The Streets Were Paved with Gold (9 page)
Read The Streets Were Paved with Gold Online
Authors: Ken Auletta
There was business logic to the plan. From a profit-making point of view, the crowded lofts and tenements and small factories were inefficient. Greater profits could be generated from high-rise buildings housing many more rent-paying tenants and businesses. The highways made for cheaper truck transportation. In a free economy, it was not surprising to see landlords and developers act in their own interest. Perhaps a socialist system, intent on development, would have made similar decisions—with the buildings even uglier, a tomb to proletarian solidarity rather than an ice-skating rink in Rockefeller Center. But the demands of profits and growth inevitably clashed with neighborhoods and a sense of community.
Public officials, spurred on by a plethora of developers, construction unions, lawyers, insurance agents and patronage-hungry political
leaders, plunged ahead. In the 1930’s, the federal government financed private homes by creating the Federal Housing Administration to stimulate the flow of money into home mortgages. This effort was interrupted by World War II, but then on June 22, 1944, President Roosevelt signed into law the GI Bill of Rights. The federal government now offered 4 percent home loans to veterans, with no down payment required. Thus the American dream to own a home led to massive federal assistance to fulfill that dream. Implicitly, government was saying:
We invite you to the suburbs.
Millions took advantage of that offer and of subsequent home and education loan gifts. Statistics on file with the federal Veterans Administration in Washington reveal the impact of these loans. According to Robert C. Coon, the VA Director of Home Loans, the suburban New York county of Nassau has received more home loans (162,669) since 1944 than all of New York City combined (146,691). Over thirty-three years, Manhattan received 351 home loans; suburban Suffolk County, 76,543. The Bronx received 9,927; its northern neighbor, suburban Westchester, three times that number (29,660). The city government had no plan to retain middle- and upper-income residents; the federal government had no plan to cope with the consequences of its policies.
Government also made it possible for people to get to their new homes. On January 16, 1955, the Triboro Bridge and Tunnel Authority and the Port Authority agreed to a $1.2 billion scheme to construct a second deck on the George Washington Bridge and miles of new bridge approaches and roads that would bulldoze neighborhoods. The architect of this scheme was Robert Moses, who borrowed from the first regional plan. As Robert Caro observes in
The Power Broker
, his masterful biography of Moses, the pact “sealed, perhaps for centuries, the future of New York and its suburbs.” It stimulated new road construction. Visions of sugarplums danced before the eyes of the establishment. The banks thought of the bonds to be sold; the construction unions, of the jobs to be created; the law firms and politicians, of the legal fees and insurance premiums; the real-estate interests, of the enhanced value of their Manhattan properties.
Had that money been spent on mass transit, New York might today be a very different place. Caro calculates that the same $1.2 billion could have completely modernized the city’s subway system and the Long Island Railroad (purchasing land along the Long Island Expressway to allow trains to speed in and out of the city at
speeds of 80 miles per hour), which would have lessened the city’s dependence on the automobile.
But the automobile was the wave of the future. On June 29, 1956, the Federal Highway Trust Fund was created. Over the next twenty-one years, $90 billion was raised and $80 billion spent on 38,000 miles of new federal highways, with $2.2 billion of that total spent in New York State to construct 1,246 miles of road. In the program’s first ten years, notes Caro, 439 miles of federal highways were constructed in the city—but not one mile of new subway.
America was transformed. People poured out of cities, creating new markets. Businesses followed. A 1977 study prepared by the Academy for Contemporary Problems for the federal Commerce Department describes why:
In earlier stages of our national development, firms and individuals were willing to pay the higher costs of living and doing business in the Northeast’s centers of high population and economic concentration because the more primitive transportation and communications of an earlier day made such proximity of suppliers, producers, clients and supporting businesses essential. The benefits of close proximity outweighed the costs. But modern transportation, together with electronic communications, have eroded the once-premium advantage of concentration. Instead, they are underwriting a decentralization of our national economy and population.
By 1970, the average household income of the New York City suburbs ($17,062) was more than 50 percent greater than that inside the city ($11,269). In
Breach of Faith
, Theodore H. White sketches the profound impact of highways on America and New York:
… the nation, invited by the new highways to become guzzlers of gasoline, had learned to drive five miles for a six-pack of beer or a pound of butter. Twenty years later, their appetite for driving had become the Energy Crisis.… One can follow the thread of this single Highway Act on to politics: the reasoning behind the Federal Highway Act was so seductive as to melt resistance. It ran thus: the entries to and exits from big cities were so congested that a way had to be created for people to move into and out of such cities easily and to go wherever they wanted to. But where more and more Americans wanted to go was the suburbs; and suburbia was to change American politics just
as much as the opening of the West a century before. The new highways became not simply holiday routes for Fourth of July and Labor Day weekends, or highball expressways to bring food and supplies into the hearts of the cities. They were arteries of a new way of American life.
“Rent control is metaphysical,” sighs George Sternlieb, who has studied it for years. “The subject stops all thinking.” There are many who believe it stopped construction and invited the abandonment of apartments in New York City.
On November 1, 1943, every apartment in America was rent-controlled. To dampen inflation and provide housing for returning veterans, on that day the federal government put a ceiling on rents. It was a temporary act and was rescinded in 1948. For the purpose of preventing speculation and what it called unwarranted and abnormal “increases in rents and evictions during a period of housing emergency,” the State of New York passed its own stringent rent control law in 1950. Meant to be temporary, the law was administered by the
Temporary
State Housing Rent Commission. In 1962, the state granted the city the option to enact its own statute. In February of that year, the city passed a stricter law of its own, stabilizing rent controls and making it more difficult for landlords to raise rents. This law, declared Mayor Wagner, would create a “slumless city.” The government, not the free market, would determine the rent any landlord of a pre-1947 building could charge. For 5 million apartment dwellers, the city was declaring housing an inalienable right. The trouble was that government didn’t subsidize that right; landlords did. Throughout the 1950’s and 1960’s, one across-the-board rent increase was permitted per landlord unless the apartment was vacated or the landlord was willing to claim a hardship and muddle through a bureaucratic maze to win an increase. Being citizens of a free country, landlords were also free to abandon buildings when they became unprofitable.
Rent control, though it protected many poor people, also became another ripoff for the privileged. Taxpayers, for instance, help subsidize Mayor Koch’s $250-a-month, three-room Greenwich Village apartment; its fair market value, says a spokesman for Koch’s landlord, New York University, would be $400 to $450. If Koch and some of his neighbors paid a market rent, the building would
be assessed at a higher rate, which would mean more revenues to the landlord and more real estate taxes to the city.
Arthur Levitt, Jr., president of the American Stock Exchange and son of the tight-fisted state comptroller, also benefits from rent control. He pays $661 a month for an eight-room, high-ceilinged apartment, with a wood-burning fireplace, on East 86th Street. A fair market rental, says his landlord, would be $850 to $1,200 a month. The Stock Exchange president, who is active in the chorus demanding business tax reductions, stumbled when I asked him to justify his cozy rent. “Let me think about that a moment, and exactly how I want to answer it,” he said. “I hate to give you a ‘no comment.’ ” Then, after a long pause: “I pay more rent than half the tenants in the building.” He admitted that the rent was low but said it was “close to market value.” Three times in the last fifteen years, he said, he had voluntarily agreed to hike the rent above the sum required, as his landlord concedes. But he admitted, “It’s not unfair to say that the building is underassessed.”
Dean Alfange, a former American Labor party candidate for governor in 1942 (now a benefactor of horse racing and the state Liberal party), keeps a five-room apartment with a sweeping view on Central Park West in the Sixties. He pays $373 a month. The same apartment, one floor below, rents for $650. It is not controlled. The good doctor on Alfange’s floor also has a controlled apartment. He pays $418 for six rooms overlooking the park, complete with a nice 14½-by-23-foot living room.
Former opera singer and actress Dorothy Sarnoff (she appeared in the original
King and I
) doesn’t have a view, but for the last twenty-four years she has had a rent-controlled apartment on plush Central Park South. Mrs. Sarnoff now operates a thriving speech instruction clinic, charging $1,500 for six hours and $2,500 per lecture. Her rent is $470 a month for an apartment said to be worth $750. Reached in Washington, where she was instructing State Department officials, Mrs. Sarnoff claimed she was paying “a fair rent.” Besides, she wondered, “If rents go higher and higher, where does the middle class go?” When pressed, she admitted she was not a member of that class.
Nor is Nat Sherman. His Fifth Avenue tobacco store rents for $210,000 a year and produces hand-rolled cigars and gold-tipped cigarettes; custom-made pipes sell for as much as $800. The monthly rent for his six-room Central Park West apartment is $355. For thirty-five years he has enjoyed the same apartment,
though he admits to spending five or six months each year basking in Florida’s sunshine. Is this a fair rent? His response: “It happens to be used so little that I think it’s fair. I paid my dues in the early days. If my landlord doesn’t make money, I’ll be glad to pay the difference … I wish you wouldn’t quote me in that area.”
For the last thirty-three years, Mrs. Otto Fuerst has lived in the same Central Park South building as Mrs. Sarnoff. Her two-bedroom apartment rents for $440. The rent control law requires that an apartment serve as a “primary” residence, but that doesn’t bother Mrs. Fuerst, just as it doesn’t bother Mr. Sherman. Mrs. Fuerst admits to spending most of the year alternating between Palm Beach and California. Why? “I think a person of wealth should get anything they can get,” she says. “I’m a parasite. I just spend money.” Then she hung up.
At swank 1085 Park Avenue, an eight-room rent-controlled apartment goes for $640 a month. A six-room apartment rents for $473. At 40 Central Park South, where room service is provided by the St. Moritz Hotel and sleek Rolls-Royces parade in front of the long white canopy, 44 of the 143 apartments are rent-controlled. Ms. Carol Hausamen, the owner, says that if those who could afford it paid a fair rent, the building’s $4.6 million assessment would rise 10 percent. A means test, she guesses, would remove 90 percent of these tenants from rent-control privileges. But the only way to get them off, she jokes, is to “shoot ’em. They go out feet first.”
A lot of shooting would be required to remove all the comfortable people enjoying rent-control privileges in buildings along Central Park West and South, up and down West End Avenue and Riverside Drive, up the East Side, down lower Fifth and upper Park avenues, and across the river in Brooklyn Heights. According to Frank Kristof, vice president of the state Urban Development Corporation and a student of rent control, approximately 15 percent of the current 500,000 rent-control families could afford to pay more. That’s 75,000 families. Daniel Joy, a supporter of rent control and the city’s Commissioner of Rent and Housing Maintenance, agreed: “Whether it’s 14 or 15 percent, that’s the ball park.”
The citizens of New York City pay for rent control. If rich men like Nat Sherman were not in rent-controlled apartments, perhaps more upwardly mobile black families would live on Central Park West rather than move to Scarsdale. In 1975, 1.7 million of the city’s 2.1 million rental units were subjected to some form of rent regulation (either rent control or what is called rent stabilization).
If there were a means test and those in controlled apartments paid a fair rent, the Temporary Commission on City Finances concluded after long study, city real-estate tax coffers would be enriched by $100 million per year. The federal General Accounting Office has said the figure would be twice that. The Commission also calculated that since the inception of rent control landlords have subsidized tenants to the tune of $20 billion. Small wonder that landlords, who felt they were not getting a return on their investment, often abandoned their buildings, removing them from the tax rolls. Between 1960 and 1976, 300,000 housing units were abandoned. And, currently, real-estate tax delinquencies reach almost $1 billion. According to Congressional testimony by Koch’s Housing Commissioner, Nathan Leventhal, “
Only
12 percent of the buildings in arrears showed up on the rent control rosters.” Nevertheless, with rent control a persistent local issue—over the years, city candidates charged their opponents with being soft on landlords as national candidates charged theirs with being soft on communism—it is not surprising that the climate was deemed unsuitable for private housing construction. And the public pays, since financially pressed landlords often cut back on building maintenance, giving many middle-income residents another excuse to leave New York.