The market lesson in brick

The oldest existing tenement is also one of the tallest and may be the first tenement as well, 65 Mott Street in the heart of the NY original immigrant ghetto Five Points neighborhood which is today Chinatown, seven stories, built around 1820. It's something of a puzzle. All the other tenements from 1820 to around 1880 are only five stories tall.

I once asked Tyler Anbinder, the great authority on Five Points, why it is so tall. He responded candidly that he didn't exactly know, but maybe it wasn't originally seven stories and was later expanded. I asked him then why tenements weren't built seven stories back then. Again candid, he suggested that he could only imagine that seven stories, given the architectural materials or methods, would have been unstable. I've asked at least one other historian who gave pretty much the same answer -- it couldn't have been originally seven stories.

And I'm pretty sure they are wrong. Here's why. First, there was at least one other building seven stories tall built even earlier -- five stories and two stories of attic -- the Rhinelander sugar factory that was built up on the hill that City Hall and the Municipal Building stand on. (One window of it has been preserved with a plaque.) Later in the the early 19th century it was expanded to eight stories. So it was possible to build sound seven story buildings in 1820.

More obvious, the 65 Mott still stands today, so whether the seven stories were an expansion or original, the original was perfectly able to support seven stories. There aren't even any structural supports that you occasionally see in old buildings. It was and is sound.

Second, since buildings between 1820 and 1880 were only five stories, why would anyone expand an existing five story building to a seven story one? It could only have been expanded after 1880. But take a look at a 1897 real estate map:

There it is. The little "7" indicates that by 1897, it was already seven stories tall. Now look at a googlemap overhead view of the rooftop:

The dotted lines trace the building and its smaller back tenement. Notice that it is built on the model of an early box tenement, without any airshaft or window space on the sides. (The 1879 law would probably have required more window space even if the structure contained only four rooms per floor.)

That's #3 above. The 1879 law would have required more window space than the building offers. So if it had been expanded, it would have been expanded prior to 1879, when, again, buildings were only five stories. 

So if expansions to seven stories wouldn't happen until after 1879, and its current structure could only have been built prior to 1879, how did it get to be seven stories? 

To answer this dilemma, consider a new market, like the dot.com boom. When a new market first appears, it bursts into a frenzy of speculation. Not everyone jumps on the band wagon, but some people do. Remember that the landowners did not build on their land themselves; they contracted with entrepreneurs who were looking to make their wealth on the rental market. In 1820, suddenly there was a new rental market, not houses, but multiple dwellings for the surge of immigrant cheap labor. To cash in on poverty, volume is always essential, since the immigrants individually have limited disposable income. 

Now consider such an construction-rental entrepreneur. He has, say, one lot to make his way to wealth. There's a new market the potential of which no one really knows. No one really knows how much rental space the market will bear. But since the immigrants keep coming, the demand seems unlimited and not likely to stem. Our one-lot entrepreneur makes a fully rational decision to build as high as any building has been built -- the steeples of churches except -- as high as the sugar factory. 

In a way, it's a crazy scheme. Who will climb six flights of stairs? Certainly not the gentry. That's one reason why townhouses and business establishments were only four stories -- and the fourth story of a town house was for the house servants. Only immigrants would be expected to climb three flights. But the tenement house was for immigrants. Even the six flights of stairs of the Sugar House, after all, was only for immigrant labor. 

So our ambitious contractor builds to the max. Just one problem. Lots of other entrepreneurs also have the same idea, building similar structures. And as he tries to rent out the top floor, he finds that the market has already shifted. Supply has increased and the marginal value of a sixth floor has collapsed. The only people who will rent there are the most desperate of the poor, only the most undesirable. Instead of becoming a source of wealth, the top two stories become a lesson to the contractors: the market will sustain only five stories. 

And so the structure remained the tallest residential structure in New York City from 1820 to around 1880. And the construction market remained five stories with this one and only exception, the lesson of a bubble speculation, and an early if not the first tenement built. That five-story market didn't change until the Eastern European and Italian immigration in the 1880's, when to accommodate the increased demand suddenly the tenements bumped up to six stories, where it remained until just before the New Law in 1901. At that moment, you'll see a few seven story structures built an the assumption that the neighborhood will continue to grow more dense, and since the New Law would require less density -- less rental space-- small lot owners would build on speculation, to build more densely prior to the law. Ironically, a few decades later, the subways took the density out of the neighborhood, and now those seven story walk-ups are the legacy of another speculative promise that never happened. 

As an addendum: The building no doubt was modified to comply with various laws over the years. The roof seems to have been modified to add a stairwell bulkhead and the brick above the top floor lintels don't look original either. 

Zoning with a conscience (the talk'll be up at Columbia University in the Foreign Affairs building, 420 W. 118th Street, room 409, 2pm Sunday)

In 1961, the city updated its zoning. This time, the city's planners responded to the Modernist movement which had been around since 1910 or so, but gov't isn't exactly avant garde, so it takes time for gov't to catch on.

The principles of Modernism reflect deep social awareness, with its origins in socialism at a time when socialism was not only respectable, but viewed as the best means, perhaps the only means, towards social justice. Rather than merely serving the investors' financial interests, Modernist architects intended to design an ideal world for all. They developed manifestos and principles of design, competed intellectually for innovations that would improve humanity, not just the developer or his rich clients. Stylistically, they rejected the ostentatious flaunting of wealth that characterized the design fashions of their predecessors. Ornamentation signaled useless vanity. Modernism replaced the show of wealth with purely functional form -- no eyebrows over the windows, no more columns and terra cotta. Steel girders and glass walls -- the structural elements -- were left bare in rectangular shapes of structural support: the Seagrams Building is its most insistent and elegant expression.

You'll notice that unlike the Equitable Building that covered the lot completely, and unlike the Empire State Building that attenuates towards its spire, this building rises straight up but doesn't cover the lot. Instead of setbacks to bring light to the street, the new zoning required that as the building grows taller, its footprint must attenuate, not its tower. The result is an empty space surrounding the building, which then can be used by the public as a park or plaza. The method of bringing light to the street is shifted from the top of the building to the bottom where the public can benefit both from the light and from the space. 

The new zoning also introduced a method of restricting the bulk or size of a building. Previously, buildings could be built to whatever height, allowing overwhelming and oppressive density. City Planning Commission came up with a measure of density that still allowed for flexibility of height. The measure of size is the floor area. By zoning for floor space rather than for height, developers were allowed to choose the height of the ceiling freely. 

The New Museum has the same floor area and zoning as its nextdoor neighbor
but because its ceiling heights are 20'+ it dwarfs the buildings on the street.

But their innovation served much more than that. It was now possible to limit the bulk of all the existing or potential buildings in a specific zone. And it allowed landowners to sell their bulk allowance to other landowners who might want to build more than the zoning had given them. The new zoning created a market of space. 

It also had a preservationist consequence for owners who sold their bulk allowance in excess of their existing building. Once an owner has sold his excess bulk allowance -- his developmental rights, sometimes called "air rights" -- the owner can't develop anything larger than the building he already has, so there's no reason for him ever to redevelop his building. The result is a kind of preservationist balance: for every tall skyscraper built by buying developmental rights of small buildings nearby, those smaller buildings are preserved. The new ensures the old. 

It also ensures that the old, small owner loses the value of his property, can't sell it easily, since who wants a building that can't be redeveloped for increased rents, while the skyscraper next door increases the real estate values of the neighborhood and therefore the real estate taxes. The small owner may have gotten a one-time windfall from selling the air rights, but in the long run, he's losing. 

Next up, the current model and how it plays into affordable housing. 

Division

[Cross-posted at http://chinatownforchinatown.wordpress.com/]

There are two sides debating in the Chinatown Working Group. Some want to see more tourists in Chinatown to support business. Developers, financiers, some business owners, the Business Improvement District, for example, sit on this side and arts purveyors as well. On the other side stand the labor and tenant adovocates who want business to serve the local residents. You might ask, why not have both, local services and toursim?

If only the sustainable market forces were balanced. But they’re not. Gentrification is an opportunistic tide that, once it gains an entry, will flood the locality resistlessly. To use urban planning to help the juggernaut of monopolistic market forces is unnecessary. The empowered need no help.

In any economy, there are vulnerable sectors even among the most sustainable. Local services are actually highly sustainable since local residents have consistent, reliable purchasing needs. You see those needs reflected in the streets of Chinatown. As long as the community remains, the local services will be sustainable.

Although they are highly sustainable, local services are also highly vulnerable to attack from giant outside capital which has more resources, government connections and mobility. Ironically, the least vulnerable — giant capital, developers, big businesses, chain stores — are also the least reliable because they are mobile and least tied to the locality. Like a corporation that protects itself in bad times by laying off labor, giant corporations are most capable of protecting themselves at the expense of the locality, whereas small local servers depend on the locals.

Tourism is closely tied to development and big capital — high prices and upscale values that can be marketed to upscale spending. Local services, especially in Chinatown, depend on low prices and high volume. If giant capital gains a foothold, commercial rents will rise, replacing local services, and  gentrification will displace the community, killing the viability of any remaining local services. It’s a snowball effect.

This is not to say there shouldn’t be tourism in Chinatown. There’s always been tourism in Chinatown back all the way to the 19th century. But here’s the paradox of tourism: people come to Chinatown not to see a spectacle staged for them but to experience Chinatown as it is, a lively working community, culturally distinct from the rest of New York because it serves its own. Cater too much to the tourist, and you lose the Chinatown that tourists come for. You’d then have to market Chinatown as a brand, constantly hoping that that brand doesn’t go out of fashion. Chinatown business becomes the slave of an outside community that it has no control over, and it turns a community with businesses in it into a business with no community in it.

In planning, as everywhere, there are empowered sectors that need no help, and disempowered groups that need support. Were it not for the 1% predators, the 99% disempowered would be fully sustainable. That’s why planning should always keep as its goal protecting the disempowered and avoiding giving ground to giant capital.

Margaret Chin, the developer's candidate

Margaret Chin is taking money from the Real Estate Board of New York's Political Action Committee. You'd want to ask, why would the founder of Asian Americans for Equality welcome large campaign support from real estate?

Affordable housing is built in NYC through incentives given to developers. So if you want to get any affordable housing here, you've got to welcome a market-rate developer, otherwise you get nothing.

Does that explain why Margaret voted for the NYU development (albeit curtailed)? Maybe. Does it explain why she voted for the Chinatown BID against widespread opposition within Chinatown? Maybe. Why she voted to help First American International Bank, the promoter of the BID, demolish and redevelop 135 Bowery?

The BID benefits larger property owners, larger businesses and developers and banks. But the small property owners and the small businesses are the anchor of Chinatown. At what point does a commitment to building new affordable housing sacrifice community entirely?

The city has shoved a wedge between affordable housing and community, turning affordable housing into a tool of gentrification and displacement. Look at Williamsburg. Chinatown next? The BID is a step towards the new Downtown Hotel District (DoHo?) formerly known as Chinatown.

From Crain's http://www.crainsnewyork.com/article/20130729/BLOGS04/130729878 about REBNY's funding of Chin's campaign

From City Council Watch, Seth Barron (writer for City & State) "Margaret Chin Progressively Awful"

Sean Sweeney in The Villager "The billionaires back Margaret Chin for City Council"

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.

Puzzling

It's supposed to be well-established that commodity prices are the inverse of interest rates. Interest rates are as low as they can be and luxury housing prices are high, for example. But the rest of the economy is not wildly inflated. Is liquidity trapped only for the 99%, and not for the luxury economy of the 1%? Anyone know?

Update with my own guess, since nobody ventured: low interest rates in a liquidity trapped recession hike luxury assets like the stock market and luxury housing, but don't stimulate the economy. Quantitative easing adds to the luxury market, since it pumps money directly to the 1% -- the banks. The underlying trouble is the lack of fiscal stimulus coming from Congress made worse by the sequester. In short, the well-established inverse relation between interest rates and commodity prices is just a generalization, not a rule. The economy is like the proverbial horse -- the Fed can flood the land with money, but it can't make that horse drink.

Reviewing the 2008 rezoning

Irrational opposition to NO711 takes me back to the EV/LES rezoning. The supporters of the rezoning were as outraged at me back then as I am towards the one person who maintains polemical objections to NO711 -- not because of his polemic, which is at least interesting, sound or not, but because he lied, then supressed the truth and followed with a string of manipulations and distortions. So I wonder if, in pushing my opposition to the rezoning, I was similarly manipulative. What I said about the rezoning back then was: 

1. The rezoning is an overall upzoning. The EIS bore me out -- 53% more development under the rezoning than under the previous zoning. (Harvey Epstein fortunately managed to mitigate the upzoning plan with an IZ application over the avenues.) 

2. The upzoning of sidestreets will turn townhouses overnight into candidates for demolition and luxury redevelopment. That was an accurate prediction.

3. Developers would often choose not to take the Inclusionary Housing bonus. Also an accurate prediction, although the jury remains out with the largest developments upcoming on Mary Help of Christians and the former theater/deli on A between 6th & 7th. 

4. The height caps were too high, which allows for air rights sales, undermining the inclusionary bonus incentive. We're seeing this at play on Norfolk Street, and there will be more. 

5. The LES downzoning would drive hotel development onto the Bowery and into Chinatown. Hotel development has gone crazy on the Bowery and in Chinatown since the rezoning, although it had already begun before 2008. Hotel development would probably have continued regardless of the rezoning, so it's hard to tell how much the rezoning increased it. 

6. If the EV rezoning is implemented, there would be little political will within CB3 to protect Chinatown and the Bowery. I think I was wrong about this. CB3 eventually came around to support the Bower Alliance of Neighbors zoning plan (although CB3 still features on its website its old Bowery study that BAN rejected), and CB3 has shown support for the Chinatown Working Group's zoning efforts despite its amibitious scope. It's taken time, but it's happening. 

7. CB3 did not push hard enough to protect the Bowery. Here I was completely wrong. The city was and is intransigent on the Bowery. When CB3 members told me this, I simply didn't believe them. I wrongly assumed that they were sacrificing the Bowery for the sake of the rest of the EV. Whether they could have tried harder is irrelevant: they saw (and I did not understand at the time) that the city wouldn't budge, so pushing would get nothing but push back and trouble. So, considering the possibilities, I now think that CB3 cannot be faulted at all for the Bowery and its lack of protection, and I was wrong to fault them then. 

(In my defense, the Task Force leadership undermined its credibility by insisting that everyone had to accept the plan immediately and without change otherwise DCP would walk away from the plan. I responded, btw, that DCP had no intention of walking out. I was right about that as well: CB3 never fully approved the plan, insisting on Harvey's and Paul's 11-points of contention to the end, and yet DCP never walked. It was DCP's plan as much as the Task Force's and DCP wanted it at least as much as the Task Force leadership wanted it.) 

8. Under the previous zoning, most development in the EV was contextual; out-of-scale development was mostly south of Houston. That was true. After NY Law School and TNC, there was a lot of redevelopment in the EV, but only two rose above seven stories, one on 12th & C and one on 13th & B, both about 9 stories, one story taller than would be allowed under the rezoning. Just about everything else capped at 6 stories. 

So was I full of manipulations, distortions and absurd arguments? I'd genuinely like the rezoning supporters to explain. I'm sure I see all this still from my own perspective, so I have to rely on them for a more complete assessment.

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. 

Chin, AAFE, development, gentrification and displacement

I posted this originally as a comment at the Villager in response to an article on Margaret Chin's council campaign. 

What troubles me most about Chin is what she's been doing to Chinatown. Despite broad Chinatown protest, Chin supported a Chinatown business improvement district (BID) which will destabilize small property owners, increasing the likelihood of the selling of Chinatown properties and redevelopment that will lead to gentrification and community displacement especially of the low-income community. 

While her association with AAFE and the First American International Bank may be well-intentioned, under city zoning the construction of affordable housing brings 80% market-rate luxury housing, raising real estate values and commercial rents. NYers saw this in Williamsburg -- the community was sold an affordable housing program that resulted in wholesale transformation of the neighborhood. The affordable housing non profits can't back off the city's Inclusionary Zoning program because affordable housing development is their mission and that's what they are funded to do. The result of collusion between upscale development and non profit affordable housing is a net loss of affordable housing, deeper gentrification and low-income community displacement. 

The close relationship created in the law between those non profits and market-rate developers has placed a destructive wedge between community and the non profits that should be protecting those communities. The fault is the city administration's, but the city's gentrification program succeeds by using those non profits. AAFE strongly supported the upzoning of Chrystie Street, Houston Street and Delancey, opening the door to upscale development for the sake of 20% affordable housing, playing the city's game rather than resisting, protesting, refusing and leveraging. 

Supporting NYU development, the demolition and redevelopment of 135 Bowery (for the First American International Bank), the Chinatown BID (promoted by that same bank again) and the SoHo BID -- intended or not, it's a constellation of development and upscaling. Chin is a good-hearted, hard-working activist, but she's been caught in a game that is headed in the wrong direction for community. That's why CSWA, a Chinatown labor organization, and a Chinatown small property owners group oppose her. That's an unusual coalition spectrum -- property owners and labor. Says a lot to me.

New blog "Chinatown for Chinatown: a discussion board"

I started a blog about Chinatown planning called "Chinatown for Chinatown"
http://chinatownforchinatown.wordpress.com/

I've avoided blogging about Chinatown while I was involved with a Chinatown planning group. It's not the kiss-and-tell aspect -- I believe in transparency. But journalism gives the writer an unfair advantage within the group. It can bias the process or coerce it. But the Chinatown Working Group has mostly concluded its discussions, now waiting for its planning consultant to come up with recommendations to the group. So I can write as an outside observer.

I've asked several local voices and urban planners to post as regular guest bloggers. I'm hoping to see an open, broad discussion that will be of help to the planning consultants as they dig into the issues and challenges that Chinatown faces.

No escape from luxury

Btw, this is the article that Yglesias was responding to:

http://www.forbes.com/sites/stephensmith/2011/09/29/does-urban-growth-have-to-mean-gentrification/

Smith doesn't assume an upper limit on luxury demand, he thinks the upper limit is reached when overdevelopment begins to lose its attraction. It's a scary thought: the rich lose interest in bland elevator buildings, so they raid the neighborhoods without them. Their presence attract their elevator-addicted friends, so developers construct for them and transform the neighborhood, driving the upscale to seek a hipper slum to raid. It's already happened here -- the Schwimmer Manse.