city limits magazine-march 1981 vol. 6 no. 3

8/3/2019 City Limits Magazine-March 1981 Vol. 6 No. 3

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LI. MARCH 1981 $1.50 VOL.6 NO.3

Forty-Second Street Saga Pension Dollars for Neighborhoods 'Shopsteading' 'Homesteading'


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URBANVIETNAM

by Howard B. BurchmanVietnam is much on my mind these days. The waythings are going a new military adventure seems almostinevitable. The outburs t of patriotism following thehostage release presaged more dramatic action than thetying of yellow ribbons. The bountiful billions beingpressed on the Pentagon create the momentum for conflict. Urban Vietnam does not speak to military action,however. It speaks to the attitude of arrogance characterized by-one of the more harrowiQg expressions tocome out of the war: "W e had to destroy the village inorder to save it."The extent to which that attitude has characterizedour urban policy is remarkable. What was UrbanRenewal other than a "strategic hamlet" approach applied to urban cores. Urban Renewal hated the areas italleged to be renewing; it loved the money to be madefrom it. More than the cities, it hated the people livingin them. Just so with Vietnam. Cities were destroyedbecause they were in the way of being saved.What is behind the popularity of destruction andrevamping? First, the opportunity to make big money.Second, simplicity. Destruction allows inconvenientrealities to be rooted out rather than acknowledged andresponded to. Third, egotism. The process is egotism

writ large: the obli teration of another creation for theconvenience of asserting one's own personal vision.Despite the disappearance of Urban Renewal as aprogram, the underlying attitude and motivation remain. Given the chance, some federal financing, ablurry image transported from somewhere else and it resurfaces. Now it calls itself urban revitalization, thefederal mechanism is UDAG, and the blurry images arethe South Street Seaport and the Portman Hotel. Thesimilarity between these projects is astonishing. Bothrepresent the wholesale importation of concepts fromaltogether different urban settings. Both will radicallyalter neighborhoods already experiencing their ownmomentum of change. Both greedily demand an unnecessary federal subsidy.The Portman Hotel is clearly the "Westway" ofUDAGs. Has anyone ever wondered how such unnecessarily disruptive schemes manage to get so far? How cana so-called Times Square revitalization destroy threetheatres when theatre is the very thing that should bepreserved and enhanced in that area? Recent experienceshould have more than sufficiently demonstrated thattheatres cannot just be built. The new ones tend to beCITY LIMITS/March 1981 2

vast barns, hated by audiences and performers, andloved by producers who fantasize mind boggling grossesin them. The tawdry hotel planned by Portman with itsflashing lights is nothing but a cheap conceit seeking todominate rather than contribute to the area.And why are boutiques the only means that have beendiscovered to restore historic areas, or ariy other areasfor that matter? Rouse's boutiquery by the Bay joinsnot only his two other identical ventures but also suchplaces as Convent Garden in London, Les Halles inParis, and practically every revitalization planned forevery city. In place of indigenous quality we get theinternationalism of high price consumption. It makesno difference whether the location be New York Bay orBoston Harbor, or the central markets of Europeancities, we have found a new equality in high price goods.

Probably the most upsetting quality of both Portmanand Rouse is their total lack of local identity, their totalunresponsiveness to what is New York. There is nothingthat roots these developments to the locations chosenfor them - indeed, in their own ways they seek to destroy what is already there. In the most stimulating ofurban environments we get cookie cutter development;here's our local Rouse Boutique and Portman Hotel.The level of creative enterprise manifested in these projects is the equivalent of that involved in deciding toopen a McDonalds on 14th Street. What better argument for the dumping of UDAG than these twoprojects? 0

Howard Burchman consults on neighborhood-basedhousing and community development projects.


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EDITORIAL LIMITSHPD Housing Starts Increase,ButWho Benefits And Who Cares?

In what has become an annual bit of fanfare, aCity Hall press release dated January 28, 1981,loudlyproclaimed yet another banner year for HPD underMayor Koch's administration. A combined total of21,776 dwellings units in new construction andrehabilitation were started in calendar year 1980.This record was surpassed only by the rate of new1981 press releases which had reached 27 by January 28th. All the daily papers picked up the story, asthey did last year and the year before. But they failedto ask one basic question - who benefits fromthese figures? Had they asked, it would have beendiscovered the city has no answer.In spite of some sleight of hand in HPD's arithmetic - last year's press release cited only 9,401 rehab ,units in 1979, but this number somehow grew to10,242 units in the interim - the 1980 level of HPDproductivity is impressive. Regardless of what onethinks of HPD's politics, the rehabilitation of 16,137units of housing is no mean feat.Whether this achievement will stand up undercloser scrutiny, however, is another question. Virtually all of the housing rehabilitation initiated by thecity in 1980 is being funded in whole or in part byfederal Community Development funds. A paramount requirement of the CD program is that apartments rehabbed with CD funds be occupied by lowand moderate income families. Ironically, HPD,which has managed to overcome all the logisticalproblems of producing this housing, has not beenable to keep track of who lives there. That is, the Cityof New York proudly spent $123 million on HPD projects last year, bu t has no idea who is living in theseprojects. The city claims that 8A and Participationloans are benefitting low and moderate income people, but in no way can document this benefit. Giventhe record of the city in slighting low income neighborhoods and projects, we can hardly be expectedto take the city's word on this issue.

Although it never made it to the pages of the dailypapers, the City Comptroller's own audit of the 8A3

loan program highlighted this problem an'd characterized HPD claims of benefit as "manifestly illogical:' The Comptroller went on to say that HPD's criteria for documenting benefit "don't even begin tomeet HUD requirements:'It is also worthy of note that those programswhich do directly serve low and moderate incomepeople, such as sweat equity, have been slashedand contr ibute few figures to the Mayor's total.For some reason, when the Mayor sends out apress release on housing statistics, his figures arebroadcast and printed virtually verbatim. Whateverhappened to the idea that there is value in a healthytension between government and the press? Thismay be the only news vehicle you will read that willtell you not only what the Mayor's press releasesaid, but also, perhaps more importantly, what itdidn't say - 0

CITY LIMITS/March 1981


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A Forty-Second Street SagaAt the corner of Forty-Second Street and Tenth Avenue sit five historic apartmentbuildings whose tenants have been buffeted by harassment, foreclosures and fires.With a pricetag of $3 million on the structures, many hands are reaching for them.Tenants, however, can be a stubborn lot. by Susan Baldwin

Tenth Avenue and Forty-second Street.


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W e're not going to move, and that's it. We haveall been through too much, and we can't giveup now. I dare them to try to throw us out," said LarryFlowers, a long-time resident of a turn-of-the centurytenement complex in mid-West Manhattan's Clintonneighborhood where speculation is rife and ruthless tactics to empty buildings in "hot" real estate areas arepracticed freely.Flowers is one of some 40 cantankerous, low incometenant families who are barely surviving in their modesthomes in the 500-block of West 42nd Street at TenthAvenue - a corner that daily becomes more attractiveto sharp operators bent on turning a high profit in quicksales.With the spectre of the convention center, the controversial, high-priced Portman Hotel in Times Square,and generally highly inflated land values in Clintonlooming over this neighborhood, with its long history ofworking class ethnics making their way in the city together, the meaning of this battle to save homesbecomes even more poignant, and raises serious questions about the city's commitment to save decent affordable housing for residents who have persevered during the bad years when these areas were undesirable.

that their days in their homes are limited if they don'tfight back."They would have to offer us at least $1 million each

if they want to get us out," said Flowers as he and ahandful of tenants huddled in the cold on a recent rawday, while a plumber tried to work on the broken pipesleading to a byzantine, over-large, and inefficient boilerthat once used to heat an entire tenement block."We hear all kinds of figures for what they want forthese buildings," said Nancy Kyriacou, the housingorganizer from a neighborhood group - Housing Conservation Coordinators - who has been working withthe tenants since the early 1970s when they first began tobe harassed by unscrupulous landlords and owners - atleast four of whom are under indictment and one hasbeen convicted on arson charges.

According to Kyriacou, asking prices for the propertyrange from $2.7 million, as is, with tenants in occupancy, and $3 million, empty. The Madison Avenue broker- LB Kaye Associates, Ltd. - confirmed these figuresbut refused to identify the owner(.s) and mortgageholder(s).When one indicted arsonist - Ralph Sperling - served as manager, sometenants came home to their apartments to find the front doors ripped from thehinges, combustible materials heaped up in their rooms, and knives stuck intheir mattresses."You can live in a place all your life, nobody wants it,and then you find yourself watching as they suddenlydrive people out, almost over night," asserted OliverGribec, a veteran of the West 42nd Street houses, whohas watched properties around him become boarded-upor demolished as the wave of the future - inflated realestate and quick profits - takes its toll on his neighborhood. "I'm not going to say these were gorgeous buildings, but they certainly were habitable - good solidhouses - before these real estate crooks came around,"he continued, adding, "then we had the typical attack- a lot of fires; someone trying to blow up our boiler; aman freezing to death. And now, two weeks ago, therewas a fire in a mattress in an unoccupied apartment (at502 West 42nd Street), and a former tenant supposedly

was offered $5,000 to move by our latest new owner."Suspicious FiresPlagued by suspicious fires, no heat and water, and,most recently, broken frozen pipes, for more than twoyears, the families, which once numbered 170 before theproperty was taken by the city for non-payment of taxesin May, 1978, and redeemed for $500,000 the followingyear, have lived under a state of siege not knowing frommonth-to-month who owned the buildings or held themortgages. But, what they have known for some time is5

Built as model, fireproof tenements in 1900 by ErnestFlagg, a popular high society architect who 'Yasdedicated to improving urban tenement life, the buildings' design featured the elimination of long dark exterior corridors in favor of larger interior spaces and theinclusion of private bathrooms in each apartment - anamenity unheard of in basic low-cost housing of thetime.The Flagg family held the mortgage until the early1970s when a number of landlords with dubious reputations - Walter Scott, Jacob Fine, Henry Hof, Jr., andhis wife, Henriette, and Milton Herman, to name a few- owned them at some point, skimped on services, andreveled in selling them back and forth to each"other apparently to avoid paying extensive property liens andavail themselves of paper losses for tax purposes.Following a year-long, drawn-out court case and theredemption of the property on a technical proceeding,which could best be described as "murky," in November, 1979, the buildings at 500-506 West 42nd Street and567 Tenth Avenue were reclaimed for convicted arsonistJoseph Bald, head of 500 West 42nd Street Corporation, by his attorney, Kevin Sullivan, a former cityhousing official. They were then quickly turned over tothe Tenth Avenue Development Corporation, whosechief, Henry Roth, owns numerous buildings in the city



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and operates as a shadowy figure in the New York Cityreal estate empire. Sullivan insists that Bald was not hisclient, although such a relationship is listed in cityrecords.Deny KnowledgeAsked about the properties, Roth and his associatesdeny any knowledge of them and abruptly hang up thetelephone when questioned by outsiders. And, according to neighborhood organizers and the buildings' latestcourt-appointed receiver, Seymour Yanowitz, who servesas manager, the "Roth group" as it is known is pushinghard for the buildings to be vacant by spring."Anything that could happen to these tenants alreadyhas," said Kyriacou, adding, "some of the malicious attacks on people here should have ended in jail sentences,but they didn't." When one indicted arsonist- RalphSperling - for instance, was listed as the propertyowner and served as manager last year, Kyriacoureported, some tenants came home to their apartmentsto find the front doors ripped from the hinges, combustible materials heaped up in their rooms, and knivesstuck in their mattresses. The city has charged Sperlingwith harassment and fined him $5,000, but it could notbe determined whether or not he has paid the fine. Also,according to Kyriacou, during this stormy period lastspring, a local daily newspaper called her organizationto report that it had received a tip alluding to the imminent "torching" of the buildings. The tenants spent along holiday weekend on 24-hour guard to save theirhomes.

During the Christmas and New Year holiday season,the tenants narrowly escaped hasty departuresfrom their homes when the fire department attempted tovacate them because the pipes were frozen. They arenow paying for major repairs to the boiler and frozenpipes and sprinkler system with $19,000 from their bankaccount which accrued during past rent strikes and fromAugust to December, 1980, when the first receiver, appointed by the court - Leonard Drucker of BelsonAssociates - made no repairs to the buildings.A recent computer check of the city's records listedKen Passafiume, a Brooklyn landlord also under indictment for arson, as the owner of record of the 500 West42nd Street buildings, noting that there were 60 uncorrected violations on the structures and unpaid backtaxes and water and sewer charges totaling $54,613.87.

City Held TitleDuring the period prior to the redemption when thecity held title to the buildings, the West 42nd Street Development Corporation, a nonprofit local developmentcorporation that is sponsoring work on Theatre RowPhase II in the old West Side Airlines Terminal acrossthe street, sought to negotiate a long term lease with theCITY LIMITS/March 1981 6

city to rehabilitate this parcel as a combination low income (Section 8) and fair market rental facility. The onsite tenant families , according to the plan, were to berelocated in a nearby motel while the rehabilitative workwas being done and then moved back into the apartments as subsidized Section 8 tenants, if they met the income requirements.The redemption precluded this scheme, but the private developer who was approached by the local development corporation two years ago to render plans forthe site, Lewis Futterman, says he is still interested inthe property if the price is right. "There's really no profit in it for me, but because I am committed to this (income) mixture in housing, I might like to give it a try,"Futterman added, noting that he is already doing "openmarket" housing on the old Armory site between 10thand 11th Avenues down the block. Futterman also emphasized that he has already spent $30,000 on plans forthe site and has met several times with the local com Jmunity board.

Thomas Mulcare in his nonjunctioning bathroom at 502 West 42ndStreet. .


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In the meantime, the families continue their salvagework on the properties and are presently talking aboutconsolidating into the five-story, corner walk-up building at 506 West 42nd Street and Tenth Avenue. To makethis move, the tenants are consulting with the city tomake sure that their rent-controlled status will behonored in these replacement apartments."We will feel we have accomplished something in thislong difficult battle if we can get title to this one build

ing:' Kyriacou concluded. "That will leave the otherproperties open for development, and who knows whatthe future will bring? But, we must keep fighting thesedishonest forces that continue to plague us in Clinton.Nothing they do surprises us, and they seem to havenothing to fear. After all, who can bring charges againstthem, and what would these charges be anyway? This isbusiness as usual. And, if there is a law hidden somewhere that forbids this sort of unethical behavior, theybelieve they're above it."I f the tenants are successful in their fight to relocate

into the one building, real estate interests might have toreconsider their plans as this arrangement would removeone of the most valuable parcels from this rather extensive land package.Meanwhile, the broker continues to get n u ~ e r o u s inquiries into what she terms a "discreet" advertisementof the sale of the property, and tenants wonder if theyare wasting their money to try to keep warm for the nextfew months. 0

Ernest Flagg's 1900floor planfo r the buildings.

Correction: Funds for 7-AsIn the February issue of City Limits, in the article "Evicting the Landlord", the description of the

special seed money allowance and revolving fundfor the city's 7-A program was unclear. Since September, 1978, the city has received CommunityDevelopment funds for seed grants of up to$10,000 for 7-A buildings in need of basic repairsthat cannot be covered by the tenants' rent roll. Inorder to speed up payment of contractors whomake building repairs, the Fund for the City ofNew York and the New York Community Trust inJuly, 1980, set up a revolving fund of $50,000

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!/'c/ ~ IIiiIi

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which is used to make these payments within fiveto ten days after the work is completed and passesinspection. In turn, HPD draws on its CD allocation to replenish the revolving fund within a fourto six-week period.To date, the revolving fund has provided$131,133 to 7-A administrators to pay contractors. HPD's 7-A unit received $254,000 in CD seedmoney this year and has already spent about$154,000 of this amount. According to AlbionLiburd, head of the 7-A monitoring unit, hisdepartment hopes to receive somewhere between$750,000 and $1 million for the program this year.

CITY L1MITS/March 1981


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Can Union Pension DollarsHelp

by Daniel McCarthyThe trustees of New York City's public employee pension funds, who hold $12 billion in assets, are currentlypondering several plans that could provide $100 million

or more in financing for housing rehabilitation andsmall business development in the five boroughs. Nomoves have yet been made, but the discussions so farhave pointed up the opportunities - and the obstacles- that confront pension fund managers in attempting ,to meet larger social objectives and still safeguard theirfunds.Today, the five major retirement systems administered by the City of New York jointly comprise the thirdlargest pension system in the nation. These funds havetraditionally been conservatively invested in long-termcorporate bonds and in the stock of major national corporations. Since 1975 the funds have, under politicalpressure, played a major role in averting city bankruptcy through their purchase of city securities.But, as the threat of municipal bankruptcy has re-CITY LIMITS/March 1981

ceded, and as the value of the City's pension assets hasincreased, there has been a growing interest on the partof local unions, city officials and public interest groupsin exploring the feasibility of harnessing some of thisvast wealth to revitalize local neighborhoods.The proposais now under consideration would provide capital at market rates of interest for home mortgages and loans for small business expansion. All of theproposals would employ certain insurance mechanisms,either public or private, to reduce the exposure of thepension funds to the risk of loan defaults. In certaincases, federal subsidies would be used to write down interest costs to borrowers.The recent flurry of activity in New York is a reflection of the growing national interest in pension funds.With $600 billion in assets nationwide, the country'spension funds have simply grown too big to ignore. In asingle generation, pension funds have become the largest single source of investment capital in the U.S. eco-

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Rebuild NY's Neighborhoods?nomy. Pension funds currently own more than 25% ofall common stock traded on the New York and American Stock Exchanges and hold 400/0 of all corporatebonds.Even the investment managers who control thesefunds have been slow to fully recognize the economicpower that has been thrust upon them. At the center ofthe current debate is a larger issue, one which promisesto be the center of American politics in the 1980s: Howmuch public control should be exercised over the allocation of capital resources in the U.S. economy?

Who Would Benefit?The New York City pension issue has brought together local neighborhood groups, Wall Street brokers,pension trustees and union officials in a wide-rangingdiscussion on the finer points of large capital investment. But underlying these discussions are larger issues:Who would benefit from local pension investments?Who should administer such a lending program? Andwhat risk-return criteria should local investments bemeasured against?

Several recent developments have served to bring thepension issue to public attention. Last October, CityComptroller Harrison Goldin issued a report which recommended that the City's pension trustees approve aplan to purchase up to $250 million in Government National Mortgage Association (GNMA) securities as ameans of stimulating the city's housing market. Theseso-called "Ginnie Mae" mortgage-backed securitieswould be assembled from FHA-and VA-insured mortgages on one-to-four family homes in the five boroughs.These mortgages would be originated by local banks,which would then package and sell them to the city'spension funds in the form of securities. The securitieswould pay a market rate of return and carry the guarantee of the federal government. The Comptroller claimedthat his plan - which is typical of proposals offered inother states - would increase mortgage activity andstimulate new construction in the five boroughs.Last December, City Council Member Ruth Messinger, in conjunction with the Municipal Research Institute, released a major 6O-page report on the investmentpolicies of the City's pension funds. The report recommended that the City's five major pension systems allocate one per cent of their assets, up to $100 million, to aNeighborhood Reinvestment Fund that would financelocal housing rehabilitation and small business development.Under Messinger's plan, loan packages would beassembled by two local development agencies, the Community Preservation Corporation and the Economic

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Capital Corporation, which now work directly with thecity's banking community in the areas of housing andeconomic development. Once insured, these loanswould be purchased by the municipal pension funds fortheir own portfolios. All of the proposed investmentswould be government insured and all would pay a competitive rate of return.A directly targeted investment program, suggestedMessinger, would provide "far greater and more measurable" benefits than any mortgage-backed securitiesprogram, such as that proposed by the Comptroller.Messinger argued that the market for "Ginnie Mae"securities is so active nationwide that pension fund purchases would serve primarily to displace private investors who are already eager to buy whatever mortgageslocal banks are prepared to sell. The issue of "investordisplacement" is one of the major concerns of advocates of alternative pension fund investments.Messinger proposed that the city's pension trusteeswork through the Community Preservation Corporation to provide financing for the moderate rehabilitation of occupied single family and multi-family dwellings. The objective would be to upgrade buildings -with tenants in place - before they enter the cycle ofdeterioration that almost inevitably leads to abandonment. "With one-fifth of the City's housing stock nowin substantial tax arrears, the public sector must actdecisively to preserve the housing we now have," Messinger said.

The emphasis would be on providing mortgage capital to the areas the private sector has so far neglected.Under that proposal, both rental buildings and tenantcooperatives would be eligible for assistance. SinceFH A insurance is generally not available for moderaterehabilitation of occupied dwellings (except where federal Section 8 subsidies are also available) Messingerproposed a combination of SONYMA (State of NewYork Mortgage Agency) and REMIC (NYC Rehabilitation Mortgage Insurance Corporation) insurance. The10 per cent of each loan that would not be covered by insurance would be financed by a $10 million federalgrant of CD or UDAG funds. City employees, whosefunds are at stake, would directly benefit because aspecial effort would be made to target neighborhoodsthat both require rehabilitation and have a high proportion of city employees in residence.Daniel McCarthy is the Executive Director of the Mu-nicipal Research Institute (MRI), a new public policyconsulting firm based in New York City. He has justcompleted a major study of the city's pension funds inconjunction with City Council Member Ruth Messinger.(Democrat, Manhattan).



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In order to hold down the degree of federal subsidiesrequired, the plan offers three cost-sharing m e a s u r e ~ that would ensure that property owners, the bankingcommunity and city government all contribute to thetask of neighborhood revitalization. First, landlordswould be required to reinvest at least 75 per cent of thetax shelter benefits generated by their rehabilitation projects. Second, banks which hold mortgages on distressedproperties would be urged to write-down at least 50 percent of the outstanding indebtedness on loans subject torefinancing by th e pension funds. Third, the city shouldgrant tax forgiveness of past arrearages on a buildingscheduled for rehabilitation in order to remove a costburden that could otherwise make the project uneconomic.There has been no formal response by the trustees toeither the Comptroller's or Council Member Messinger'sproposals. A special Investment Policy Subcommitteehas been established with City Council President CarolBellamy acting as chairperson. (The New York CityEmployees Retirement System (NYCERS) board is thelargest of the five funds and is composed of the Mayor,the Council President, the Comptroller, the fiveBorough Presidents and three union representatives.)Also, since these reports were released, Governor Careyhas called upon the state Legislature to create a SpecialCommission on New York State Pension Fund Investments, to explore "targeted" investmen.t proposals thatcontribute to the state 's economic revitalization.

Unions AmbivalentThe union trustees on the NYCERS board have approached the issue of "targeted" local investments witha certain measure of ambivalence. The city's unionshave traditionally been more concerned with the level ofbenefits their members receive than with the type of investment portfolio that the systems maintain. Since pension benefits are fixed by law, the investment performance of the city's pension system has no direct bearingon what retirees receive. At the same time, some unionofficials are reluctant to make any investment thatwould increase their exposure to New York City relatedsecurities or mortgages, since their pension systems havealready made a significant social commitment to the citythrough purchases of city securities.Still, local union officials such as Lillian Roberts ofDistrict Council 37 have been eager to discuss any investment plan that would directly benefit their mem'-bers. Union officials have been particularly interested ina homeownership program that would provide mortgage financing to its members at below market rates.

The notion of discounting interest rates raises a fundamental issue: should pension fund trustees relax theirstringent investment criteria and accept a ra te of returnthat is less than that which is available on competing investments, if it can be demonstrated that the lowerCITY LIMITS/March 1981 10

return results in significant social benefits to a commun" .ity or to the members of a pension system? ,-.The concept of choosing investments based upontheir "social rate of return" is considerably controversial. The City Comptroller, as chief investment officer.would be virtually certain to reject out of hand any targeted investment program that failed to meet conventional investment criteria.

ImplementationThe chief advantage of the Comptroller's program isthat it would be easy to administer. Since the "GinnieMae" market already exists, it would .require only thatthe present framework be adapted to meet local r:equirements . (There is some question, however, as to whetherthe Comptroller will actually be able to convince localbanks to cooperate with his plan. Since they alreadyhave access to the "Ginnie Mae" market, these bankshave no major incentive to go to the trouble of assembling special pools of mortgages to satisfy the NYCERSsystem). Council Member Messinger's plan may providegreater benefits, but implementation is more complicated. In addition to the NYCERS trustees, the boardsof the CPC, REMIC and SONYMA must also be convinced. So far, the city's housing officials have notstepped in to provide the leadership required tobring allparties together.The city Comptroller's office has expressed some general reservations about the concept of a direct mortgagelending program, such as that proposed by Messinger.Fixed-rate mortgage loans do not provide the liquiditythat other investments offer. Messinger's proposal attempts to compensate for this disadvantage by providingthat each mortgage include a shared appreciation clausethat would enable the pension fund to share in any profits at the time an owner sells his property. The Comptroller has also questioned the security offered bySONYMA and REMIC insurance, since both are tied atleast indirectly to the credit of the State and City of NewYork. In actuality, the security offered by these two insurance mechanisms does not rest upon the credit of theCity or the State, bu t rather upon a self-supporting cashreserve fund, which has been established on an acturialbasis to meet projected defaults.Basic questions have been raised by some neighborhood activists who think none of the proposals to datego far enough in providing housing investment moniesfor those low and moderate income residents who needit most. They suggest that even with federal financing,the interest rates demanded by the pension funds may beunaffordable by many homeowners. Some also questionthe wisdom of appointing the Community PreservationCorporation as lending agent for the pension fund. TheCPC has not been willing to invest in the city's most distressed areas, and its rehabil itation work often benefits middle class residents who do not warrant special attention, according to its critics. Messinger acknowledges


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these criticisms but suggests that only a bank-sponsoredentity like CPC has the stature and standards acceptableto the pension fund managers.Finally, several securities brokers and mortgagebankers have proposed an alternative to both the Goldinand Messinger plans. They have urged that the pensionfunds invest in conventional mortgage-backed securi

ties, which are similar to "Ginnie Mae" securities inconcept, but which involve conventional mortgages thatcarry private mortgage insurance rather than federalguarantees. Some local banks find these preferablebecause they avoid the paperwork and delays involvedin federal insurance programs. The plan would providemortgages on only one-to-four family homes and.whilethey may be excellent investments in themselves, theirpurchase by the pension funds would have only a marginal impact on local mortgage originations. These conventional mortgage-backed securities would providesome relief for the severe disintermediation problemssome banks now face. But, again, they could be marketed without using the pension funds. There also is noprecedent for targeting them to housing in blightedneighborhoods. The investment community, w h i ~ h assembles them, is far more comfortable with singlefamily mortgages in the secure middle class communities of the outer boroughs.

It seems likely that the city's pension fund trusteeswill approve some form of targeted local investment inthe coming year. Since there is no consensus on whatconstitutes the optimal approach, we are likely to see aperiod of experimentation with various strategies. Themost promising development so far is that the pensiontrustees have proven to be remarkably receptive to newand unconventional ideas for housing development.This is unusual for New York City, where housingpolicy is usually made in an atmosphere that emits muchheat, but sheds little light. D

'The Housing Show'"The Housing Show," a work in progress theatricalevent about trying to find an apartment in New YorkCity, will run through March 22 at the Theatre for the

New City, 162 Second Avenue.Subject matter for the play includes newspaper andmagazine-documented information on arson, urbanplanning, housing court, rent control, and the future ofNew York as well as photographic and s c u l p t u r ~ materials.Director of the presentation is Neile Weissman. Admission is $3.00. For more information, call 254-1109. D

11 CITY LIMITS/March 1981


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Co-op Bank LilDps Into New Yorkby Michael Powell

The National Consumer Cooperative Bank, plaguedby threatened f'ederal budget cuts and concern over itseconomic orientation, has hired a regional director, astaff and is closing several loans within the greatermetropolitan area. While 15 loans totaling $10 millionare still awaiting final approval, Philip st . Georges, previously the Commissioner of Alternative Management at the city housing department, and now theConsumer Co-op Bank 's Mid-Atlantic director, predictsthat "at least initially, housing will command about 60per cent of our available funds." Low income groupsare expected to obtain approximately half of the available housing loans.Two housing groups, The Housing DevelopmentCorp. at 300 West 17th Street and The Grand Liberte'Co-op at 96 Grand Street, have received final loan approval. Housing Development will receive $172,440 andGrand Liberte $118,716 for energy conservation andnew windows. In general, the bank's loan activity is expected to be evenly distributed throughout the MidAtlantic. Five sta ff members were recently hired and thebank is presently looking to place its regional office inBrooklyn, as part of its self-avowed effort to "reach outto the comrilUnity."

As a number of New York-based community groupsawait final loan approvals, the issues of community andlow income participation in the bank's decision-makingprocess are not yet resolved. The regional AdvisoryCouncil, originally intended as an integral part of thebank's struCture, is still only in the early planningstages. When asked about the Council, St. Georgescommented that "this [the Advisory Council] should bea long-term objective." St. Georges expressed confidence that the bank's regional conferences and his "ex-tensive contacts in housing and other fields", will temporarily compensate for the lack of an advisory board.Many community groups, however, contest St. Georges'ssanguine assessment. As one community activist said,"Informal contacts are fine, but, the board is a way offormalizing these relationships."Low income groups' access to loans and the decisionmaking process is a critical aspect of the community input issue. As the Co-op Bank Monitor puts it, "TheBank has a legislative mandate to assist low income coops." This mandate is encompassed by the Title II Office of Self-Help Development and Technical Assistance. Under this program, low income groups can obtain special assistance in starting up and maintainingco-ops.although St. Georges says that "many low income projects can work at 11 and 12 per cent interestrates," the Title II program can specifically grantreduced-income loans to low income groups. InterestCITY LIMITS/March 1981 12

rates of 7-10 per cent are foreseen as falling within theSelf-Help area. During the last year, however, attemptsto water down the Title II mandate caused the Monitorto state that, " t'he Bank has so far failed to aggressivelyaddress the needs of low income groups." st . Georgesreplies that "extensive efforts to reach low incomegroups are being made" in the Mid-Atlantic region. Hecautions, however, that "middle income co-ops of allkinds are an important part of our program. Manystructures built under the 312 loan program and theMitchell-Lama's need minor rehabs and touch-ups -This will be a significant part of our housing effort."Perhaps more ominously, St. Georges warned that"unless the low income people can become better organized and more creative, the moderate income co-opsmight well dominate the national board and the stockholders meetings." Co-op members will eventually con:trol eleven out of twelve seats on the national board. Thischange will occur as the bank gradually repays its startup loan from the Federal Reserve. While the relationship between the board, staff and regional office is notyet clearly demarcated, the National Board is expectedto play an increasingly active role as the Bank expands.The Bank's expansion, however, is not merely a matter of time. The Reagan a9ministration has proposed cutting all future funding and appropriations fOT the Bank.The funding figure originally projected by the Carteradministration was $300 million over five years. $137million was appropriated for 1981, with $80 millionalready committed . Reagan's administration is askingthat the remaining $57 million appropriated for thethird and fourth quarters of this year be rescinded aswell. This last cut would, St. Georges admitted, "effectively scotch our present concept of the bank." He insists, however, that the "prospects are fairly good forholding onto the $137 million allocated for 1981."Although the Bank originally passed the House of Representatives by only one vote, Bank officials are confidentthat they have gained manY valuable allies in the interim and, that $137 million will provide sufficientstart-up capital.

With the appropriations and banking committees inboth houses of Congress still waiting to vote on fundingfor the Bank, however, nothing is being taken forgranted. Bank officials are discussing contingencyplans, such as floating a bond issue or going to secondary mortgagees for funding. These plans, however, arespeculative. As the National Consumer Co-op Banklimps into operation, with Reagan's budget cutters taking sword swipes at its legs, St. Georges admitted that,"people are starting to think about a very differentbank than the one we originally envisioned." 0


13/14

DEPARTMENT OF HOUSING PRESERVATION AND DEVELOPMENTHOUSING DEVELOPMENT

I-----l CORPORATION (HOC) ICOMMISSIONER I I Hoger Simon 480-1212 IAnthony Glledman

------ ________________ JI566-2324 I .I REHABILITATION MORTGAGE I' - _ _ __ INBURANCECORP.-(REMIC)

I Neal Hardy 4 2 : " ~ 3 5 1 II I I

ADMINISTRATION ENERGY CONSERVATION OPERATIONS SPECIAL PROJECTS POLICY AND GOVERNMENTRELATIONSDEPUTY COMMISSIONER ASST. COMM. DEPUTY COMMISSIONER ASST. COMM. DEPUTY COMMISSIONERJudy Seidenfeld 2356 Mary Brennan 6456 Robert Davis 6841 Janet Langsam 6465 Ronald Marino 5035,6909I

FISCALAFFAIRS J I I I~ ~ ~ M " ,.,GT. SERVICES INSPECTOR GENERAL EQUAL PROGRAM &Nachbar 6502 INFO SYSTEMS GENERAL COUNSEL OPPORTUNITY MGT. ANALYSISDIRECTOR! Steve Shapiro ~ C O M M EXEC. DIRECTORAndrew Coo per 2356 5454 2310 . Laila long 2486 Bruce Gould 6125

I I 1OFFICE OF /If OFFICE OF RENT STABILIZATION ASSOC. OFFICE OF RENT ANDPROPERTY MANAGEMEN T DEVELOPMENT RENT GUIDELINES BOARD -- HOUSING MAINTENANCEDEPUTY COMMISSIONER

William Eimicke 5610,4983IRELOCATIONOPERATIONS

ASST. COM""Wilfredo Vargas248-6411Urban Renewal andProperty ManagementPublic ImprovementRelocat ionEmergency HousingActivities

75 . . . . . . . . . . . .

ALTERNATIVEMANAGEMENTASST COMM.Joan Wallstein05820584

Community Mg t. 1585Sa les 3930

Interim lease Program

. . . . . .0fIIae-1ODG . . . . . . . .

PROPERTYMANAGEMENTASST. COMM.1820,1821

Upper Man. and Bx. 4890lower Man ., 5 .1. andOns. 4843

DEPUTY COMMISSIONER CONCILIATION & APPEALS BD. DEPUTY COMMISSIONERIndependent Bodl Charles Reiss 6557

~ E H A B I L I T A T I O ~ COMMUNITY HOUSINGDEVELOPMENT SUPERVISIONASST. COMM. ASST.COMM . ASST. COMM.Manuel Mirabal Ruth lerner6902 5146 6478

Participat ion loans 7582 Community Service Management Supervision6512SH IP, Sec. 312 loans 1626 Neighborhood Preservat ionJ-51 Tax ExemptlonlAbatement 0620

421 Tax Exemption 8050Moderate Rehab. 6555

Area Off ice 7992 Rental Subsidies andProject Planning:

Bx-7480Bklyn-5844Man - 7477Ons. & 5.1.-4960land Acqu isition andAppraisals 1131

Site Improvement 8550

Jec . 8 Contracts 7941Mltchelllama Refinancing6510Tech . Serv ices Bureau


EVALUATIONCOMPLIANCE

ASSl . COMM.Joseph Shuldiner5800

Art icle 8A loans 7766Voluntary Agmts. 2612

Housing litiga tionBureau 7375ERP Recoupment 0940

Management Alternatives 10297A Mon itoring 6434

Owners Counseling Un it 3918

Daniel Joy 10371

CODEENFORCEMENTASST. COMM .Frank DeIl'Aira6974

Housing Code and OtherInspections 0019Central Complaints

9604800Emergency Services

678 2037

RENT CONTROL

Robert Muniz5076 (110 ChurchMaximum Base Re

Trad it ional Renl AdjustEvictions

Hardship and Rent StruProtest

litigationEnforcemen t

Senior Citi zen Ren t IncExemptionRecontrol and late Enro

Research and SurveDist rict Off ices:Bx - 585-2600Bklyn - 643-7570lower Man. & 5.1.- 566Upper Man.-678220Ons.-526-2040


14/14

by Michael Powell TAKING YOUWinter has fallen across the city, and your apartmentfeels like a suburb of Nome, Alaska. Water from yourkitchen sink would be leaking allover the floor if it

weren't frozen and the falling plaster keeps you awakeat night. Your landlord? He's in Florida until April,maybe May. What do you do?Tenants throughout New York City, with problemsboth more and less severe than the one described above,are increasingly resorting to legal remedies for otherwiseintractable housing problems. While Housing Court isnot necessarily the best, or only, remedy for housingproblems, it can be used very effectively by individualtenants and tenant associations.Tenant Petition or Dispossess - Which Route?When considering legal remedies, tenants are facedwith two possibilities: taking the landlord to court witha tenant petition or withholding rent and awaiting a dispossess. While there are differing philosophies regarding the effectiveness of both actions, this article willaddress the tenant petition. Tenants, however, shouldbe aware that both have drawbacks and that the twoactions can be used together.Tenant Petition (aka - H.P. Action)A tenant petition can best be described as the tenanton the offensive. The tenant petition involves pullingthe landlord into Housing Court to explain, or "ShowCause", why certain repairs are not being attended to.As with any tenant action, the petition is much more effective if brought by a tenant association, rather thanone or two isolated tenants.Tenant Petition forms can be picked up at HousingCourt. Th e cost of an action for the entire tenant association is $20 - hence, another incentive for organizing;the more tenants involved, the cheaper the action willbe. A form should be filled out by each member of theassociation. Tenants should write their names and the tItle of the tenant association on the top of the form,which reads "petitioner". (For example: John Smith/305 Martense St. Tenants Association). This methodallows twenty or thirty tenants to file one action with thesame docket number. In some cases, several buildingsbelonging to the same landlord have banded togetherand filed joint actions, using such names as "The Striving Three". Once again, the tenants should be carefulthat everyone receives the same docket number. Jointactions are often initially resisted by housing courtclerks, but the tenants should persist; tenant power, asalways, lies in numbers.Each form should be carefully filled out. The landlord' s name, address and management company should

be written in where the form reads, "RESPONDENT".Tenant signatures must be notarized and complaintscarefully enumerated. Complaint sheets are used bywriting, "See attached sheet", on the petition form.Finally, three copies must be made of each form; oneeach for the court, HPD Litigation, and the landlord.Service of the forms, after a judge signs them, should bemade via certified mail, return receipt requested. Thesereceipts must be brought back to the court the same day,along with a notarized Affidavit of Service.The Tenants' Day In CourtWhen your court date arrives, efforts should bemade to marshal every tenant to court. Technically, ajudge can rule that the tenants have defaulted if they donot appear in court. Evidence, such as high electric andgas bills (and a normal bill for comparison), repairreceipts, calendars marked for lack of heat, medicalbills and any other information should be compiled andbrought into court. City housing department (HPD)lawyers, usually very effective ones, are available tohelp the tenants. Tenants should, however, try to obtainthe services of an outside attorney. Legal Services andLegal Aid lawyers will generally handle petitions forincome-eligible tenants, though this varies from officeto office. Other private public interest lawyers willrepresent tenants for reasonable and negotiable fees.The drawbacks with HPD lawyers are two-fold: one,they are technically allowed only to "advise" tenants in. court, and, two, they are not allowed to do follow-upwork, such as representing tenants with dispossesses andtraveling out to buildings to meet with the tenants.In addition to the personal evidence mentionedabove, tenants should obtain the inspection printoutfor their building. All violations certified by Code Enforcement are registered on its computer. Thus, evenif your tenant association is not able to obtain an inspection before going to court, HPD should have access toprevious inspection records. I f your tenant associationis working with HPD litigation, this bureau can providethe printout in court.

Violation records are important; however, the tenantsneed not ask for an adjournment to wait for a courtordered inspection to certify their own problems. Tenants are allowed to testify about violations within theirapartment. This testimony is written up as A, B, or Cviolations, depending upon the severity of the problems.Tenants should be warned, however, that judges do notlike this method... Judges claim testimony is too timeconsuming and too imprecise. The tenants' answershould be that adjournments are time7 consuming foreveryone and that they have a right to be heard in court.

city limits magazine-march 1981 vol. 6 no. 3

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