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Zero at Ground Zero

In late July, Mayor Bloomberg, Governor Pataki, and HUD Secretary Mel Martinez held a press conference at Thomas Paine Park, near Ground Zero, to announce a $50 million federally funded program to build 300 units of downtown affordable housing for working families. As welcome as the new construction is, the announcement struck many of lower Manhattan's current moderate-income residents as a prickly paradox.

A day later, a couple hundred tenants, mostly from Independence Plaza North (IPN), the 1,329-unit, city-supervised-and-subsidized, three-tower project on Ground Zero's border, rallied on the steps of City Hall to support a bill just introduced by Council Speaker Gifford Miller. IPN's 3,500 residents were notified in June that new owner Laurence Gluck—just 24 hours after he completed his $100 million purchase of the complex—had filed papers to withdraw the project from the Mitchell- Lama program, a move that would free him to charge sizzling market rents.

That could potentially cost downtown a thousand more affordable units than what the ballyhooed announcement promises, making Tribeca the latest example of the ongoing loss of tens of thousands of affordable apartments citywide, caused by conversions like Gluck's. Indeed, as bold as the mayor's $3 billion, 65,000-unit, five-year housing construction plan is, it doesn't address the shocking erosion of the city's existing moderate stock, prompted by a loophole in federal and state laws that allows developers to buy their way out of rent regulation 20 years after their projects open.

Spending $300,000 in public funds per new apartment, while speculators grab more than that in profits on each unit they convert, is such bad municipal business that it may provoke our businessman mayor to focus his future efforts on preservation as much as new construction. Since Bloomberg spent last Wednesday in a campaign-mode swing through Queens, he might also recognize, as potential opponent Miller clearly does, the political gold mine these threatened projects are, with thousands of residents making voting decisions on the basis of who best helps them defend their homes.

Independence Plaza has a special claim on the city's conscience. The twin towers collapsed, as tenant association president Neil Fabricant puts it, on "our doorstep." Toxic fumes penetrated their doors and windows for months; they lived with masks in their own homes. Residents evacuated; kids were moved from school to school. Barges that hauled the wreckage woke them at 4 a.m. every day. Asbestos readings alarmed their families. IPN's response was so courageous it was featured in The Washington Post, on the BBC, and even in the Johns Hopkins University Journal at the mayor's alma mater. With more than 20 percent of Tribeca's total population, the complex is a third black and Latino. Twenty-two percent of the residents are poor enough to qualify for individual rent subsidies.

IPN owner Gluck, who also owns the old Daily News building, made a name for himself in Mitchell-Lama circles in 2000 when he and a partner, Joseph Chetrit, bought Park West Village on the Upper West Side. They were limited in how high they could raise rents at Park West, since it was built in 1961, long before a January 1, 1974, cutoff point in state law. All Mitchell-Lama projects built before that date revert to rent stabilization if the owner takes them out of the program after 20 years, while those built after it, like IPN, can go to market rents. Despite stabilization, Gluck and Chetrit's tactics provoked a rent strike and successful lawsuit. Another Chetrit project, Westgate, a post-1973 complex and the first to opt out of the program, experienced double and triple rent boosts prior to a legal settlement.

It's this kind of history that's gotten the City Council's attention. Though the state legislature launched the program in the 1950s, and 60 of the Mitchell-Lamas here are state rental projects regulated exclusively by the State Department of Housing and Community Renewal, another 25,000 are city assisted and supervised by the city's Housing Preservation and Development agency (HPD), including IPN. It's only those projects—especially the 13,000 post-1973 units—that Miller's bill can help. The bill can't block the opt-outs, since they're expressly permitted under state law, but it tries to make them less attractive to owners.

The bill requires owners to give 18-month notice of their intention to opt out, instead of the current 12 months, and allows HPD to conduct a "community impact study" of any opt-out, paid for by a $1,000 per-unit fee imposed on the landlord. It also sets up a public hearing and review process to determine if an owner has "substantially complied" with Mitchell-Lama regulations, imposing penalties if they've failed, as well as mitigation payments for any "adverse effects." Miller's bill covers IPN—since it applies to any incomplete conversion—but will not save it.

That's why Alan Gerson, the councilman whose district includes the project, has been talking to the Lower Manhattan Development Corporation and Deputy Mayor Dan Doctoroff about another solution. Gerson wants Liberty Bonds and other funds cobbled together to finance a tenant association takeover of IPN, by eminent domain if necessary. He says it can become "a model for a citywide trust fund," though some of the federal funds involved are restricted to the Ground Zero area. Gerson adds that other bills—including ones that may extend the Miller bill protections to tens of thousands of other, mostly federal, projects—are also planned.

Only Albany, however, can actually pass legislation that would stem the growing tide of Mitchell-Lama conversions, with 39 developments already opting out and another 11 eligible or near eligible to do so. The assembly passes one-house bill after one-house bill about this problem, but the Republican senate, which collected 237,000 in Common Cause-identified real estate contributions since 2002, has so far stonewalled. Their logic is that the legislature cannot break the opt-out "contract" it made with the owners, even though a federal court has already ruled in one pivotal case that the owner "failed to demonstrate that the state legislature intended the Mitchell-Lama Law to give rise to constitutionally protected contractual obligations."

The mayor has said nothing about Miller's bill, Gerson's proposal, or the senate's recalcitrance. HPD issued a "no objection" letter clearing the way for Gluck's opt-out over the howls of IPN tenants. The governor, who joined in the announcement of affordable downtown units, endorsed the senate's recent eight-year extension of the rent control laws even though it did not include any of the assembly's language extending stabilization to the post-1973 Mitchell-Lamas.

Yet it's not as if protecting these projects is a matter of partisan ideology. A 22-member national commission appointed by both parties in the Congress—and headed by two New Yorkers, Richard Ravitch and Susan Molinari—came to exactly the same conclusion. Their Millennial Housing Commission report, issued in May 2002, noted that 81,000 federally assisted units in NYC will see their protected status expire by September 2004, adding that "nearly all" are "at direct risk of being lost." Also citing the thousands of disappearing Mitchell-Lama units, the report says "the situation threatens to greatly accelerate NYC's overall housing emergency."

The Ravitch commission, which endorsed extending stabilization to post-1973 buildings, warned that Bloomberg's "well-received plan to create 65,000 new units" might "simply replace the equivalent number of Mitchell-Lama units that are now at serious risk of being lost to affordability." A businessman who once ran for mayor, Ravitch says it's "imperative that city-assisted affordable units—which can be preserved by city action—receive the city's urgent attention." His commission favors the use of federal trust funds to acquire "imperiled" projects, similar to Gerson's fund for city projects.

Ravitch's "crucial challenge" is also an enormous political opportunity for Bloomberg, who can structure a response that will literally reach into the living rooms of core communities. Though IPN has been knocking at Doctoroff's door for a year, only the council has responded, and with a bill that merely slows rent escalations. Mitchell-Lama owners have raked millions off these projects for decades—with 1 percent mortgages, guaranteed profits, and puny up-front investments. It's time the tenants who are the glue of neighborhoods came first. V


Research assistance: Michael Anstendig, Ross Goldberg, Phineas Lambert, Naomi Lindt, Brittany Schaeffer, and Jessica Silver-Greenberg


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