Affordable Housing Institute : US

No, not your humble narrator – rather one of the many namesakes that we who have such a common name experience.  [I was once invited to attend a gathering of the members of the David Smith Society – no joke! – for whom there was only one qualification – to be named David Smith.  We saved a fortune on name tags. --- Ed.]

 

A houser ’til his death: Dave Smith

 

This David Smith – who evidently answered to Dave, which I do not – was a long-time affordable housing advocate in New York City, home of Jane Jacobs as well as the birthplace of American apartment living and of the American co-op. 

 

David L. Smith, a leader in the nation’s co-operative housing movement and locally in the Penn South co-op, where he lived for 46 years and served as president and chairman for more than two decades, died Sat., March 14, at age 90.

 

As told by this affectionate obituary in The Villager, his life story reveals one of the great policy issues regarding affordable housing, and a subtle unpleasant truth about how it was answered.

 

A champion of affordable housing and active in civil liberties and the labor union movement over the years, Dave Smith was also a member of Community Board 4, which covers Chelsea and Clinton, in the 1980s. He was president of the District 2 School Board in 1968, when he supported community control of local schools.

 

Dave Smith, exhorting the residents to stay the course

 

But he often said his proudest achievement was his successful effort in 1986 to convince a majority of residents of the 2,820 apartments of Penn South to vote by a large margin to keep the complex a nonprofit co-op and reject the idea of allowing co-op shares to be sold at market rate.

 

Here’s the two-part policy issue: (1) should affordability be preserved, and (2) for whom?

Penn South, from the Empire State Building

 

By his actions Dave Smith, staunch laborite, answered those questions (1) Yes, and (2) for those who move in first.

 

Ironically, Penn South’s future was determined – as the twig is bent, so shall the tree lean – fifteen years earlier, when newly-married, newly-demobilized Navy man Dave Smith and his young bride moved into another celebrated urban-renewal property in Manhattan:

 

The Smiths lived in Stuyvesant Town, built as affordable housing for returning veterans by Metropolitan Life Insurance Co., from 1947 to 1962.

 

[No doubt he was irate at Met Life's 2006 sale of Stuy Town, and would taken not a little glee from the financial difficulties of its buyers. – Ed.]

 

They were leaders in the committee to integrate the segregated housing complex on the East Side between 14th and 23rd Sts., and they helped the first black family to move into Stuyvesant Town in 1949.

 

Good for them.

 

“Their lawyer was Paul O’Dwyer,” said Karen, referring to the late civil rights lawyer who was Mayor William O’Dwyer’s brother and later was elected City Council president in the 1960s.

 

Fighting for the right to wear acetate shirts: Paul O’Dwyer, 1970

 

Dave Smith later led a rent strike at Stuyvesant Town,

 

Depending on the facts, I might well have been on the other side of that issue from him.

 

which resulted in Met Life’s refusing the Smiths a lease,

 

… which sounds questionable unless Met Life found Dave Smith to have breached his lease by non-payment:

 

and prompted the family’s move in 1962 to the newly built Mutual Redevelopment Houses, Inc. — known familiarly as Penn South and financed by the government and the International Ladies Garment Workers Union.

 

“So look for/ the union label/”

 

Built in the early Sixties (and dedicated by President John F. Kennedy in 1962; see this nifty timeline),

 

The groundbreaking of Penn South: ask what you can do for your co-op

 

Penn South is today spectacularly well located, between Eighth and Ninth Avenues and 23rd through 27th Streets in Manhattan, a handful of blocks from Penn Station/ Madison Square Garden.

 

A cluster of buildings in Manhattan’s heart

 

From the beginning, Dave Smith focused on giving the residents control over their own destiny:

 

“He insisted that the co-operators should be on the board of directors — not just the union leaders,” said Karen Smith.

 

That was a watershed moment.  Any preferred benefit is susceptible to capture from those in power (thanks, Kofi Annan, for those rent-stabilized apartments), and Dave Smith insisted that residents have their own voice and control their own destiny. 

 

In 1972 when residents controlled the Penn South board [I deduce that it was a decade before the union's leaders were gradually rotated out – Ed.], Dave became board president, holding that post until 1992 when he was elected chairperson.

 

Because Dave Smith won that fight, and his later 1986 battle to keep Penn South limited-equity, co-op resale prices are controlled:

 

Q: What does it cost to purchase shares for an apartment in Penn South?

 

A: The current equity as of January 2009, is approximately $11,000 per room. Thus a 3.5 room apartment (one bedroom, kitchen, living room and foyer) would be approximately $38,500.  Equity may be financed up to 50% with an approved institutional lender taking a security interest. The Penn South Credit Union is an approved lender.  [Some other time, I'll post about credit unions, as this is an interesting one. – Ed..]

 

Where else could you buy a beautifully located 1-BR in Manhattan for $38,500?

 

Moreover, because it has rigorously preserved affordability, Penn South sets its rents on a cost-based method.  As a result, Penn South is a huge rent bargain:

 

Q: What is the maximum allowable income for an apartment in Penn South?

 

A:  Maximum allowable income for an apartment is calculated on a formula set by the New York City Department of Housing Preservation and Development (HPD). Annual (monthly x 12) carrying charges, plus a $55 allowance per room for painting and repairs, electricity charges, six percent of equity paid and six percent of Debenture Bonds (for cooperators who own bonds) are totaled and multiplied by eight to arrive at annual allowable income.

 

Since income < 8x rent, rent > 12.5% of income.  Considering that the affordability standard is 30% of income, this is an enormous bargain, and in fact income limited could be half as high as these and still meet the affordability targets. 

Applicants with income up to 50% above maximum allowable income will be eligible for an apartment but will be subject to a surcharge. Because equity varies by apartment and from year to year, we cannot estimate the actual equity to be paid until the time when you are called for a specific apartment.

 

By adhering to these deep affordability targets, the residents of Penn South eschewed substantial monetary benefit:

 

“It wasn’t a forgone conclusion,” his daughter Karen, a Manhattan Civil Court judge, told The Villager at an informal reception in her father’s memory in the Penn South community room on March 17.

 

The honorable Karen Smith

 

Nor was their choice without consequences, both demographic and personal:

 

“Some board of directors’ members wanted to go to market rate, but my dad went from door to door and asked people if the middle-income co-op, built with union and public funds and dedicated to working people, should become a place where only the well-to-do could live,” she said.

 

There’s the core issue – for whom was the co-op built, and for whom should it be maintained? 

 

It was a defining moment. 

 

Time to choose

 

The road not taken

 

The co-op again voted to reject the option of converting to market rate in 1991.

 

Had Penn South voted to decontrol prices, they would have gone sky-high.  The location is superb.  The original residents, as they sold their shares, would have reaped plenty of money to relocate elsewhere.  Many, many of them would have moved.  The co-op’s character would have changed entirely, and it would have been home to many more young professionals working on Manhattan.

 

The road taken

 

Instead of yuppie heaven, Penn South became – what?

 

Under his leadership, Penn South built a co-generation power plant in 1986 providing electric power, heating and cooling for the complex.

 

Again, good for them.  It’s not absolutely clear that this was a cost-effective use of their resources – do we really need a localized power plant? – but there’s no doubt that they had the resources because the rents were so low.

 

In 1991, when three-quarters of the 6,200 residents were over age 60 and the co-op was evolving into a naturally occurring retirement community, or NORC, Dave Smith was instrumental in generating public funding to provide services for seniors.

 

In case you’re wondering, Naturally Occurring Retirement Community (NORC), is a term to describe a phenomenon, and Penn South is an archetypal NORC:

 

Senior residents of Penn South had the weather on their side on Sun. Sept. 17 at the celebration of the 20th anniversary of the Penn South Program for Seniors on W. 26th St. between Eighth and Ninth Aves. Three generations of Penn South residents gathered for the event. Declared a NORC (naturally occurring retirement community) in 1986, the limited-equity co-op’s support service for seniors has been the model for others in the five boroughs.

 

2006: gathering of Penn South seniors

 

He was a member of the National Cooperative Business Association and was honored by the group in 1989. Inducted into the Co-op Hall of Fame in 1995, he had also earned the Co-operative Spirit Award in 1994. Last November, he earned the National Association of Housing Cooperatives’ Jerry Voorhis Award for lifelong contributions to co-operative housing.

 

Among Richard Nixon’s first targets for red-baiting demonization: Jerry Voorhis

 

He made a living most of his life as a salesman, first for Electrolux vacuum cleaners and then as an associate of a group that made and marketed molded shoes.

 

As a kid, I remember Electrolux.  They were the coolest vacuums imaginable, Space Age.

 

Send your dirt into space with an Electrolux

 

A major disappointment came in 1996 when co-operators voted down his proposal for an assisted-living residence on the site of the Penn South parking lot on 26th Street.

 

I promised a subtle unpleasant truth, and it is this: When you keep rents really low, people do not move, and gradually your property ages … as do its residents.  Nobody moves:

 

Q: When the waiting list was updated, I noticed that my number on the list went from a lower number to a higher number, that is, the number of applicants ahead of me on the list increased instead of decreased. How is that possible?

 

A:  In June of 2005, the housing company re-activated all those applicants who had been on “freeze” for 5 years or longer. These people were automatically reinstated on the waiting lists in their original order. Therefore, those applicants added in later years will fall back on the list as applicants are reactivated.

 

You have to read that a couple of times to get its full import.  The waiting list was so long that they froze it for people who had already been waiting five years or longer!  Talk about labor immobility.

 

I’ve previously posted about struldbrug buildings that outlive their utility yet cannot be demolished.  That is a NORC – not ‘naturally occurring,’ but rather a direct consequence of the interruption of turnover resulting from house-locking people into a fantastic rental bargain that they cannot monetize or transport with them.

 

Allow me to return to the original question; for whom are we building the co-op?  Dave Smith’s dream was an affordable community serving a broad constituency in lower Manhattan.  What he secured was an affordable community serving a narrow, and aging, community in lower Manhattan.  Instead of enabling a cohort of people to grow rich from the real estate, he helped enable a cohort of people to grow old in the same place. 

 

Either way, a few first movers gain most of the benefits, just in kind rather than in cash.

 

Two roads converged in a yellow wood

 

“And I took the one less invested in/

And that has made all the difference”

 

Thus both roads available to Dave Smith led to the enrichment of first movers.  His road, the road of preservation, at least keeps the apartments affordable, so that when age catches up with the first movers, the next movers will have an unbelievably affordable place to live. 

 

Neither, I suspect, is the vision Dave Smith had that wintry day in 1962.

 

Age eventually caught up with Dave Smith too:

 

Two years later at the age of 80 he lost re-election as chairperson of Penn South’s board of directors.

 

He took it manfully:

 

When he lost the election as chairperson, he told The Villager that he was disappointed, but pledged to serve co-operators whenever they needed him.

 

“When co-operators need someone to represent them before city and state agencies, I’ll be there for them,” he said.

 

Honoring an original Southie
David L. Smith, former president of the Penn South co-op complex in Chelsea and a longtime leader in the co-op housing movement, gets a handshake from Congressmember Anthony Weiner as Smith’s daughter, Judge Karen Smith, looks on. Smith received the National Association of Housing Cooperative’s Jerry Voorhis Memorial Award for his lifetime contribution to cooperative housing at a gala reception with more than 100 people attending on Sun., Nov. 16. Smith, one of the original residents of Penn South in 1962, had just celebrated his 90th birthday two days earlier [November 14, 2008 – Ed.]. He spoke with pride of Penn South residents’ vote 10 years ago to remain a limited equity co-op.

 

David L. Smith and Anthony Weiner

 

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