Summary so far: internal design vs external design -- unrelated motivations, unrelated principles

So the principles that govern the external appearance of the tenement are not about money or class, but fashion and function (it's a residence not a bank, gov't building, church or commercial office); the principles that govern the interior of a tenement are exclusively about money, class and purpose (reaping profit from others using it rather than using it or living in it oneself).

Purpose is the underlying motivator of the ghetto and its most enduring gift to New York, the apartment building -- in legal technical terms, tenement (I'll have a post on the interesting  and complicated permutations of the meaning of the word later on). If you build a house for yourself, you yourself will attempt to ensure that it will be pleasant, sanitary and sound. If you build for the free market, you will attempt to assure that what you build will appear to be pleasant, sanitary and sound to attract the highest possible rent -- the goal is not to live there but to profit. But if you build for a captive market, then you ensure only that it stands.

Constructing for oneself (poster made for the Chinatown Working Group) 

Constructing for profit (also a slide for the CWG)

That's the history of the ghetto in New York in brief. Where there's more money to be made, there's more grasping for it. As demand increases, the grasping becomes more frenzied. New York City is that frenzy of exploitation.

When land owners chose to give up on a piece of land as a place where he or his extended family or friends or his associates -- in other words, his class -- might live, he turned from the land to the structure built on it for rent. From that moment, the internal structure was determined by class, purpose and money-seeking. The external design remained slave to fashion and function.

You can see this distinction today. When a landlord prepares to sell an apartment building, he will spiff up the entryway and the hallways. He will not fix your plumbing or your ceiling. The external and the internal are two different games.

You can also see the significance of purpose today. Increasingly, apartments are owned by remote corporate giants which are ever more difficult to deal with. The law requiring a super living within 200 feet of the premise is gov't's attempt to mitigate the dangers of remote ownership. As more landlords skirt that law, more renters suffer loss of services more frequently and for longer periods of time.

Summing up this series so far:

The External Principles

1. Rich vs poor was not a design distinction in architectural ornament. Even when the rich tried to distinguish themselves from a common style, the ghetto immediately imitated them.

2. The degree of lavish ornament among tenements does not correlate with rich or poor but with history. The streetscape is a jumble of unrelated historical period styles, not a swimsuit competition.

3. Function, however, was very much a design distinction in architecture. Banks and gov't buildings are the most obvious examples (except for churches, which in my haste I failed to mention; they are the most purely affective structures, intended either to inspire or comfort and often to signify sanctuary by being distinctly archaic or harmonious or grandiose or all of those). If banks propagate public confidence in stability borrowed from  Roman lack of fashion changes, the gov't building to impress and intimidate, and the church to inspire or comfort, the residential building provides a stylish surround, consistent with the cultural norms of decor.

4. The history of modern architecture is a fabric of fashion, not money or class. (In this, architecture is distinct from attire. The male gentry uniformly dressed in puritanical, dignified black, their women in exuberant extravagance. Male labor flaunted wild colors while their women, to avoid being mistaken for streetwalkers, dressed like humble peasants. Again, cultural function trumps fashion.)

The Internal Principles

5. The back house is an indication that the landlord has given up on the value of the land, replacing it with the value of the structure on the land -- a shift from a personal dwelling in a desirable neighborhood to a commodity for others to rent in a ghetto for those who cannot rent elsewhere. That shift is pervasively explanatory. If I build for myself, I'm going to be sure that it's pleasant, sanitary and sound. If I build it just to make money from a captive consumer, the I care only that it's sound.

6. The captive market results in declining amenities as demand and rent increase, the opposite of a free market. At first, tenements were built with natural light and fresh air along the model of a townhouse, just taller. As demand increased, space, light, air and privacy were increasingly lost to rent-seeking -- packing the immigrants in as densely as possible.

7. The height and depth-in-the-lot of the tenement correlates closely with the growth of the city's population, especially of labor growth.

In short, the lesson of ghetto real estate is the shift from land value to structure value -- personal dwelling (amenities assured) to money-making for a captive consumer. The result is the inverse law of ghetto real estate: as exchange value increases (rent and demand), its use values declines (the amenities of space, privacy, light, air). It's the opposite of the free market where exchange values and use values rise together. Once the landlord doesn't want to live there, it's just a business. Ownership from afar is particularly harsh on housing. We see this today, where landlords are increasingly giant corporations remote from the needs of renters.

Okay, we're about a third way through this series. We've still got to look at why the first tenement built was also the tallest -- it seems to have held the longest record (40 years?) for tallest building in the city, although I don't believe it is recorded in the Museum of the Skyscraper; how laws changed the tenement structure; why corner buildings are usually built after 1901; when historians shouldn't be trusted; when writing on the wall should be disregarded; how to tell one period from another; why preservationists don't know the difference. That'll keep me busy for a couple of weeks at least.

Next up: gov't intervention in this inversion of the market. It begins with Fernando Wood and the often misunderstood elitist origins of the Republican Party prior to the Civil War.

Slide of my favorite terra cotta the cultural complexity of which will occupy its own post

Ghetto real estate

I'm cheating here. I posted this about a year ago, but it fits into the series exactly right here, and I'm short of time anyway. It starts the story of how landowners --the original New York City gentry -- encountered a vast landless immigrant labor force drawn to an industrializing city...

Concerning the history of real estate in the slum

Trying to attribute gentrification to the real estate industry, Neil Smith came up with an analysis that distinguished ground rent from building rent. It's an echo of David Ricardo, whose brilliant analysis of rent distinguished the value of the land from the value it produced in an agricultural economy. Smith's distinction is inventive and imaginative, but maybe not reflective of any economic reality. I think he conflated potential with real. To explain why I think so, I'm going back in time to the roots of slum real estate.

In her Manhattan for Rent (Cornell 1989), Elizabeth Blackmar recounts how Henry Rutgers, in the 18th century, leased out a piece of his land to a contractor, specifying exactly the size of the house the contractor could build. Too small a house might attract poorer tenants, too large might attract boarders, in either case altering the character of the neighborhood for the worse, degrading the value of his land.

In old New York, the gentry leased land to a contractor who would build a structure and rent it out to a single-family tenant. The building owner then extracted the rent on the residential tenant and in turn paid rent on the land to the landowner. Rutgers' specifications recognize that the value of land depends not just on the rent of whatever structure is built on it, but on the value of the land itself. For Ricardo, the value of the land depended on the demand for the best soil for cultivation. In a city, and for Rutgers, it's the demand for the best neighborhood, the cultivation of preferred neighbors.

So far Smith's analysis works well. The value of the land can be discussed independently from the rent of whatever is built on it. What I question is whether the value of the land can differ from the value of the buildings on it or their revenue.

The drawing at the top shows the Five Points neighborhood, lower Manhattan's notorious slum of the mid-19th century. The artist gives the impression of the topsy-turvy discord of the place, a kind of bizarro-New York. Wooden houses are sinking into the ground at different rates, street fights abound, a white gentleman is kicking a woman, presumably a prostitute, into the street while the only dignified character is the black gentleman in a top hat. Prominent among the incongruities is a tenement building, standing like a Trump Tower amidst a tattered Detroit street.

Here's a photo of the same street taken probably a few years later. You can see that the shack next to the tenement has sunk even deeper. In the drawing it's a two story structure, but the photo shows the ground floor window below the street level.

Charles Dickens had visited this very corner only seven years prior. He complains about the knee-high garbage in the gutter, and that's actually how this photo can be dated. The streets of Five Points were so filthy the city decided to "scrape" them clean in 1855. The story goes an Irish immigrant commented on seeing the newly washed streets of her neighborhood, "I had no idea there was cobblestones down there."

The cleaning of the foulest quarter of New York must have been quite the news. Five Points was not just the city's troubling social problem -- no one had ever seen such poverty, density or desperation in the city before, not to mention the concentration of Catholicism -- the place had also become a curiosity, a circus-like attraction. This photo was the instagram of its day -- The streets of Five Points have been cleaned?!? Definitely got to check that out and record it! -- and here it is, Five Points recorded ironically at its only clean moment, no doubt misleading many viewers today to think "It wasn't as bad as the literary accounts of it." Among the misled may be the viewers of Scorcese's Gangs of New York which reproduces dusty but barren streets, very much like the one in the photo. Here's what the streets of Five Points normally looked like:

Easier to see with this photo of a nearby East Side street lined with ca.1865 tenements, taken prior to 1894 when Colonel Waring finally got the streets of New York clean:

Not pretty. Dickens' complaint was no literary exaggeration. (Btw, if you look at photos of NYC streets in the late 1890's, you'll typically see cute little piles of horse shit here and there. They don't indicate that the streets weren't clean effectively. They're actually the mark of Waring's success. Priorly, you couldn't tell the horse shit from the heaps of excrement of all types, as above.)

Now take a close look at the tenement in the Five Points photo and drawing, in particular, what's behind the tenement in its lot. There's a back tenement -- a smaller tenement behind the main building. That little building tells all. I'll say a lot more about the reason for and the structure of the back tenement, but for now, let's just consider the mere fact that it's there.

In his contract, Rutgers also specified that there be no back house in his lot. A back house was guaranteed to bring a bad element. Who would rent in a back lot? Who would live in a front building with no back yard?

The mere existence of that back house says unambiguoulsy that the landowner has lost faith in the neighborhood as a place where he would ever consider living in. He's abandoned its use to the exchange value of its building. That shift will send both the land and its building floating onto the current of exchange, of industrialization and immigration, and eventually to legislative reform.

And that's why it's so tall. At a time when the tallest townhouse was was three and a half stories, these tenements were the skyscrapers of its day. People of means spurned apartment buildings. Multiple dwellings -- they called them tenements, but they were just apartment buildings -- were for immigrant Catholics, not for dignified society. The decent lived in a house.

And it wasn't the tallest. But I will finish this story later. The real estate market, immigration, density, the lack of public transport, and most important, the owners' relationship with his land -- all influence the character of construction and of neighborhood. It's a story of an inverse relation between use value and exchange value that characterizes slum real estate, exactly the opposite of the non slum market where use and exchange and demand all rise together. In the slum, demand and exchange rise at the expense of use. The more demand, the higher the price, the worse the conditions and the greater the density. It explains the uniformity of the slum and its diversity over time. More soon.

Money laundering and affordable housing

The Treasury's decision to investigate money laundering through NYC real estate might actually save New York from wholesale gentrification.

Constructing a lot of new housing can keep rents low by adding supply. Because it's expensive to build, developers prefer constructing luxury housing to get the quickest and highest rate of return. If the wealthy move out of older housing stock or locations further from the city center into these new luxury units, they free up housing for the less wealthy, who decamp from their older and further locations in turn freeing up housing for the even less wealthy and so on down the line. This is the one good reason for de Blasio's Zoning for Quality and Affordability (ZQA) -- allow new units to have higher ceilings to attract the wealthy out of less appealing older models.

But if the luxury housing is being bought by foreign speculators or money launderers who have no intention of living in the apartments, new construction does no good for the housing market. It turns the city's real estate into a non housing market crowding out the housing market. It's a disaster for the resident citizen, especially the low-income and immigrants.

(You might think, well if we eliminated rent regulations, the market would be flooded with vacant apartments, but this is both empirically and theoretically wrong. Most people who would be pushed out of deregulated apartments don't -- and often can't -- leave the local rental pool. They just move to a lower income neighborhood where they create a tighter market and push out lower income tenants who in turn move to lower income neighborhoods evicting people there, again, all the way down the line until at the bottom immigrants huddle up in substandard housing crowded together in dangerous conditions. At the top, landlords renovate the vacated luxury units and hike the rents there. Iow, deregulation doesn't free up the market, it's just a game of musical chairs, destabilizing everyone and raising rents everywhere. This happened in Boston when rents were deregulated, so we know that it's not just a theoretical speculation-- it's reality.)

The alternative to constructing luxury apartments to ease the housing market is constructing affordable housing. But if the monied are still coming to the city and searching for apartments, the pressure on gentrification in outer boroughs will be greater than the creation of affordable housing can accommodate.

It's easy to show that the current model of affordable housing creation is necessarily inadequate. De Blasio's Mandatory Inclusionary Zoning, for example, would require one affordable apartment for every four luxury unit. But as we know from Occupy and presidential campaigns and memes everywhere, the ratio of the wealthy to the struggling is not four rich folks to each struggler, but more like 1:99, and that's actually generous. 1:999 would be closer to reality. So the current model is beyond inadequate -- it's preposterously inadequate.

So again, the affordable housing model can only work if the luxury housing doesn't become a place for billionaires to park their money. It's got to be housing, not speculation, otherwise the entire geography of the city will be distorted into empty speculation at its center without even a tax base.

WNYC covers rent regulations

Adam Davidson, appearing on WNYC's morning "Brian Lehrer Show" discussion program, gave his strongest argument for rent deregulation without any analysis at all. Instead, he appeals to authority: economists on all sides agree that rent regulations are bad for the housing market and harm the middle class. 

True, economists agree on across-the-board rent regulations, but that's not New York's model. New units in NYC are not required to be regulated, so rent regulations here incentivize new construction. Deregulation would remove that incentive since raising rents and evicting tenants are cheaper and easier than construction. The New York model is actually healthy for the market.

Davidson refers to one economist, Christopher Mayer, but Mayer completely forgets that deregulated tenants don't simply disappear from the rental pool. If they have to vacate, they move from upscale neighborhoods into middle class neighborhoods and create a tighter market, raising rents there. So deregulation will hurt the middle class especially. In aggregate: 

deregulation = same # of units, same # of renters, just more wages going into rent, a windfall for landlords and no incentive to construct or ever ease the market. 

A land tax would help, tagged to upzonings in selected neighborhoods that can withstand increased development. 

Boomtown

Matt Yglesias comments on US cities leading in construction spending. New York is not only way ahead, it's an outrider way ahead (though not quite at a Pareto distribution -- construction is expensive here, so that may be why there's no Pareto), and it's not correlated (pace Yglesias) with population; LA is next most populous, Chicago, then Houston, all on a Pareto distribution, but LA is low on construction; Dallas is constructing more than Houston even though Dallas doesn't have much more than half Houston's population size. In fact Dallas is about one seventh the size of NYC, but it's constructing at the absolute rate of 60% of NYC's.

In any case, NYC is booming. Given the high cost of construction in NYC, this boom means developers see huge money in development. How much of that do you think is affordable housing?

It also means that developers are not worried about diluting the luxury market. Why? Do they expect high-renters/owners to abandon older housing stock to move into new? Or locations further from the center into closer? Either of those would be good news for low-income neighborhoods -- less displacement pressure on them. But if developers simply expect more high-paying population in the city, then no one benefits but the developers.

Shaoul, the BSA, DoB and WTF

Went to the Board of Standards and Appeals to see their response to Shaoul's request for a variance to keep the 6th floor expansion that the BSA had ruled illegally built some years ago. Shaoul's attorney made the good point that the Department of Buildings had issued a permit for the expansion, and the BSA didn't rule it illegal until after the expansion had been completed.

The BSA chair wasn't having any of it. She pointed out that the even though the building didn't have a Certificate of Occupancy, the owner had been renting the apartments illegally for years.

In reply, the attorney blamed that on the DoB for not enforcing the law. I was truly impressed with audacity of this legal argument. I really like it. If you place several hundred landlords, say, into a ship and sink it and drown them, it's the fault of the Coast Guard for not stopping you. I'm all for it.

But seriously, this attorney nailed the truth about NYC real estate: the DoB encourages illegal activity at every turn, either by issuing illegal permits (commonly permitting bulkheads that are actually intended for residential use, to skirt the zoning limits on residential space), or by failing to enforce blatantly illegal expansions, demolitions, hazardous endangerments to tenants -- literally whatever and whateverything landlords can think up.

Btw addendum: the BSA didn't rule on Shaoul's request at this hearing. They scheduled another hearing in late June and another in July to finish up. It was pretty clear that the BSA intends to deny him -- a whole bunch of elected officials signed on to a letter asking for a denial. But even if they deny, without enforcement, he'll just continue to flout the law.

Call to action!

Constructing in an occupied building has become one of the most aggressive means of harassing tenants. Shaoul used it often, and Kushner, who recently bought nearly 30 parcels in our neighborhood, informed the community board last month that he intends to construct building expansions wherever he can. 

The case of 515 East 5th Street may become the precedent for all future expansion harassment. Please come to the Board of Standards and Appeals and spread the word. From GOLES:

GOOD OLD LOWER EAST SIDE, INC



TENANT ALERT!

FIGHT ILLEGAL CONSTRUCTION OF ADDITIONAL FLOOR AND PENTHOUSE ON 515 EAST 5TH STREET!

DATE: TUESDAY, MAY 21ST, 2013

TIME: 10:00 AM SHARP!

PLACE: BOARD OF STANDARDS AND APPEALS (BSA)

22 READE STREET, SPECTOR HALL

NEW YORK, NY 10007

(ONE BLOCK FROM CITY HALL)

COME TO THIS IMPORTANT HEARING AND SHOW YOUR OPPOSITION TO LANDLORD’S APPLICATION TO LEGALIZE THE ADDITIONAL FLOOR AND PENTHOUSE WHICH HE BUILT. THIS CONSTRUCTION WAS FOUND ILLEGAL IN BSA DECISIONS IN 2007 AND 2008. NOW THE LANDLORD IS SEEKING TO REVERSE THEM. IF LANDLORD IS ALLOWED TO KEEP THIS ILLEGAL CONSTRUCTION IT WILL SET A PRECEDENT FOR OTHER LANDLORDS TO DO THE SAME LEADING TO DANGEROUS CONSTRUCTION THAT CAN CAUSE DAMAGE TO STRUCTURE OF SUCH OLD TENEMENT BUILDINGS.

FOR MORE INFORMATION CALL GOLES 212-533-2541

The Death of New York

Here's the picture of the new New York: the new immigrants to New York are the American wealthy and their adult-age children. The new New York has not prepared for the new with large-scale construction, so these new migrants-of-means will gentrify this city unrecognizably throughout all five boroughs.

One of the few incentives to construct remains rent regulation. New construction is not regulated (unless the developer voluntarily accepts a cross-subsidy). When you read the nearly all economists, left, right or upside down and even the redoubtable Krugman, agree that rent regulations are bad for the housing market, what they mean is regulations across the board, including new construction. None of that holds in NYC. It's just the opposite. Rent regulations actually serve new construction. And deregulation wouldn't increase the market pool either. Regulated renters evicted by deregulation don't generally leave the pool -- they work in the city or have family here. They remain in the metro area, and wherever they go they create a tighter market there, displacing renters and upscaling neighborhoods, creating pressure both upwards and downwards. The result of deregulation is a disruptive game of musical chairs in which at best landlords at the top renovate to update deregulated spaces. (This was studied by, of all groups, Giuliani's arch-conservative Manhattan Institute, concluding that deregulation in Boston didn't lower market rate rents but actually increased market rate rents across the board.) The sum effect is a increase in the aggregate funds available for rent, and all of that goes to the landowner -- little more that a shift from the local economy where the regulated renters were spending, to the landlords. 

The moral is: keep rent regulations and construct luxury housing in upscale neighborhoods to keep the upscale out of ethnic neighborhoods, and hope that other American cites can draw the wealthy away from us. 

Demand for luxury apartments is higher than ever

Luxury apartments are rising higher now to meet increased demand. But "demand" is a gloss for at least three independent economic functions: 1) the quantity of those seeking an apartment relative to the availability of supply, 2) their willingness to part with their disposable income for living space (the "opportunity cost" of space), 3) the sheer quantity of their disposable income. There's a fourth function: a decline in use value that increases the exchange demand -- the willingness of apartment seekers to double up and share a space. Even if that doesn't directly raise prices of luxury apartments, it raises them indirectly. Raising prices down the ladder raises up top as the options narrow. 

The 19th century argument that the cost of living space would always rise as capital expands was definitively disproved in the 1960's and '70's when large swaths of Manhattan saw rental declines, in some places precipitous declines to zero and even below (landlord abandonment or arson, the city giving properties away to residents). This wasn't a shift of capital as with Detroit -- Detroit's experience gave support for Engels' warning that the immobility and economic inflexibility of home ownership for labor would be a curse as capital shifted locations, although in Engels' case he thought it wasn't so much capital shifting as that labor needed mobility to shift so it could sustain a strike by seeking work elsewhere. 

In New York it was a cultural shift to the suburbs partly encouraged by government both by construction of suburbs and of infrastructure to take residents to and from the suburbs. That's why Robert Moses is so much blamed for the bankrupting of NYC. Capital did not shift to the suburbs, leading urban dwellers out of the city; capital was still in the urban center when Moses allowed the tax base to shift to the suburbs, and capital followed. It can't be blamed on the loss of manufacturing base: New York is growing in population and in wealth and tax base, but not in manufacturing. The move to the suburbs was a government-facilitated cultural shift that eventually spiraled the city downward as the eroded tax base undermined services, and middle class flight undermined public education. Explicit race-based programs like red lining and slum clearance closed the coffin. 

The new demand for upscale housing shows distinct reflexes of its distinct functions. The quantity of apartment seekers will gentrify outer boroughs as long as central upscale development lags demand. The price of space will rise as long as the willingness and wealth is there. The draw in New York seems to be its density, safety and convenience. It's a party for the rich. 

So why do all these rich folks come here and why are they willing to pay ever more? Is it the nightlife here? Or that NYC is the chain store capital of the US? Maybe it's just NYU. 

Where to apply the Yglesias solution

Matt Yglesias has been arguing to remove zoning restrictions that prevent residential development and increase rents. It's the obvious answer to the misguided view that rent regulations raise market-rate rents. 

Adding supply lowers demand and price, but evicting regulated renters don't add supply since the evicted tenants remain in the renting pool (the piece I did for Met Council's Tenant/Inquilino explains this in more detail), so they just raise rents wherever they go in the locality. The only available means of adding supply, short of killing renters, is construction. As it happens, rent regulations are one of the very few incentives to construct housing: new housing, unless it's subsidized, is unregulated. 

Yglesias also points out correctly that if cities don't construct, a tight housing market gentrifies their older, lower-income neighborhoods, displacing whole communities. 

But what happens when the city constructs at a scale commensurate with its demand? Yglesias seems to assume there is a limit to demand. That might appear to be necessarily true, since there's a limit to global population. But one person can rent more than one unit, so any limit has to be found in the aggregate funds available for rents, and there's no reason to assume that that's necessarily limited, especially where there's fiat money, and that holds of just about every nation across the globe, even Europe if considered as a whole.

In most urban markets, the limit is reached through preference and employment opportunity. More people want to live in L.A. than in Detroit, and in particular, more people with more money want to live there, for a variety of reasons. Supply that preference demand, rents should decline, or should they? 

But not all markets have a limit. Some actually create more demand the more it is supplied. Bars are a perfect example. One or two local bars may suffice for a neighborhood. But if the neighborhood boasts many lively bars, it becomes a nightlife strip attracting non locals. The more the bars, the more attractive the strip to non local consumers. More supply=more demand.

Some cities have this attraction too. The more you construct, the more people live in the city, the more people want to be where those people are. People are themselves an attraction, especially among young singles actively seeking. So if New York abandoned its zoning regulations and constructed wildly, would market rents decline? Would the upscale leave older neighborhoods to themselves? Or would New York just grow, continuing to spread upscale development everywhere? 

If that's so, then the Yglesias recommendation won't help New York, unless other cities become more attractive and cheaper than NYC. The only hope I see to prevent gentrification of the entirety of this city, is recommending the Yglesias solution to other cities.