The big story in New York real estate in recent weeks has been the potential sale, for a purported asking price of $5 billion, of Stuyvesant Town and Peter Cooper Village, two huge “middle class” housing developments on Manhattan’s East Side, by the Metropolitan Life Insurance Company, their developer and long time owner. Metlife had previously sold its other large New York City housing projects, such as Parkchester in the Bronx. Immediately, politicos have rallied to the side of the potentially embattled tenants of these developments, most of whom benefit from rent stabilization. The local council member has proposed a tenant buyout, which he says will be possible with union pension fund money, “socially conscious” investors, and city subsidies. If the existing tenants want to make a bid for the place, more power to them, although I advise that we are in a real estate bubble and any buyer will likely pay too much – one reason Metlife is selling. But if they want to put city pension fund money at risk, given that the city would be required to raise taxes and cut services to make up any losses, and to receive tax breaks, I say forget it. Since Stuytown and Peter Cooper village are large enough to be their own census tracts, we can use 2000 census data to find out some characteristics of those who live there. And like Waterside Plaza, another development that was granted a city tax subsidy in exchange for a continued great rent deal for the tenants, residents of these developments are MUCH better off than most of the rest of us.
As a matter of fair disclosure, I am generally opposed to “affordable housing” schemes. The number of units involved is necessarily small compared with the number of people in need of less expensive housing, and the beneficiaries thus constitute a privileged few. Meanwhile, money is directed away from overall tax burden, which is high, and public services, which are often inadequate, to the detriment of the majority, who are generally worse off. For example, new luxury development has been exempted from taxes in most of the city. Now some affordable housing advocates want builders to provide “affordable housing units” in exchange for a continuation of the tax break. In my view, however, it would be better to just collect the taxes and provide better schools for everyone, or lower property taxes for everyone, than to provide a less expensive dwelling for the fortunate few. Rents on all rent stabilized units, meanwhile, are higher because of the 18 percent property tax increase of 2002. What about all those tenants? But special deals are very popular in New York, and few dare to ask “what about the others?”
Moreover, political insiders often benefit from the limited number of affordable units. Back in the 1960s and 1970s, it is generally believed, Mitchell Lama units generally went to members of certain unions and political clubs as a big fat reward. More recently, Mayor Bloomberg implied that members of DC37 would be first in line for affordable units while seeking that union’s support.
It is easy to see why even rent controlled tenants of these developments are worried about a new owner. Last May, Metlife won a major court battle and gained permission to provide tenants with electronic key-cards emblazoned with tenants’
photographs – instead of old-fashioned metal keys. As noted by the New York Sun “electronic keys allow landlords to try to ferret out tenants who are illegally taking advantage of below-market rents – while actually subletting their government-regulated
apartments and living somewhere else. State law requires rent-regulated tenants to use their apartments as a ‘primary residence.’”
With a larger business reputation to be concerned about, Metlife might be hesitant to crack down on tenants for whom Stuytown and Peter Cooper are a pied-a-terre or income source. But a buyer with such an intention would factor that into their bid, allowing Metlife to reap the reward without doing the deed. A buyer with a plan to make a major investment in the buildings to bring them to “luxury” status, getting approval for rent increases under the “major capital improvement” rules, could thus push rents at many apartments over $2,000 per month in rent. At that level, the new owner could demand to see a tenant’s tax forms, and if their income was over $200,000, the unit would be de-regulated. The high bidder may thus be the entity with the harshest intention. Of course, the exiting tenants could bid more based on a plan to allow everyone to continue renting at low stabilized rents, while illegally subletting at high market rents. The rent regulation system doesn’t encourage ethical behavior by either landlords or tenants.
With these issues in mind, let’s consider the characteristics of residents of New York County census tract 44.01 (Stuytown), 60 (Peter Cooper) and 44.02 (Waterside Plaza), relative to New York City and Manhattan as a whole (see attachment).
The locals are certainly smart enough to look after their own self-interest. Among those age 25 or more, 27.4% of NYC residents had a college degree, compared with 49.4% in Manhattan, 64.7% in Stuytown, and 70.3% in Peter Cooper. While 11.6% of NYC residents had graduate and professional degrees, that share was 23.4% in Manhattan, 31.4% in Stuytown, and 35.7% in Peter Cooper. Of course those in Waterside Plaza are smarter, with 74.3% with college degrees and 46.1% with graduate and professional degrees – and they already have their subsidy. Those without degrees are trying to get them: 7.0% of those age 18 or over in Stuytown are in college or graduate school, along with 5.8% of those in Peter Cooper.
Poverty is low in Metlifeville, as one would expect from “middle income” developments. While 21.4% of New Yorkers and 20% of Manhattan residents were poor based on their 1999 incomes, the census found only 3.4% of those in Stuytown and Peter Cooper were poor. And since poverty is based on one’s own income, those may have been “poor” students living on money from Mom and Dad. But incomes are also high here. The median household income was $38,293 in New York City in 1999, compared with $47,030 in Manhattan, $66,154 in Stuytown, $76,573 in Peter Cooper, and $63,519 in Waterside Plaza. Ah yes, but that’s a median, which doesn’t capture the lack of super high earners in the two developments? Well, the per capita income was $22,402 in NYC, compared with $42,922 in Manhattan, $46,458 in Stuytown, $64,985 in Peter Cooper, and $41,534 in Waterside Plaza. And what share had household incomes above the magic $200,000? Just 3.4% of NYC residents, compared with 9.4% of Manhattan residents 4.2% of Stuytown residents – and 12.9% of Peter Cooper residents.
And no wonder, given the jobs they have. In NYC as a whole, 36.8% of employed workers have management, professional and related occupations compared with 55.8% in Manhattan, 67.4% in Stuytown, 67.8% in Peter Cooper, and 70.6% in Waterside Plaza. The campaign for public funds will likely feature cops, firefighters, and construction workers, but most of the remaining workers are in sales and other office occupations. And residents of these developments are more likely than the NYC average to be employed, except at Peter Cooper where they are more likely to be retired. Which is fine for the retirees, because the mean retirement income in that development is $30,714, compared with $22,557 in Manhattan and $17,652 in NYC. Mean social security income is higher in Peter Cooper than elsewhere too. This may be related to the fact that 19.6% of those in Peter Cooper and 15.4% of those in Stuytown are government workers, compared with 10.1% of those in Manhattan and 16.1% in all of NYC.
These developments are clearly a good deal. Whereas the average Manhattan rental unit has 3.1 rooms, Stuytown and Peter Cooper have an average of 3.6 rooms. While 33.7% of NYC renters and 30.4% of Manhattan residents paid 35% of their incomes or more for rent, just 19.3% of Stuytown renters and 17.5% of Peter Cooper renterz did. More affluent Peter Cooper actually has lower rents, with a median $932 per month, compared with $1,024 in Stuytown and $796 in Manhattan as a whole. That is because rent regulations favor long time residents, and Peter Cooper has more of those: 43% of the population was over age 65 n 2000. But that makes Peter Cooper the greater prize for a buyer, because that is where tenants will be dying off sooner, freeing up units for higher-paying tenants, and are more likely to have Florida as their actual primary residence. It was at Peter Cooper, not Stuytown, that Metlife installed the electronic keys with pictures, prompting the lawsuit. That is also where the city council member lives.
I could go on and on with this, but I’ll spare you. Download the spreadsheet if you are interested. But I’ll say it again – the city should concentrate on providing lower taxes and better services for everyone, and special assistance to the worst off, not special assistance for the better off. Do I feel the same way about the unfair deals they throw at me as a homeowner, such as Bloomberg and Bruno’s checks? Yup. The tenants at these developments are already benefiting from rent regulation, which is a greater benefit that most of those who are far worse off than they are receive. That is enough.