Affordable Housing Institute : US

[Continued from yesterday’s Part 1.]

 

Yesterday we saw that Stuyvesant Town, for so long a taken-for-granted functional-if-ugly fixture of the Lower East Side, is now ‘in play’ in Wall Street terms, very likely to transact to a new professional, well-capitalized, highly motivated buyer.

 

It’ll take some vision to make this sparkle.

 

Among the great ironies of this story, Wikipedia reports that it was built using eminent domain for economic development (ED4ED), that very blight removal tactic decried sixty-plus years later:

 

Stuyvesant Town was controversial from the beginning.

 

Does this look blighted to you?

Despite what the Institute For Justice and others might seek to convince you, ED4ED is not a new phenomenon, it’s sixty years old.

 

It was championed by Parks Commissioner Robert Moses, who, at the behest of Mayor La Guardia, sought “to induce insurance companies and savings banks to enter the field of large-scale slum clearance” (Moses, Letter to the Times, June 3, 1943).

As with Kelo v. New London, the city saw the area as underdeveloped and blighted (there is much in the record about gas tanks and filthy industrial uses), and the city was an active enabler of development, to create housing for returning GI’s, and offering substantial resources:

 

It was enabled by various state laws and amendments which permitted private companies to enter what was previously a public field of action. The new public-private partnership, and the contract entered between the city and the developer (the Metropolitan Life Insurance Company), were the source of much debate.

 

Among the issues at stake were use of the power of eminent domain for private purposes; the reversion of public streets and land, such as public school property, to private ownership; the twenty-five year tax exemption granted by the contract; and the rights of the company to discriminate in selecting tenants.

 

A gargantuan architect’s maquette come to life.

In the same year of 1947 that Stuyvesant Town opened its doors, New York City enacted rent control, as a “temporary, emergency measure” to deal with the extreme price spike (as they saw it) cause by the high demand of returning servicemen. Today, sixty years later, both are still with us, their fates now even more ironically joined. Stuyvsant Town, completed after rent control’s enactment, was thereby exempted (and probably thought itself safe), but it was ensnared in the 1974 rent stabilization legislation (rent control by another name) that entangles it today:

 

For now, those with apartments stabilized by rent law are in little jeopardy of losing their homes. No matter who takes over, only units that rent for $2,000 a month or more, and are occupied by those with incomes of at least $175,000 for two consecutive years, can be raised to market rates.

 

 

Opines the Times: “Children like Alana Jones, who is 15 months old, have played a big part in the life of Stuyvesant Town since it was built in the 1940’s. But many residents wonder how long middle-class families can afford to live there.”

 

Should one infer from the Times’s caption that upper-income families have no children of their own?

Who knows what it’s worth?

 

Just giving you a target to shoot at

 

The $5 billion number has been floated out there mainly to anchor everyone’s perceptions, from residents to policy makers to buyers, but the calculations will be complex:

August 31, 2006 — METLIFE hopes to get $5 billion for Stuyvesant Town and Peter Cooper Village - but don’t be shocked if it settles for as little as $1 billion less.

Shucks, there’s no particular reason to think that even $4 billion is a floor. Let’s drill down on the numbers.

 

Make sure your keyboard is out of the way

Stuyvesant has 11,232 apartments and 100,000 square feet of commercial space. Price the commercial space at $1,000 a square foot and there’s $0.1 billion. (Might as well use billions for clarity and limitations on significant digits.)

For the moment, let’s wish away rent regulation,

 

That was easy!

since that is the end state that buyers will be envisioned, after an enormously lengthy, complicated, contentious, and expensive thrash. What would 11,232 apartments be worth if totally market?

 

Lacking better information, I counted entries from the map, and decided there were 90 cruciform stacks in Stuyvesant Town and 20 in Peter Cooper Village. With 110 buildings encompassing 11,232 apartments, that’s roughly 102 apartments per building. So for simplicity, we’ll use 2,040 apartments in Peter Cooper Village, 9,192 in Stuyvesant Town.

 

According my quick calculations based on the floor plans, and assuming an equal distribution of apartment types, apartments in Peter Cooper Village average 965 square feet (810 for a 1-BR and 1,120 for a 2-BR), and in Stuyvesant Town they average 790 (720 for a 1-BR, 680 for the cozy 1-BR-cov, 835 for a 2-BR, and 910 for a 3-BR).

Market condos and co-ops in Manhattan sell for somewhere between $750 and $1,000 a square foot.

This yields us the following little table:

Thus, if Stuyvesant Town and Peter Cooper Village were fully market today — completely unregulated, completely improved, market-competitive — they’d be worth somewhere between $7.5 and $9.0 billion.

 

That, as a former client of mine who grew up in Oklahoma would have said, is enough to say grace over.

 

“And please, let us convert this turkey to market as quickly as possible.”

 

Why then is Met Life tossing this beauty into the system at the low, low, bargain price of $5 billion — and likely to settle more quite a bit less than that?

[Continued in Part 3, 4, and 5.]

Send post as PDF to