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BLUEPRINT FOR GENTRIFICATION:

De Blasio’s Affordable Housing Plan:

Megatowers, Apartments that we Can’t Afford, and More Power to

Goldman Sachs!


By A. Kronstadt



The predominant ideology among New York City politicians today is that the word “gentrification” is obsolete because present-day housing policy aims to create diversity and balance in communities and avoid displacement.

According to this paradigm, the administration of mayor Bill de Blasio has devised the brilliant strategy of getting developers to provide a certain percentage of “affordable” housing along with an always higher percentage of market rate housing via the incentives of tax breaks, off-site rights that let them build higher and more densely, and re-zoning, allowing mega-projects in areas that were formerly zoned only for more human-scale development.


AREA MEDIAN INCOME: THE CURSE OF BEING POOR IN A RICH CITY


In every case where a developer is including 20-50% of so-called “affordable” (in other words “sub-market-rate”) housing in a project, the smallest number of apartments goes to those officially described as “low income” with a household income less than 40% of the Area Median Income [AMI], who need affordable housing the most. A higher number of units goes to “moderate income” people whose household incomes fall within the 40-80% of AMI range. A number somewhere in-between goes to people who make up to 125% of the AMI, and, in some instances, more. These “sub-market-rate” apartments are only 20-50% of the building or project as a whole, while the rest are “market-rate”.

Area Median Income is calculated statistically each year and is scaled by the number of family members. For 2018, the AMI for New York City was $93,900 per year for a three-person household (meaning that this is 100% of AMI). What this boils down to is that typically there are far more ‘affordable’ apartments for persons making 80% of $93,900, or $70,000 per year, than there are for equal-sized households making 40% of $93,900, or $35,000 per year. So far, this may not sound so bad because there are bus drivers and teachers making $70,000 to $93,900 per year, and the inhuman and inhumane NYC housing market is running these working people out of the city along with everyone else, though people making $35,000 per year or less are being run out the fastest. Crain’s New York has estimated that only 14% of the apartments produced so far under de Blasio’s plan have been designated for families making $24,500 per year or less.

However, the story gets worse, because some of these developments touted as “affordable” include apartments for officially defined “middle income” people making up to 125% of the AMI, which translates to 125% of $93,900 or $117,000 per year for a family of three using the figures above.

For example, the luxurious 242 Broome Street tower in the Essex Crossing development on the Lower East Side offers sub-market-rate condos by lottery to those with annual incomes ranging from $85,000 to $117,375, scaled for a family of three. The price: $224,861 for a one-bedroom deluxe apartment that would sell at a market rate of $1,300,000. This is certainly not an effort to house the homeless, or even to keep the lower middle class in the city, but an effort to draw higher-income people into an area that the real estate industry thinks has too many poor people. This is what we call liberal gentrification.

Let us also keep in mind that the AMI is not determined on a neighborhood-by-neighborhood basis, but that the $93,900 per year sum is calculated based on New York City as a whole, along with Westchester, Putnam, and Rockland counties. It makes no distinction between the median income of homeowners and renters. It lumps the whole upper crust of New York and its most prosperous suburbs in with the poorest among us. Furthermore, and here is the real crux of the problem, most of the developments that include so-called affordable units are in areas where the effective median income is far lower than $93,900 per year. For example, there are buildings in Harlem and Brownsville where cut-rate apartments are being offered to people in the 100% AMI bracket-- $93,900 per year -- or higher. What other purpose could such an offer serve except to draw the well-to-do into these under-gentrified neighborhoods?

The numbers defining what is affordable go back to Republican Mayor Michael Bloomberg’s New Housing Marketplace Plan (NHMP), and, although de Blasio touts himself as a progressive, he has not shifted the figures in favor of low-income people at all. Under Bloomberg’s housing plan, it was assumed that those making under 40% of AMI would need the subsidized housing least, since it was that demographic that already received the greatest proportion of housing subsidies. The logic of this is twisted: it is tantamount to saying that those who need housing the most have gotten enough and it is time to give something to those who need it less. Twisted or not, the idea was quintessential Bloomberg; Bloomberg was a naked gentrifier whose Rent Guidelines Board tacked a surcharge onto rents under $1000 per month in order to push the poor out of the city, while de Blasio wants us to believe that he is trying to help low-income people stay here. However, de Blasio’s ostensible affordable housing program is based on the same figures as Bloomberg’s and therefore must be presumed to have the same purpose — to push the poor out of low-income areas and replace them with a population that the government and developers deem more desirable.

Another deceptive element when judging whether de Blasio is fulfilling his ostensible mission of housing the poor is that in many cases, the land on which these developments -- featuring 20% or 50% or whatever percentage of sub-market rate housing -- are being built was originally earmarked by city planners and community representatives for 100% genuinely affordable housing. For example, both the Seward Park and Two Bridges urban renewal sites on the Lower East Side of Manhattan were originally supposed to be developed for low-income people, starting with the residents who were originally displaced from the sites when blocks of low-income tenements were demolished in the name of so-called “slum clearance” in the 1960s. However, both of these urban renewal areas were kept empty by politicians and poverty pimps who came to control them, and are now venues for mega-projects that are transforming huge swaths of the Lower East Side into playgrounds for the super-rich and investments for speculators from the four corners of the earth.

Some of these for-profit developments are transforming open space on the grounds of NYCHA [New York City Housing Authority] public housing projects into new housing that is predominantly market rate, with a half-assed dash of so-called affordable housing thrown in. For example, at the Chelsea-Elliot low-income housing project, which is located in the highly-gentrified Chelsea neighborhood on the West Side of Manhattan, a parking lot intended for the use of the tenants became the site of the Elliot-Chelsea, a luxury building which the city advertises as ‘100% affordable’. Built under the New Housing Opportunities Program of the New York City Housing Development Corporation [HDC], two-thirds of the apartments in the building rent for over $2000 per month and are limited to families making over $100,000 annually, with less than one-fourth available to families making less than $38,400 per year. Openings were recently advertised on the waiting list for two-bedroom apartments at the Elliot-Chelsea for $4,245 to $4,295 per month for families with incomes ranging from $147,600 to $256,080 annually.

As the open space had originally been intended to contribute to the quality of life of the people living in the projects, not to house people from outside the community with higher incomes, this cannot be interpreted as anything else but a step backward in the efforts to house those who need it the most, combined with an effort to push the envelope of gentrification.

The only way to get an idea of what is going on is to look at rents being offered at some developments in lower-income areas throughout the city. Nehemiah Spring Creek in East New York Brooklyn was built under the Extremely Low and Low-Income Affordability [ELLA] program of both the New York City Housing Development Corporation [HDC] and the New York City Department of Housing and Preservation and Development [HPD]. 143 newly-constructed apartments are being offered.

East New York has a median household income of $35,809. This amounts to $35,809 ÷ $93,900 = 38% of the AMI as defined above. A total of 32 apartments are reserved for households making either 30% or 40% of the AMI. 16 more apartments are available to households making 50% of the AMI, but 95 apartments are offered to people making 60% to 90% of the AMI, with 40 two-bedroom apartments being offered to households making $75,000 to $93,870 per year. The take-home message is that 90 ÷ 143 = 62% of the units in Nehemiah Spring Creek, which, according to the terms of the now-discontinued ELLA program, does not include any explicitly market rate apartments, are intended to attract higher-income people from outside East New York who are willing to act as gentrifiers in order to improve their housing situation.

Turning to East Harlem, a low-income area of Manhattan that is under stronger gentrification pressure than East New York, The Gilbert on First, built under the city’s Mix and Match program, offers 144 apartments. Median household income in the East Harlem area is $42,010 per year. $42,010 ÷ $93,900 = 44.7% of the AMI. 46 apartments are offered to households making up to 50% of the AMI, 38 apartments to households making 60% of AMI, 11 to households making 100% of AMI, 19 to those making 130% of AMI, and 30 to those making a whopping 165% of AMI, with 3-bedroom apartments being offered to households making up to $199,650 per year. Accordingly, 68% of the units at the Gilbert are intended to suck in a richer class of people from outside the neighborhood.


ALICIA GLEN AND THE GOLDMAN SACHS CONNECTION


Some people who work for the city as core decision makers also work for the private finance industry, most notably for stockbroker- turned- megabank Goldman Sachs. Some have shifted back and forth between the city and Goldman as their employers.

One such person is Alicia Glen, who, from 2013 until early 2019, was de Blasio’s Deputy Mayor for Housing and Economic Development. The Real Deal website dubbed Glen as “City Hall’s Goldman Girl.” Before joining the de Blasio administration, Glen had been the head of Goldman’s Urban Investment Group, which is the department in charge of “social impact” projects financed by the bank.

Banks are required to document a certain amount of investment in “their local communities” under the terms of the Community Reinvestment Act of 1978, a well-intended piece of legislation aimed at stopping “redlining” or dis-investment in areas considered risky, where there were many low-income home owners. Banks had to be forced to invest in low-income areas due to “white flight” and the withdrawal of capital from inner cities. In New York City in those days, some landlords preferred to burn buildings down for insurance money or just let them rot, rather than put money into housing occupied by people paying low rents. However, as inner-city land values began soaring in the 1980s, the obligation to invest in low-income areas became much more congenial for banks.

Although Alicia Glen supervised such public-relations-friendly Goldman investments as the CitiBike project, much of her activity at the bank had to do with Bloomberg-era redevelopment projects such as the industrial park at the Brooklyn Navy Yard and the renovation of the old Loews Kings movie theater in Brooklyn into a music venue. In those days, Ms. Glen was already pioneering the idea of cloaking gentrification projects as socially responsible investment.

It was at Goldman Sachs, when Bloomberg was still mayor, that Alicia Glen refined the scam of construing investment in extensive for-profit developments as “impact investments” in struggling local communities. As deputy mayor, Glen, along with her not-so-former colleagues at Goldman, arranged tax breaks for and shifted lot after lot of city-owned land to real estate developers at nominal prices as incentives, though they were unnecessary, since the projects receiving those breaks were super-profitable and would have gone forward without them. The small amount of less-than-market-rate housing included in those projects served to justify these thinly-disguised giveaways to the private sector.

While still managing director of Goldman’s Urban Investment Group, Glen teamed up with developers and city officials to broker the construction of several projects that she would continue to officiate over as deputy mayor. The 249-unit Kalahari on 116th Street in Harlem is a prime example of Glen’s mobilization of Goldman Sachs money -- not to provide low-income housing, but to gentrify a major crossroads of Harlem. Glen arranged an $8.2 million “mezzanine financing” deal guaranteeing Goldman equity rights over the building in the event of a default. As a condominium, Kalahari has a two-tiered pricing system: market rate apartments go for $800,000 each. 120 apartments are intended for “cops and teachers,” which will run for about $250,000 dollars each. No housing for low-income people (which is be defined by the city as people earning $30,000 to $40,000 per year) is provided. The objective effect of this is that income levels in the area are increased, making everything else more expensive. Goldman’s investments are therefore promoting gentrification, rather than affordable housing.

GOLDMAN SACHS, LIBERAL GENTRIFIERS, AND CITY HALL


The Kalahari project illustrates the new trinity of powers driving the construction of real-estate mega-projects in New York City today: FINANCE, coming from Goldman Sachs, GOVERNMENT COMPLICITY from de Blasio’s City Hall, and “LIBERAL DEVELOPERS” like Ron Moelis, the “King of Affordable Housing.”

Moelis is not only a proprietor of the multi-billion dollar L & M Development Partners, but he is also the founder and main endower of the Moelis Institute for Affordable Housing Policy, which is a division of the Furman Center for Real Estate and Public Policy at New York University. The Moelis Institute serves as a think tank, touting itself as an institution functioning in the public interest, but, in fact, it is an arm of NYU’s real estate school, with NYU itself being one the biggest and most destructive landlords in downtown Manhattan.

In April 2019, Alicia Glen stepped down as Deputy Mayor for Housing and Economic Development and was replaced by Vicki Been, who, since 2017, had been the Director of the Furman Center at NYU. From 2014 to 2017, Been worked alongside Glen as commissioner with the City’s Department of Housing Preservation and Development. De Blasio’s housing bureaucrats are literally all cut from the same piece of expensive cloth.

Alicia Glen herself has been investing, or at least trying to invest her personal money in, market-rate apartments in some of the very buildings which she has brokered construction for, both as a Goldman exec and as a city bureaucrat. In January 2014, Glen and her media attorney husband Daniel Rayner placed a deposit on a two-bedroom apartment in the Adeline, a building constructed by L & M Development, with financing from Goldman Sachs, also in Harlem, not far from the Kalahari. At the time, Glen already owned an apartment in the Kalahari itself. However, after the NYC Conflicts of Interest Board told Glen that she would have to recuse herself as Deputy Mayor from any decisions involving L & M or Ron Moelis, she withdrew from the deal. The Board did not order her to give up her condo at the Kalahari because they determined that L & M had finished its job there and was no longer involved with the building.

Yet another project in which Alicia Glen and Ron Moelis collaborated, that started when Glen was still at Goldman Sachs and continued into her tenure as Deputy Mayor, is the Essex Crossing project, which was detailed in SHADOW #61. At Essex Crossing, the SHADOW found that Moelis’ L & M Development Corporation partnered with Donald Capoccia’s BFC Corporation. Capoccia is on the board of directors of the Moelis Institute at NYU, and is also a partner in L & M Development. It is no surprise that Goldman is invested in this “social impact” project, brokered by Alicia Glen and her Urban Investment Group to the tune of $500,000,000, giving it 85% equity. This means that Goldman gets to snap up the property in the event of any default on the part of the developers.

The more low-income an area in which an L & M Development Partners project is located, the more obvious is their intent to gentrify, rather than to house residents already living there.

In Brownsville, Brooklyn, where neighborhood median income is $25,677 per year, L & M purchased a distressed 1970s Mitchell-Lama development, Marcus Garvey Village, consisting of 625 units, for $98.6 million. The units were all designated as truly affordable housing many decades ago -- by renovating the apartments, L & M was not adding any affordable housing to the city affordable housing stock, but merely renovating existing units that had been allowed to decay. This is part of the deception behind de Blasio’s plan to build 200,000 affordable units.

DON’T CAST SHADE ON OUR NEIGHBORHOOD!:

CHINATOWN BATTLES MEGATOWERS


The “impact” planned by Goldman Sachs, developers like Moelis, and city officials like Alicia Glen is being executed by way of an intimate and incestuous intertwining of public and private sectors. The trinity of liberal gentrifiers is now moving in on the Two Bridges area to the south and east of Essex Crossing, on the margin of the financial district.

The population of Two Bridges, between the Brooklyn and Manhattan bridges, where Chinatown grades off into an area accommodating some of New York’s oldest housing projects, is more low-income and working class than the highly-gentrified adjacent East Village and Lower East Side.

In the 1950s and 1960s, slum clearance projects resulted in the demolition of dozens of buildings and creation of the Two Bridges Urban Renewal Area. Struggles over land use there ensued, leading to the formation of the Two Bridges Neighborhood Council in the city projects along Cherry and Water Streets, to fight against attempts to extend the financial district into Two Bridges. A wave of activism forced the relocation of a planned new Bell Telephone building and spearheaded financing for low-income housing and housing for seniors.


Most notably, the Neighborhood Council was responsible for establishing a sprawling Pathmark supermarket at the corner of Pike and South Streets, intended to improve the access of low-income Two Bridges residents to affordable better-quality groceries. In Harlem, the Abyssinian Baptist Church and other community organizations struck a similar deal to establish a large Pathmark supermarket on a large site that they owned on the far east end of 125th Street.

The Two Bridges Pathmark abruptly closed in 2013, leaving a supermarket vacuum in the area. The massive site on which it was located was quickly sold to Extell Development, noted for constructing several “too-tall” towers throughout NYC. Extell had been seeking the site since at least 2007. The Harlem Pathmark closed in 2015 – the site was promptly sold to Extell as well. The Abyssinian Baptist Church unloaded the property without the consent of other non-profits who co-owned the site, attributing the closures to the financial troubles of the Pathmark Corporation, as did the Two Bridges Neighborhood Council. To most observers, those two massive sites being snapped up by the same developer specializing in buildings in the 800-foot plus range was unlikely to have been coincidental. As of this writing, the Harlem Pathmark site remains vacant.

The Two Bridges Pathmark site at 250 South Street is now the location of “One Manhattan Square”, an 80-story, 823-foot leviathan featuring 815 condominium units. Curbed New York describes the building as the “height of urban romance.” This yuppie Tower of Babel features an “adult tree house” which is actually a garden several times the area of Gramercy Park spread over five levels, for the exclusive use of its residents. The condos are being primarily marketed to Asian buyers, many of whom have been purchasing them purely as investments and will never taken up residence there. As with other luxury condos and rentals in Lower Manhattan, Extel was able build far higher than zoning would normally allow because One Manhattan Square is accompanied by some below “market rate” housing in a separate building located at 239 Cherry Street.

Due to community opposition to the giant tower, and because the land under the building was sold to Extell by a non-profit, the developers were forced to keep rents at 239 Cherry Street somewhat more affordable, with its 204 apartments being made available to individuals and families, running from $947 per month for a studio to $1230 per month for a two-bedroom. While these apartments are below “market rate”, they are still steep for anyone on a fixed-income, such as Social Security.

The supposedly non-profit Two Bridges Neighborhood Council received $52 million for the Pathmark site from Extell. Having rooted itself in the concerns of an ethnically diverse and primarily low-income community dominated by housing projects, the neighborhood group has itself become a de facto real estate developer, offering additional large former urban renewal sites to developers pr posing more mega-projects. In December 2018, the City Planning Commission approved a 77-story residential complex for 247 Cherry Street, a 62-story apartment building for 259 Clinton Street and a project at 260 South Street comprising two 60-story towers.

The city is trying to fast track the new developments, insisting as they did when approving plans for One Manhattan Square that the new towers would constitute only a “minor modification” to existing zoning regulations in the area and therefore do not require the environmental studies and public participation prescribed by the Uniform Land Use Review Procedure [ULURP].

What the developers and the de Blasio administration are trying to do is to create a mini-city of the wealthy within what has always been a tightly knit community of the poor, permanently shifting the economic life of the neighborhood to another level unaffordable to long-term residents. Although 25-30% of the proposed apartments are slated to be “sub-market rate”, 70-75% would be “market-rate” luxury housing.

Two Bridges is one of the areas in the city where the egregious inequality of de Blasio’s affordable housing is being challenged on a grass-roots level. Local liberal politicians like City Councilmember Margaret Chin, along with old-hat liberal community organizations such as Asian Americans for Equality and Good Old Lower East Side, are making a weak push for re-zoning the area to scale down the projects to some extent, but it is clear that they are not prepared to oppose de Blasio’s liberal gentrification scheme to transform Two Bridges. As has happened with generation after generation on the Lower East Side, however, neighborhood residents have stepped up to bypass politicians and poverty pimps who have been bought off by real estate interests.

Two lawsuits have been filed against the impending projects. One, sponsored by Manhattan Borough President Gale Brewer and the City Council, simply challenges the omission of the ULURP review process, while a much more aggressive suit in the name of several area residents, as well as activists from the National Mobilization Against Sweatshops and the Chinese Staff and Workers Association, argues that the developments are illegal based on existing zoning, and that permits for the projects should be rescinded. On June 5, 2019, Judge Arthur Engoron of the NY State Supreme Court extended an existing injunction against the four proposed new towers. He is expected to rule on whether the decision of the City Planning Commission expediting the towers should be overturned.

Yet another lawsuit has been filed, based on a 32-year-old deed restriction at one of the sites that require it to be used “...in perpetuity for housing for elderly and handicapped persons of low income [as defined under federal law]...”.

Parallel with the lawsuits, activists are putting pressure on politicians with demonstrations in their neighborhood and at City Hall, but they are facing off with an array of powerful developers: JDS Development, Ron Moelis’ L+M Development, CIM Group, and Starrett Corporation.

Will politicians like Margaret Chin who are 100% down with the de Blasio liberal gentrification program listen to these real estate luminaries, or to a bunch of elderly people and low-income project residents who have lived in the Two Bridges area for all of their lives?

Community opposition has thwarted up-zoning in other neighborhoods such as Inwood, while contentious residents of the Lower East Side have defeated previously-planned mega-projects, going back to the days of power broker Robert Moses in the 1960s.

If we are not bought out by the meager pittance of affordable housing that they want us to trade our community and environment for, we may stand more than a chance of succeeding.