Doing it Right: Affordable Home Ownership in Harlem

Julia Vitullo-Martin, May 2005

His parents scrimped and saved for years to buy a modest, small house in Bedford, Massachusetts, Mayor Bloomberg told the audience attending the annual lunch of the Citizens Housing & Planning Council on May 11. They were so proud of that house, he said, that he understood well the profound need New Yorkers have to own their own homes. That's why he warmly supported the affordable-housing component in the recent rezoning of the Greenpoint-Williamsburg waterfront.

Details of how an affordable home-ownership program would work in Brooklyn—or even if there will be one—are not yet known. But we do know how home ownership has been working in Harlem—a neighborhood so distressed in the 1970s that the city government ended up owning some 70% of the real estate. It has taken decades for the city to work its way through experimental programs—some good, many bad—and to return 97% of its huge property inventory to the private sector. Today, a third of Manhattan’s residential construction is slated for Harlem, according to New York Magazine. Over the last year, houses have appreciated in value by 100%.

Beautifully restored brownstones sell for over $2 million, ordinary brownstones for $1.5 million, and empty shells for $900,000.

MIDDLE-INCOME RESTORATION

One of the Bloomberg administration's most successful programs is Cornerstone, originally conceived in the Giuliani administration as Anchor (Alliance for Neighborhood, Commerce, Homeownership, and Revitalization). When first proposed, Anchor was both too complicated and too government oriented. The idea was to produce construction jobs by building affordable housing and "plaza retail corridors," in distressed neighborhoods, "in partnership" with nonprofits and private companies.

Cornerstone is simpler. It builds middle-income, market-rate, multi-family housing, on vacant, city-owned land, financed mainly by private sources. The city provides no direct subsidy. Rather, to control costs, it relies on cheap land, below-market financing from the Housing Development Corporation, and good private-construction practices. The city issues Requests for Proposals to developers, who respond with very detailed bids. The city knows precisely what it's getting.

What it's been getting is good. Handsome buildings—the Larkspur, Bradhurst, 1400 on Fifth, Harriet Tubman Gardens, Brownstone Row—have been rising all across Harlem. These buildings have little in common with traditional, government-financed housing. Their architecture is contextual. Ground-floor retail keeps the street lively and safe. Courtyards and gardens soften the structures.

Harlem is fast becoming one of the loveliest neighborhoods in New York, because the Bloomberg administration is working from the right principles.

First, when the neighborhood was so distressed in the 1980s that virtually no private financing was available the city stepped in, becoming the financier of last resort. Overall, the city government itself has financed the restoration or construction of 42,000 units—7,000 of them co-op units. Carol Abrams, a spokesperson with the Department of Housing Preservation and Development, says that "back in the days when you couldn't attract private financing it was very important for the city to step up and take the risk. But with each successive deal, the city has stepped back, with private partners putting more and more of their own money at risk and the city less and less." In other words, when the private sector is willing to invest, the city does not waste tax dollars.

Second, the Bloomberg administration recognizes that ownership is important in Harlem, which has one of the city's lowest ownership-rates. Only 10% of Harlem residents own their own homes, compared to 32% citywide. The city has targeted one of Harlem's most important demographic groups: working-class, two-wage-earner households. At Harriet Tubman, for example, a family of four must earn under $104,000 to qualify as moderate-income, and under $157,000 to qualify as middle-income. The city balances ownership incentives fairly. A co-op owner wishing to sell within 15 years of purchase must pay back any financing subsidy, and must find an income-qualified buyer. After 15 years—or sooner, if the low-interest mortgage is paid off—the co-op owner can sell freely.

Third, City Planning upzoned the most important corridor, Frederick Douglass Boulevard (Eighth Avenue), often called the gateway to Harlem, because it is the only north-south avenue that transverses 110th Street. As a result, density is bringing the critical mass Harlem needs to support good stores, services, restaurants, and theaters. Of the 3,000 Cornerstone units the city has financed in Harlem, 750 have been in the Frederick Douglass corridor.

Fourth, the city encourages ground-floor retail, which is so important to the safety and liveliness of the street—and also an additional source of income to the developer, who retains the retail. Older government-financed programs, such as public housing, often forbade ground-floor retail.

Fifth, the administration has revitalized the Housing Development Corporation, a scandal-plagued agency during the late 1990s, which handles the below-market financing for multifamily construction. A public benefit corporation established to provide low-cost financing to private developers of moderate-income housing, HDC finances development by selling bonds and making low-cost mortgages. Over the last few years it has financed over 1,000 units of housing in the Frederick Douglass corridor alone. Almost all developers building on former city-owned land, or developing market-rate property with an affordable component, go to HDC for financing.

Sixth, the Department of Finance backed off of its destructive property-tax policy, by which it proposed to tax rehabilitated houses at full value. This almost surely would have halted renovation on Harlem’s more fragile blocks.

A measure of the city’s success is the amount of strictly private development that is now occurring adjacent to government development. Harlem Horizon, for example, on Frederick Douglass Boulevard between 114th and 115th, is 100% privately owned and financed. Gaetano & Associates is developing a small market-rate building two blocks down on 112th Street, a street that Harlem's most prominent real estate broker, Willie Suggs, used to call "horrific." Architect Steve Gaetano has been working on affordable housing in the neighborhood for 8 years, and says, "For the first time we see the demand is there for strictly market development." Ibo Balton, HPD's Director of Manhattan Planning, who has lived and worked in Harlem for 12 years, comments, "Blocks I thought would never turn around are suddenly fashionable. People are buying private property and building their own brownstones—some very modernistic, some traditional. First we had to do our job in government. Now private buyers are taking over."

WHAT’S NEXT

Affordable housing will be a hot issue in all rezonings, most urgently in the Greenpoint-Williamsburg rezoning in Brooklyn. How much of the housing will be low-income and how much middle-income? Will all the affordable housing be rental, rather than ownership, which has worked so well in Harlem? Will the city be spending tax dollars in areas where the private sector is perfectly willing to invest? Harlem provides a model for struggling neighborhoods: an initial high investment of tax dollars on streets bereft of private investment, followed by a gradual reduction of government money as private sector money moves in.