than those committed by their own landlord.
Tenants today are faced with the job of building a movement that is both capable of winning short-term demands and providing a broad program that inspires in uninspiring moments. For this to occur, there must be real movement at the grassroots — not only from paid organizers. The above examples of tenant organizing offer glimmers of hope but also illuminate the very long way left to go.
ATC 125, November–December 2006