Affordable Housing at Stuyvesant Town and Peter Cooper Village

Testimony to the New York City Council Housing & Buildings Committee Preserving Affordable Housing: Stuyvesant Town and Peter Cooper Village

Brad Lander
Director, Pratt Center for Community Development
September 25, 2006

Chairman Dilan, Councilmember Garodnick, members of the committee, thank you very much for the opportunity to present this testimony. My name is Brad Lander and I am the director of the Pratt Center for Community Development. We work for a more just, equitable, and sustainable city for all New Yorkers by helping communities to plan for and realize their futures. As you know, we are deeply committed to creating and preserving affordable housing for a wide range of New Yorkers.

Much of the debate about Stuyvesant Town and Peter Cooper Village (ST/PCV) thus far has centered, understandably, on two themes:

1. On MetLife's decision to sell the property, and the ways in which their desire for a profit in the billions violates the spirit of the public/private partnership and substantial government subsidies they initially received to build the buildings, as well as any idea of good corporate citizenship.
2. On the valiant and important efforts of the tenants, with strong leadership from Councilman Garodnick, to purchase the buildings in order to preserve them as affordable housing for thousands of middle-class and working-class New Yorkers who live there, which I believe merit support from the City of New York.

These are indeed critical areas of focus, and I will address each of them briefly. I also want to place energy on what I believe this Council and the entire city need most to learn from this situation: If we want to preserve a diverse, mixed-income, affordable city, where low-income, working-class, and now clearly middle-income New Yorkers can live, then we must act quickly and strongly to strengthen New York's rent regulations.

MetLife's Plan: Earn Millions by Helping to Eliminate Affordable Housing
I know you were as appalled as I was to read in this Saturday's New York Times about the callous efforts of MetLife and their broker, CB Richard Ellis, to boost the sales price of the properties, by offering potential buyers a "road map for displacement" in the offering documents. Those documents outline for buyers how they can deregulate about 4,600 apartments, housing for more than 15,000 people, boosting rents from a range today of $1,096 to $1,581 -- solidly affordable middle-class rents -- to a range today of $2,406 to $5,842, solidly luxury rents. Not only do they suggest aggressive eviction and direct displacement, but also turning the developments into gated communities and providing an "elite private school" to appeal to "the discerning tastes of Manhattan's market-rate apartment community." This is a corporation, quite literally, trying to earn billions, by helping convert New York from a diverse, mixed-income city into a playground for the rich. While they have a legal right to do so, they should not hide behind "accountability to shareholders" -- publicly-held corporations have ethical responsibilities. They are not required to maximize profits by selling products that are harmful to our health or our city. MetLife should be embarrassed, and strong pressure should be put on them to accept the tenants bid, if they want to continue to do business as a corporate citizen in this city.

Support the Tenants' -- and City's -- Opportunity: A Permanently Affordable Cooperative
On the second theme, the efforts of the tenants and Councilman Garodnick to purchase the buildings are critically important. In all likelihood, the only way to save this housing as a mixed-income place where working-class and middle-income New Yorkers can live is through a non-eviction, cooperative conversion led by the tenants. I wish them all the best of luck in this truly heroic effort.

Their efforts are worthy of financial support from the City. I disagree with a recent New York Times editorial which advised against public support for these efforts, suggesting that the resources would be better spent at less expensive locations in the outer boroughs. If affordable units are lost at ST/PCV, it will put ever-more upward pressure on rents in the outer boroughs. And in general, it is more cost-effective to preserve the affordable units we have than to create new ones.

There is one important caveat. Any publicly-supported cooperative conversion must include resale restrictions that insure that the complexes will remain affordable for middle-income families well beyond the first buyers. It would not be appropriate for us to provide millions simply to enable families there now to stay for a few years, and then profit substantially on sale. Unfortunately, this is what happened in the recent deal at the West Village Houses, where the City contributed a substantial sum to enable the tenants to purchase the development. Tenants there who bought their units will be able to sell them at a market price in just 12 years. While this is better than seeing those tenants evicted and all of the profits going to landlords, I believe that the taxpayers of the City should not pay many millions for just 12 years of affordability.

Fortunately, there are ways to appropriately balance the possibility for current residents (and future coop buyers as well) to build up equity and the city's need for long-term affordability. There are models of "permanently affordable homeownership" around the country, and that will work in 21^st century NYC. One possibility is to peg resale to the area median income, which goes up modestly but reasonably from year-to-year. I would be happy to talk further about these models.

Strengthen Rent Regulations for a Diverse & Affordable 21^st Century New York City
The most important lesson of this situation, however, is that we must dramatically strengthen the City's rent regulations if we want a diverse and affordable city. While it is MetLife's private, corporate decision about whether to profit by widening the city's polarization, it is the public, political weakening of the rent laws that makes it possible. ST/PCV only offer affordable housing for today because of rent regulations, which have kept units affordable even as market-rate prices have risen dramatically. Most of the current tenants have been able to stay because of rent regulations, and they only have a credible option to purchase because of rent regulations.

If we simply did not allow so-called "high rent" vacancy decontrol -- as was the situation before 1994, and as should be the case today -- we could keep ST/PCV affordable for the long term, for its current and future families, without spending one single public dollar! MetLife would still make plenty of money; they simply wouldn't have the opportunity profiteer. The lesson is clear: We must end or dramatically restructure so-called "high rent" vacancy decontrol, and close the gaping loopholes through which landlords have already deregulated more than 145,000 apartments.¹

This will take substantial political will. We will either need to repeal the Urstadt Law or persuade Albany to have the courage to help us save our city. AG Eliot Spitzer recently discussed the possibility of indexing "high rent" decontrol, which is currently set at $2,000. Had it been indexed to inflation when it was set in 1994, it would now be at $2,750, and it would be a good deal harder for MetLife to deregulate thousands of units. This is just one small, but practical step. If we could act quickly to raise the threshold, it would directly decrease the price the speculative buyers would be willing to pay ... and therefore increase the chances of success for the tenants' purchase effort.

Since the potential sale was announced, I have been thinking about rent regulations in a whole new way -- not only as our largest affordable housing program, but as fundamental to preserving a diverse and affordable city in a time of growth. Not as an old solution to a WWII-era problem ... but as a surprisingly fair, cost-effective, and reasonable solution to a serious 21^st century problem.

¹ I urge the Councilmembers to read the recent report by the NYC Rent Guidelines Board, Changes to the Rent Stabilized Housing Stock in New York City in 2005 (NYC RGB, 2006), which documents these losses.