By Alex Distefano
By Scott Snowden
By Anna Merlan
By Steve Almond
By Jena Ardell
By Jon Campbell
By Alan Scherstuhl
By Tessa Stuart
Even at high noon, even way up on the 21st floor, the light treads gently into Shirley Joseph's apartment at Phipps Plaza West, filtering through the drooping blue and white curtains and giving the room a quiet, retiring air. She sits in a chair by the window. Her friend Yvonne Perkins rests her hands in her lap on a couch nearby.
It is not honorable to say a woman is on in years, they say. The women are, let's say, longtime tenants of this 894-unit Mitchell-Lama complex. They have retired. The news that Phipps Houses, the century-old organization founded by philanthropist Henry Phipps to create affordable housing, is leaving the affordable Mitchell-Lama program in order to charge market-rate rents has them frightened, and angry.
For years Mitchell-Lama has kept their rents manageable. Under the program, landlords held down rents in exchange for tax breaks and low-interest mortgages. Without it, at this enviable location on Second Avenue in the 20s, rents could triple. With Mitchell-Lama and a good job at a bank, Shirley has been able to help put her granddaughter Noelle through the University of Maryland, to take trips, to eat out once in a while. She now makes around $1400 a month in Social Security and pension, and pays $600 in rent.
"I was never wealthy," says Shirley, who moved into this very apartment in 1976. "I was in the middle. The rich can buy apartments. The poor can go to the projects. Mitchell-Lama created housing for people in the middle."
Brutally and steadily hacking away at the city's stock of affordable housing, many landlords have taken advantage of a clause in the Mitchell-Lama law that allows them to prepay their mortgages after 20 years in order to escape the program and the 6 percent limit on profit it places upon them. One would think the nonprofit Phipps Houses would resist such a greedy maneuver, and one would be right. Phipps resisted for nearly six years.
The culprits are 65 limited partners who, back in 1974, gave Phipps $4.6 million to help build the project, mainly completed with a $39.3 million government-backed low-interest loan on free city land. For their contributions, the partners won years of significant tax breaks, and yearly dividends of between $35,000 and $62,000 to split among themselves.
Fed up with Phipps's stalling, some partners sued in 1999 to force the conversion. Phipps settled in November, agreeing to leave Mitchell-Lama and filing to do so. Under the agreement, eligible residents can apply for Section 8 vouchers to subsidize their new, higher rents. Phipps president Adam Weinstein touts this as its saving grace. But many won't qualify for the vouchers.
Weinstein will not divulge the identities of the limited partners. Discovering their names is a simple matter at State Supreme Court. Many are the super-rich bankers and lawyers you'd expect. But they're a motley crew. There is an ex-president of the elite Phillips Exeter Academy's board of trustees, a lawyer who is restoring an old saloon hotel in New Mexico, a venture capitalist who led the search for a new president at Yeshiva University, a rottweiler breeder, a city planning commissioner, and the chairman of the board of the New York Red Cross.
Most notable are the numerous descendants of the wealthy industrialist Charles Stewart Mott, who collectively own 22 percent. A vice president at General Motors in the first half of the last century, and founder of the United States Sugar Corporation, Mott died in 1973 at 97. A massive and renowned philanthropic foundation bears his name. The Charles Stewart Mott Foundation was started in 1926 to support programs dealing with urban problems. Mott's heirs, listed individually as partners at Phipps, are major donors to the social good in Alabama and Michigan. Driving these middle-income tenants to market rate is not the family's most generous endeavor.
The seeming ringleader, though, is Disque Deane, the indefatigable and globetrotting venture capitalist who runs the 6000-unit Starrett City complex in Brooklyn, yet also finds time to head up a 75,000-acre industrial agricultural concern and the building of a 10,000-plus-barrel-a-day fuel plant in Bolivia.
In court documents, five objecting partners, led by Patrick Gerschel, identified the likely source of Deane's enthusiasm for converting Phipps to market rate. He and his affiliates will net $475,000 in fees through the privatization process and beyond, make an additional $85,000 in administrative fees annually, and be reimbursed by the other partners for $2 million in fees for winning the settlement. That's not including the cash coming from the conversion. Gerschel's lawyers called the settlement "a self-serving transaction" that provides Deane, as representative for the limited partners, with "exorbitant financial benefits and control."
But these micropolitics leave Shirley and Yvonne still sitting there worrying. "If you pay a lot of rent, you have no money for anything else," Shirley says, frustrated. "Why can't I live on Second Avenue and not make a lot of money? It shouldn't have to be that way in New York City."
The Mott Foundation offers a grant focusing on community organizing. Perhaps the Phipps tenants could get a Mott grant to keep the Mott family from kicking them out of their homes.