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What to Make of Starrett City

Julia Vitullo-Martin, February 2007

Starrett City—the immense, barracks-style housing project in East New York, Brooklyn, that opened in 1974—is serving these days as a paradigm of planning principles, good and bad. Are huge towers necessary to respond to relentless residential demand? Can they be made livable? Was Robert Moses (©Julia Vitullo-Martin) right, and Jane Jacobs wrong, about size? Unpopular as large developments are, planner Alex Garvin argues, "It's high time we started building projects of the same dimensions. We will never solve the housing problem while waiting for a small developer to build here and there." Indeed, the classic bungalow neighborhood of Canarsie, built by small developers, sits immediately across the creek from—and within view of—Starrett's towers. The two paths of development could hardly be more stark.

Starrett, more public than private development, has always been highly subsidized. It has benefitted from below-market-interest-rate loans, tax abatements on the property, tax breaks for wealthy owners, rental subsidies, and senior assistance. Should projects once subsidized be permanently subsidized? At what ongoing cost should affordable housing be maintained?

AN EXTRAORDINARY PRICE
All of these questions are being raised anew by Starrett City's announced sale to private investors, Clipper Equity, for a stunning $1.3 billion. At about $220,000 per unit, the buyers have paid handsomely. Can these 5,881 apartments on 140 acres, the largest federally subsidized rental property in the country, possibly be worth so much?

(©Julia Vitullo-Martin)

Real estate experts in New York generally say no—unless the buyers have something up their sleeve, or know something no one else does. Former housing commissioner Jerilyn Perine, executive director of the Citizens Housing and Planning Council, says, "The price just doesn't make sense."

After all, unlike Manhattan's Peter Cooper Village-Stuyvesant Town, recently sold for $5.4 billion, Starrett City is so entangled with government that its sale must be approved by federal and state housing officials—not one of whom has spoken out publicly in its favor. On the contrary, HUD Secretary Alphonso Jackson warned, "This transaction has the potential to harm New York City's low-income housing market and those who need it." Senator Chuck Schumer said bluntly that he would do everything he could to block the sale.

(©Julia Vitullo-Martin)

While the Bloomberg administration as of now has no official veto, it can easily stymie the rezoning that further development would require. Mayor Bloomberg and his commissioners are definitely not feeling all that friendly at the moment. "The mayor believes strongly that private owners should have the right to sell their property and to reap rewards from that ownership," says housing commissioner Shaun Donovan. "But owners must also live up to their legal responsibility both to maintain their property and to provide affordability where itís required. Taxpayers must be represented and must get what they paid for."

WELL-MANAGED, FULLY OCCUPIED
Originally envisaged by labor unions as a way to house their middle-income members within city boundaries, the project was out of fashion long before it opened. Union members with savings to invest preferred to put their nest eggs into single-family suburban homes rather than austere high-rise apartment buildings. The lead union financier, United Housing Foundation, walked away, selling its interest to the Starrett Corporation, which finished it under the state's Mitchell-Lama program as subsidized middle-income housing.

Still, one of the many ironies of Starrett City is that it has long been a well-managed, desirable, fully occupied development, even though it defies most ideas of good design, not to mention good location.

(©Julia Vitullo-Martin)

Built on landfill next to a garbage dump, an arduous 90-minute subway ride from the jobs of Manhattan, Starrett City's 46 towers are divided into eight sections or loops. Each with its own recreational area and garage, the towers look from a distance like rigidly placed public housing. Up close, they look better, in part because much of the property is nicely landscaped. The grounds are clean and contain very little litter, the park benches are unvandalized, the buildings graffiti-free. Good shopping, including a 124,000-square-foot shopping center, is within walking distance of nearly all the towers.

Yet, however well maintained and managed, Starrett City provides plain apartments in severe towers that would never be mistaken for luxury housing. The seller is unlikely to be able to recoup his investment through grossly increased rents because the market rents are unlikely to be much higher than current rents—certainly not the thousands of dollars per month higher that the new owners of, say, Stuy Town can anticipate. Says Perine, "The question is not the rents, which aren't that far from market now, but the development potential, which may be high. Yes, it's far out in Brooklyn. But this is New York. Someone will move there."

(©Julia Vitullo-Martin)

Real estate consultant Robert C. Rosenberg, who as the president of Grenadier Realty managed Starrett City for most of its history, says he could envision two development scenarios. One possibility is that as ever more tenants pay market rents, they might find they qualify for a mortgage, allowing them to buy their apartments—returning Starrett to its original heritage as a co-op. The second possibility would be marketing new multi-bedroom units to large Orthodox families being squeezed out of Williamsburg. Since many now qualify for Section 8 certificates, this strategy would be compatible with the new owner's statement that he intends to keep the project "affordable." (The New York Times, however, has reported accusations from community organizer Acorn that the new owner has refused to rent apartments to some Section 8 applicants at his other Brooklyn buildings.)

NEW TOWERS IN THE PARK?
While most of the public discussion has centered on the reactions of the federal officials who must approve any sale, the real debate may ultimately lie with city officials, who control future development. Existing buildings are generously spaced, leaving plenty of room for new construction. But nothing new can go up without a myriad of city approvals and cooperation. Both the mayor and his housing commissioner have pointed out that other properties owned by Clipper's lead partners, Sam Levinson and David Bistricer, carry 8,792 violations on 71 buildings. Indeed, the mayor distinguished these buyers from Stuy Town's new owner, Tishman Speyer—a "reputable landlord." The mayor has a point. In 1998, a New York State Supreme Court judge slapped Bistricer with an injunction, in effect banning him for life from converting rental buildings in New York to condominiums or cooperatives. Newly elected State Attorney General Andrew Cuomo has told HUD he intends to enforce the ban.

So if Clipper's strategy is to develop the property further, they have gotten off to a bad start with their needed government partners. But are they genuinely bad landlords? Their intentions are hard to judge.

(©Julia Vitullo-Martin)

FLATBUSH GARDENS
Many of the violations are on a once infamous project in East Flatbush called Vanderveer Estates, until bought by Bistricer in 2005 and renamed Flatbush Gardens. Bistricer said he had inherited the violations from the previous owner, who had been defaulted by HUD for egregious mismanagement. About 83% of the violations have been corrected.

The truth is that Flatbush Gardens look far better today than in 2004. The buildings have received substantial work, and the grounds are clean. The complex gives an appearance of being in transition—the debris has been cleared, but no new landscaping has replaced the old. Some buildings have been renovated—new walkways and awnings cheer the exteriors, and new windows sparkle. Other buildings languish. Still, this had been one of the most notorious slums in Brooklyn, so the progress in two years is substantial.

WHAT’S NEXT
The buyers must present their offer to HUD and the state housing agency for approval—which is usually given routinely. That won't happen this time. As a former HUD secretary, Attorney General Cuomo regards housing as his bailiwick, and seems to be personally offended by this deal, which he intends to quash. State housing officials, appointed by Gov. Spitzer, say they are working closely with federal and city officials, and will present a united front of opposition. Given, especially, the new governor's tendency to get his way, the sale may not go through. In the meantime, Starrett City is providing New Yorkers with a fine forum for debating the serious issues of housing, development, and neighborhood integrity.

 


February 2007
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“Starrett City is a project that worked. The whole East New York area was being abandoned back then. Everybody was fleeing—people, workers, businesses, banks. But south of Linden Boulevard is now a low-crime area. Life is good. People who live there are very happy. That said, is Starrett City worth $1.3 billion? This sale is not a real estate deal in the traditional sense. Something else is going on.”
Robert Rosenberg,
Former President, Grenadier Realty
 
“The old management of Starrett City did an honest job—which is not true of everybody. It's so much not true of everybody. But now what? Is $220,000 a unit too high a price? Probably. Will this be followed by a large build-up of maintenance problems and new vacancies? They could start losing units. Will they be able to develop the property further? It's a terrible location, which is why there's so much vacant land available out there.”
Dick Netzer,
Professor Emeritus of Economics, Planning, and Public Administration, NYU
 
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