The Q at Parkside

(for those for whom the Parkside Q is their hometrain)

News and Nonsense from the Brooklyn neighborhood of Lefferts and environs, or more specifically a neighborhood once known as Melrose Park. Sometimes called Lefferts Gardens. Or Prospect-Lefferts Gardens. Or PLG. Or North Flatbush. Or Caledonia (west of Ocean). Or West Pigtown. Across From Park Slope. Under Crown Heights. Near Drummer's Grove. The Side of the Park With the McDonalds. Jackie Robinson Town. Home of Lefferts Manor. West Wingate. Near Kings County Hospital. Or if you're coming from the airport in taxi, maybe just Flatbush is best.

Wednesday, April 16, 2014

Folks, This Is Not Sustainable

I know a lot of y'all are tired of all the talk about 626 Flatbush. But as I've said many times it's really an oversized stand-in for everything that's going on all around us. In another life, the Q might have been an economist, because I'm endlessly fascinated by the workings, and failings, of capitalism. I stopped reading the sports pages years ago when I noticed that the world of money was, for me, infinitely more entertaining. So I notice things, and sometimes, I become as perplexed as a lifelong Met fan.

A couple of years ago I first started noticing the degree to which our affordable neighborhood was becoming unaffordable to people of my own income level, the one that (obviously) I'm most familiar with. Mrs. Flatbed and I bought a small rowhouse in 2003 on a rough and tumble block, and to make the mortgage we had to pay almost twice what we were paying for rent in le hot South Slope. So while it's still a stretch for us now with two kids and mostly just one income, for the time being, we can just about afford it. I hope we're earning the least we'll earn during our working lives, while the little ones need lots of attention. But you never know. Do you? Heck there were years when I made $5,000 and got by, though there was a lot of cash coming in and going out. Ah, to be young and brash in the '90s.

When we first moved here in 2003, you could still get a one-bedroom for just shy of $1,000. I know because I kept on eye on it, on and around our block anyway. A two bedroom could be had for $1,200. (Remember, I'm not talking about the heart of the Historic District, rather on the southern side, where we have a bit of what I like to call the "Parkside Drawl" and perhaps a slighter higher tolerance for rambunctious streetlife). The 2-bedder is probably what we would have gone for had we not decided to take the plunge and put more than half of our annual income into our home, which we hoped would be our home for at least as long as our mortgage, and maybe beyond. The American Dream. For a modern musician and a rock dancer, wait, rock musician and a modern dancer, it seemed extravagant, and we did our best to slide into working the kind of jobs that could afford us this life, while hanging onto our creative lives as best we could. Then we decided to have two kids. Whoa. Now we were REALLY middle class. Middle. Middle America. Though living in the 'Bush during the Bush years made it seem less middle middle boring middle. It's NYC. City of Dreams. The Big Apple. City of Broad Shoulders! (er, that's Chicago, but our shoulders are pretty broad too). All good. And this is, bar none, one of the most exciting neighborhoods in the whole borough. If you don't think so, you and I got different ideas of exciting. I mean world-class krazy fun and never a dull moment. Great great people, not boring, with great stories and fascinating perspectives. And the Park, man!

My nearby neighbors thought we paid an arm and two legs for this house at the time. It was the most anyone had ever spent on one of these Clarkson row houses - by almost TWICE. Actually, these homes hadn't traded hands much through the years. Some folks had owned their homes for decades, and some died in them. Maybe that'll happen to me. Never know. (Sometimes I wonder how long I'll have to live here before I get to stop being a spoiled gentrifier? Probably til I'm surrounded by richer and whiter people, though I'm pretty damn ruddy pale.)

The rents and the housing prices in Brooklyn had risen before - quite a bit actually since 1996, the start of the big housing run-up. By 2007, a lot of people were acting like they did during the late '90s tech boom - the bubble was in full effect, and you could feel the anxiety. The bubble was palpable. Or rather popable. I remember that people I knew were buying up houses to flip...I never DREAMED of such a thing happening, but the frenzy was on. Then it all came crashing down, and a full-on Argentinian-style meltdown nearly happened here. And then...wow. It started again, and the money that'd been waiting on the sideline got the greenlight to build, build, build. Where were all these people coming from to buy these overpriced apartments and houses? They weren't ALL coming from Manhattan. Folks were calling Brooklyn the "it" city. Really? Brooklyn? Well, okay if you say so. I think that was partly because so many bold-faced names were saying Brooklyn was their home, and many folks in the media actually live here. But a funny thing happened. The whole borough started to become wildly speculative in its pricing. Bed-Stuy even. Bed-Mothereffing-Stuy! The place Billy Joel was CRAAAAZY enough to walk alone. And otherwise sane people started saying that this was the new normal. Mad prices. Mad rises. Irrational exuberance. Delirious Brooklyn.

My friends, this is NOT the new normal. Anytime you hear someone say that you know we're in a time of berserkness. Remember that book called Dow 40,000? And if I needed any more proof, I got it tonight when I finally saw the numbers comparing the "affordable" rents to the market rents at 626 Flatbush. Remember, the affordable rent is unlikely to go up much, since it's based on 50% of median household income, which is roughly $50,000 a year for NYC and hardly budging. I know I don't need to tell you this, but it's worth thinking on it in this context. HALF of NYC households earn more than $50,000. HALF of NYC households earn less. HALF. Wow. (If that doesn't blow your mind then, well, I guess you're not me. And yes, it's barely growing in real dollars, certainly not at the rate of housing.)

Just a few years ago I noticed for the first time that market rents in Brooklyn were becoming 1 1/2 to 2 times what would work for a median to just-above poverty working family, which is often a single parent. Neighborhoods of lowish income families were now officially out for half of the population. Pretty much all of brownstone Brooklyn, save parts of Crown Heights and Bed-Stuy. People were starting to pay half or more of their gross income in rent. Crazy, but true. And the more hip folk moved here the more crazy it got.

So now I'm looking at the affordable rates vs. market at 626. And if trends continue, market rates will go up considerably by the time the building opens. Remember affordable is based on 50% of median. Oh, and there are almost no 2 or 3 bedroom units in the building. They're simply not as economical for the landlord. Families, it would appear, are simply not where the money's at:

AFFORDABLE:
Studio - $696
1 bedroom- $748
2 bedroom - $908
3 bedroom $1039


MARKET:
Studio - $1,875
1 bedroom - $2,200
2 bedroom - $2,800
3 bedroom - $3,500


I recall from my book larnin' that it was just a hundred years ago that socialism and its naughty brother communism broke through to the level of the State. By 50 years ago we'd built nearly 200,000 units of public housing in NYC. By 45 years ago we passed the Rent Stabilization Law. By 35 years ago the City went bankrupt as the middle class left for the suburbs. 30 years ago marked the first age of the yuppy. 25 years ago housing prices plunged. 20 years ago Courtney Love had a hit record. 15 years ago everyone wanted to start a dot com and we all lost our minds in the stock market and frenzied speculation. 13 years ago planes hit the towers and we wondered if NYC would ever recover. From then til now, minus the speed bump of 2008-9, we've been on a tear. A bloombergian mega tear.

It's not sustainable. We're in a bubble. We're in madness. You don't usually know when you're insane. I mean that's part of the definition of insanity, right? Doing the same thing and expecting different results?

Madness. Unadulterated madness. Who's got a pin?

37 comments:

Joy said...

I was out of town for over a month and fell behind on my Q reading, so it's possible that this point has been made on earlier posts, but I think it's important to point out in these discussions of gentrification, that what's happening now is NOT plain old gentrification. There is the kind of neighborhood turnover wherein you bought a row house on Clarkson in 2003, and there is concerted public policy to change zoning and give massive perks to development companies to build luxury towers. This is a loooong piece, but one of the best things I've read on the topic ever. Again, apologies if this has already been linked to/discussed on the Q. http://vanishingnewyork.blogspot.com/2014/03/on-spike-lee-hyper-gentrification.html

bored at work said...

Perhaps the current rise in prices for private homes and condos is not sustainable. The market will correct for that if so. But I think your analysis completely fails on the rental question.

Demand for apartments remains strong and there is not much new inventory coming on line given the crash. NYC's population is at an all-time high and people want to live here.

Perhaps the rents are unaffordable to those currently living in the neighborhood, but someone is willing to pay. If they are truly too high, the developer will lower the rent. But don't count on that.

disco princess said...

re: " If they are truly too high, the developer will lower the rent. But don't count on that."

That's the problem.

WriterOnWinthrop said...

Thank you, Joy. Great article.

WriterOnWinthrop said...

Another aspect of the problem is the disappearing middle class throughout the US. Either overextend and try to be rich or continually figure out where to move that has jobs and is affordable...

no_slappz said...

In consideration of the fact that apartment vacancies in NY City are running at only a couple of percent, it's obvious the rent is getting paid.

As always, lots of young New Yorkers are sharing apartments, and many still receive a hefty check from their parents, even though college was quite a while ago.

There's a lot of trust funds supporting people in this city, people of all ages.

Meanwhile, the number of apartments protected by rent stabilization is One Million. That's a lot. And there are loads of tenants who receive Section 8 housing subsidies, and there are a lot of apartments in public housing.

Ektorp said...

I don't think the trust fund kids are to blame. As the Q points out, the NYC median household income is $50,000-- that means 1.5 million households earn more than $50,000. And of those something like 750,000 households earning more than $100,000 a year.

Developers built maybe 10,000 housing units citywide in the last year -- that meets only a small fraction of the demand for housing. Think about it -- there are over 300 households for every one new housing unit built in NYC last year, and a quarter of those households earn more than $100,000/year. So I don't think there is anything unsustainable about a new building charging high rents. We live in a capitalist economy and that's how it works.

Dan Freed said...

If you are single and healthy & earn 40K per year, $1K per month to share a 2 bedroom is no problem. If you are an immigrant family of 6 with 2 earners, 1 grandmother & 3 kids where school & healthcare are free, you can probably manage to pay $1600/ month rent. These are market rates in this neighborhood, which ain't park slope but is more desirable than many that house people who work in Manhattan. I'm not sure I see the rent bubble. as far as the bubble for buyers goes, no one is building any other new york cities that i can see. in the rest of america, people are stuck in traffic jams, dining at Wendy or Chipotle. many of the subway performers we take for granted are more interesting than whatever's on offer on any given night in Arlington, Virginia or Boise, Idaho. & there will always be jobs here, while in other places jobs come & go.

Clarkson FlatBed said...

Ektorp. Thanks for the lesson in capitalism. Let me be perfectly clear...I don't care how many $100K plus households need to be serviced. In the end, capitalism will help them just fine. Because all we're building anymore is buildings for THEM. That's my point. If you want to house the spectrum of earners, you gotta build for the spectrum of earners.

Dan, I get your math, but you're basically talking about people at median, or just around it. Remember, millions don't earn anywhere near that. The majority of jobs in this City pay minimum wage. $40K a year sounds like a fortune to those folks.

And what about fixed income earners? That's another huge percentage of the population. Old people? Disabled? Unemployed but looking? It's a jungle, baby. I hear the City is trying to downsize empty nesters living in public housing, so maybe you're on to something.

As to the bubble - you seem to be suggesting we're right where we should be. Funny, I don't think people being priced out would agree with you. But suppose you're right. How long is that going to last? Even if you argue, which I wouldn't buy, that things are fine, we're headed in but one direction, with incomes barely budging.

When I write that it's not sustainable, I ask you to look at the middle class squeeze not just in NYC, but throughout the country. The Times just did a piece on it. Actually, people who WORK for the Times have been moving here after being priced out elsewhere. Once they start moving to East NY, perhaps folks will feel obliged to note the irony. Part of the American Dream is building a home and staying there to raise a family and get old. As a renter, that is becoming a pipedream. Even as owners, those on fixed incomes can't keep up with maintenance, insurance and property taxes.

Ah, forget it. I've made my prediction and I'm sticking by it. For those who own and don't have to worry, I'll probably never get through to you.

Dan Freed said...

Tim- I agree NYC becoming harder & harder to afford but I'm not sure that means its a bubble. I guess my point was that people can still do it, so they will pay more than they should to live here. You seem to be conflating two arguments: 1. that we need more affordable housing for reasons of economic justice or maybe preserving the dynamism of the city & 2. that rents &/or housing prices will crash. I'm probably with you on #1 but not #2.

Clarkson FlatBed said...

Okay, mostly agreed Freed!

If the rents were rising sharply only here, then I would say that we're going through a "Crown Heights" right now. Except rents are rising everywhere at breakneck speed. I recall rents rising in one nabe or another, say the East Village or Williamsburg, and it being about zeitgeist nonsense, the sense that one MUST live in one place or another. When I say it's not sustainable, I mean that the number of people moving here, particularly Central Brooklyn, are making it harder and harder for the diversity of incomes to survive, leading to wholesale change of nabe after nabe.

I've watched the pressure build and build. It's starting to become anger and frustration on a massive scale. I don't think you see it til you start sitting in on the conversations. So the other way I mean it's unsustainable is that folks aren't going to sit by and quietly watch their lives and families destroyed.

There were times in the past when people got fed up and started to make some serious noise. I sense that happening, but perhaps I overestimate the revolutionary impulse. Not for revolution per se, but for demanding massive structural change.

I also don't share the antagonism towards people with family support. The phrase "trust fund" gets thrown around, but people aren't raised in a vacuum and we all had support, or not, in many ways through the years. And native New Yorkers often live at home for years saving up for their first place - that's a form of "trust fund" as well. It's becoming harder and harder to make it by yourself in this City without some sort of support. I work with some of these folks and the struggle, along with student debt, is absurdly stacked against them.

There will always be people willing to give the City a try for a couple-three years to follow a dream, but when the creative class can no longer afford to STAY here we have a "soul" problem every bit as much as with menial working folks. I actually heard someone say the other day that New York would be a better place without poor people. Well...hmmm. So would America I suppose. The world. Good luck with that buddy!

I'm working on a piece about limited equity coops, because I think that's the way to go but I don't know enough yet. I talked to a guy from Pratt Area Community Council on Friday and my head's still spinning.

leffertspapa said...

How to make it sustainable in 3 easy steps:
1. Give the working poor enormous raises
2. Build, build, build
3. repeat steps 1 & 2

jeffe said...

Look Construction costs hard and soft about 300 dollars per sq ft the Land between 100 and 200 sqft in the land of Q your at 400 to 500 a foot thats without profit to the developer for taking the risk
Assume you loose some space due to stairways and halls approx 15%- 18% ( you cant sell that space but you have to build it) the developer needs approximately $600 sq/ft sellable to break even for a 1000 ft 2 bedroom 2 bath that means approx 600,000 and more when you add in the reward for the risk this may or may not be affordable but the numbers are the numbers
if you want to make it affordable someone has to pay wether its is through grants or cross subsidies.
I think it would be more constructive if the discussion centered on various strategies to provide affordable housing at different levels of affordability with cross subsidies . But keep in mind the math is the math and the numbers have to work for everybody or it just wont happen.

Clarkson FlatBed said...

I like that you're throwing out hard numbers. But why does it matter what it costs to build? They're either it in for the short term (to sell the building quickly) or the longterm (hang onto the land and leases, with a massive potential upside). And when you're not putting in your own money, what exactly are the significant risks? Even if a bunch of your projects go belly-up you declare bankruptcy and walk away, then get hired by another firm. This boohoo-ing for developers I just don't get. When did you ever hear of real estate execs staying down for the count?

I hear you though. And I hear the logic of a developer coming through your comment. I'm talking about the logic of a neighborhood, one in which the suits don't live, and any fancy dancing with numbers won't change the fact that the dozen or so projects currently happening (plus the dozen more that are but glints in eyes) will reshape and re-people the neighborhood.

Some care. Some don't. Some want to see solutions, some want the economy to work it out. After all we've been through as a nation, I'm still shocked that people put their trust in the for-profit real estate sector. But I guess I'm just old-fashioned, or cynical, or horribly out-of-touch. We'll see, won't we?

Personally I like living in a neighborhood of old-timers and new-timers. The skewed rents are tipping the balance, but to hear some talk, that's inevitable. Nothing is inevitable. The state is the ultimate authority, and right now, they seem out of ideas.

jeffe said...

Hey Im not boohooing for developers but trust me developers many times put up significant amounts of their own money especially these days and yes speaking from my own experience you can loose significant amounts of your own money. You can trust most for profit business to at least try to make a profit and I think it would fair to say that making a profit would be their prime motivation ( i think that would be a reasonable expectation). You have dont have to trust the developer in matter of fact that state and city have a lot of oversight in the development process. It certainly not a perfect process from either side of the fence. As to the State being the ultimate authority all i can say is
thank our lucky stars we live in a constitutional democracy with a Bill of Rights. Government I believe is better off doing the things it absolutely needs to do keeping the playing field level, law enforcement, necessary regulation, maintaining the rule of law. Building housing I dont believe they have any advantage and many disadvantages. I dont believe they can do it more efficiently than than private enterprise. But they can do it I be scared to guess what their costs would be and its the tax payer who would get stuck with any cost overruns. If your not talking about not wanting any new housing or limiting the amount of housing that gets built thats a political question
It can be done but you limit the supply it has consequences including increasing the prices of what ever is available. I like the Q Hood I like the new restaurants and stores Ive noticed many more young people starting families in the neighborhood it and doesnt upset me. I think its kind of nice. I knows its difficult for young people to pay what it takes rent or buy an apartment and I think we need policies that will both provide additional supply and help buyers financially. Part of the problem is that there are areas in this city which many people find desirable and has attracted additional populations of young people q hood is not a wall street banker territory it just regular people in the middle of the economic spectrum many of times 2 incomes ie teacher and lawyer just trying to raise kids and have a life in the City These are not titans of wall street, or lucky employees of facebook or google. But they are part of the face of gentrification. No doubt their are plenty of issues with respect to fairness, income inequality that need to be addressed. But many issues were exacerbated by the ultimate authority of the state and how it elected to bail out the financial institutions ( which is a story until itself). But pitch forking and scape goating the so called greedy developer does not solve the problem. the developer is most likely to be a necessary part of the solution to the housing
dilema.

theoldspeakjournal said...

3 Words Bro: Securitized. Rental. Payments. What was done with morgage payments back in '07 by our giant vampire squid overlords that nearly crashed the global banking system is being done with rent payments. You're right to detect the speculative nature of the scheme. Megabanks and hedge funds are having a fucking field day gambling people's rent with the money from millions being thrown out of their homes. But, When this unsustainable bubble bursts is going to be really, really, really bad. There won't be taxpayer bailouts next time. Like depositor accounts funded bailouts bad. Like people with perfect payment records being evicted through no fault of their own bad. Read it and weep brother.

http://www.motherjones.com/politics/2013/11/wall-street-buying-foreclosed-homes

Barbara Ann Rogers said...

Not to quibble, but NYC never went bankrupt. Gerald Ford may have told the city to "drop dead," but he later did approve the $2.3 billion in loans that got us through.

Is this a bubble? Maybe, but it's important to remember one's history around here - generally, if you hold onto a piece of property for three - five years in NYC you won't lose.

Look at the prices people were so amazed at in 2007 - they look like deals today. And it's even more stunning when you look at what we thought were astronomically high prices in the late 1980s before that bubble burst.

The market rents projected for 626 don't look nearly as high as I'd expected. Remember this is a new building, with all the modern conveniences like dishwashers, laundry in the building if not the apartment, central air, and no doubt all other sorts of amenities. I know many people who live in this neighborhood now who'd pay those prices just to get into a building that nice - the vast majority of the rental buildings around here are pretty nasty, if you haven't noticed.

And if people who already live here are OK with that price, it's got to look like a total steal to those priced out of more "fashionable" areas.

Add what's sure to be some amazing views (whatever height it finally ends up at) and you've got a very hot product.

And if those apartments don't rent at those prices, Hudson will lower them. They're too smart to let a bunch of apartments sit empty and drain their cash. I don't think they'll have to, however.

Clarkson FlatBed said...

Good points Babs. Although as I note in my post I don't think for a minute they'll be that cheap. A year's past since they published those prices anyway, and no one's holding them to it.

Rents are, of course, incredibly difficult to inflate, as they are as good a sign of what the market will bear as anything. Although right now I feel that there is an enormous demand side disadvantage weighing against renters.

By bubble I mean this is temporary and as with most demand surpluses we will overbuild and when we do we will be left with not only ugly, tall boxes but also decimated neighborhoods. The former is sad, and the latter is obscene.

Am I being clearer? I seem to have invited all manner of misunderstanding.

Of course I could be wrong about any number of things, but I am not the only person to note the atypical winds a-blowin'

Duane Joseph said...

$1,875 for a Studio?!?!

I ask this question all the time, but none of the experts seem to be able to answer it...how are market rates determined? Specifically, what criteria is used?

Why do we always turn to the single making $40K or young immigrant family with a gaggle of kids as the barometer of what's affordable to whom? I'm single, make $40K+ and an immigrant (from a fam of 4 btw) and I don't want to believe that the only way for me find affordable living space in NYC is to move in with someone. Nor do I want to believe that if I decide to couple up and have a family, that my spouse and I would need to make six figures to find affordable living space.

As for those "loads" of section 8 tenants, the can't afford our neighborhood either. Section 8 is income restrictive and has a cap. Families have to be prepared to cover the difference of rent that the grant doesn't cover.

I think the point that one poster made about the loss of the middle class due to folks being over extended is key in all of this. Our historically economically and culturally diverse neighborhood is rapidly, and quite forcefully, being shifted away from that.

We need to stop the homogenization of NYC neighborhoods!

bored at work said...

@Clarkson Flatbed

Your comments make me laugh. "But why does it matter what it costs to build?" and "The majority of jobs in this city pay minimum wage."

Of course you are entitled to your opinion, but lets back them with facts. Why does it matter what it costs to build? Because someone (you, me, the developer) has to pay to build it. The construction of a new building and the land under it arent free. Even if the developer doesnt want to make any profit, he at least doesnt want to lose $. And, maybe the contstuction workers care what it costs to build, too.

On your assertion re. the minimum wage. Per US Senator Gilllibrand:

In New York City, there were an average of nearly 3.6 million workers, over 780,000 of which would benefit from this increase in minimum wage, benefitting approximately 21 percent of workers.

So thats a lot, but not close to half.

And per your final comment on speculative boxes going up, where are these boxes? It is much harder today than just five years ago to get a construction loan and build. So completely spec buildings are just not getting built. Look in downtown Brooklyn where several rental towers (50+ stories) are going up right now with MUCH higher rents than those proposed at 626. There is significant pent up demand for rental units across the city. These buildings will fill up. Or they will lower rents. But as I said earlier, dont count on it.

Clarkson FlatBed said...

But yes, I misspoke: Majority of NEW jobs created. That was from a NY Times article and Huffington Post piece. I'll google to find.

Why doesn't it matter what it costs to build? You missed the point entirely. It doesn't matter what it costs to build or the cost to rent because these buildings are NOT affordable and not intended to be. That's why. Incentives or not, no one is specifically building for the middle class on down, and until we figure out a way to incentivize THAT we're not doing a damn thing to help the problem.

Ugly boxes? You haven't checked out the rest of the borough, dude. Get out and look around. They're all over the place. And companies like Hello Brooklyn are selling these boxes on spec. You must pay before they even break ground.

And BatW what makes you think it's so hard to get a loan? They're not walking over to the local savings and loan and asking for charity. They've got bundles of cash in investment trusts and private investors, occasionally backed by institutions and sometimes the banks themselves jump over each other trying to get a piece of the action then sell off debt to those trusts or uncle sam.

leffertspapa said...

In most cases those new ugly boxes are replacing old ugly boxes. We were just used to the old boxes so we'd become attached to them.

I liked old industrial Williamsburg and LIC as much as anyone else, but they were not pretty.

And in fact its absolutely possible to make new construction that looks great and creates affordable units, see the Via Verde development in the Bronx: http://www.nytimes.com/2011/09/26/arts/design/via-verde-in-south-bronx-rewrites-low-income-housing-rules.html?pagewanted=all&_r=0

Clarkson FlatBed said...

Not saying affordable units would be pretty. Just saying the unaffordable ones are butt ugly.

But aesthetics aside, there are solutions here that involved partnership w/development interests. I haven't suggested that private enterprise can't have a role to play. Let's think creatively. Some of you seem very familiar with the numbers. Let's figure out a way, through incentives, to get builders to build 50/50. And not just affordable units, but middle class ones with rent increase caps. Maybe not the same ol' same ol' of rent stabilization. Maybe some sort of rent to own limited equity, like the Mitchell Lama program?

C'mon y'all. Don't just be P.R. mouthpieces for REITs and builders. Get creative. That's a direct challenge for elected officials, City and State.

Ektorp said...

Clarkson, there are actually quite a few programs that provide incentives for developers to build "50/50" mixed-income housing -- and even 100% affordable housing. And in fact, there are a good number of such projects built each year throughout the city. I'm not sure of the exactly numbers, but there are problably 2 or 3,000 affordable units built each year (and a great many more are rehabbed).
The thing is, it's a drop in the bucket compared to the amount of demand there is for housing in this city, and these programs require a great deal of City, state and federal subsidy, and even with the hefty government subsidies that are required, such projects are only really feasible where land is inexpensive (like the South Bronx) or free (like on City-owned land).
It would be great if the City had hundreds of millions of dollars to spend building new affordable housing each year and if the federal government expanded its affordable housing programs (which are actually more important than the City & State programs) But in the world we live in these resources are very scarce.
You can brush away anyone who talks about numbers or economics, but then you will never understand how new housing construction works-- affordable or not.
I think everyone who posts here would agree we need more affordable housing and more resources for the private sector to build it. But I think to say there should be no new housing for anyone until there is more affordable housing, when the government resources that exist are way outstripped by the demand, is a foolish idea and this neighborhood and this city will be much worse off if such stupidity ever comes to pass.

Barbara Ann Rogers said...

Duane, market rates are determined by the market - this is the rate that people are willing to pay for a certain good or service (it also applies to cars, food, even doctors' visits).

There's no formula for it, and it's not governed by any law (in this capitalist society). Anyone can look at apartment ads on StreetEasy, Craigslist, etc., and see what prices are being asked in various neighborhoods. I am a real estate broker, so I'm in this all the time - I know what people are looking for and how much they'll pay for it. And like it or not, those people determine the market rate - the landlord can try to guess it (and as I said those rates look pretty good for what you're getting vs. the other rental buildings around here), but if it doesn't fly, he will lower it to the point that the units do rent. Similarly, if they rent very quickly he may consider raising it - or the tenants may do so themselves. I've actually encountered a few bidding wars on rental properties recently (can't do this with rent stabilized units, where the maximum rent is governed by law)

The rule of thumb most landlords use is to require that prospective tenants make 40x one month's rent in gross income - so you'd need to make nearly $80K/yr for one of these studios (or have a guarantor, which is what a lot of people do).

Obviously this is not affordable for a lot of people currently residing in this neighborhood, but if the units they're in now are rent stabilized they'll be OK (and looked at enviously by those who aren't).

Clarkson FlatBed said...

Ektorp: Not to get too political about it, but the resources are not scarce in the least. They are not allocated or raised. Remember what I said about the State being the ultimate authority? (Unless you're religious of course).

It's not that I'm not interested in the economics Ektorp. I am. That's why I read that Mother Jones piece from Old Speak Journal with relish. The damn relish got all over the keyboard though, so I'm not sure why people even say that.





Clarkson FlatBed said...

Barbara: Since I know that Duane's no dummy, I'd like to speak up for him and say that he was probably referring to the rate at buildings set prior to the building even being built. I think it was probably pure speculation, and on the low side at that. I think you pointed that out quite clearly in an above comment - the rates stated are likely going to be considerably higher upon renting.

Barbara Ann Rogers said...

I din't mean to imply that Duane was a dummy at all (sorry if it seemed like I did) - just emphasizing the total lack of regulation over any form of prices in this situation. That's the capitalist "free market" for you, and I for one don't think it's always the best way to go, especially when you're dealing with necessities, like food, shelter, and health care.

Duane Joseph said...

Barbara: No worries. I understood that you were trying to offer some insight into the formula used by realtors and landlords to determine the monthly value of an apartment. And Tim is correct, I was referring to pre-construction price setting--I could have been a bit more clear about that. I just find the whole "formula" a bit arbitrary.

The idea that a company like Hudson Properties can decide to charge $1,800 for a Studio in PLG because they have tenants living on the UES that are willing to pay $2,000+ for the same space is mind boggling to me. Wouldn't a better formula be to survey the immediate area (less say within a 1 mile radius) to see what the average rent is for a no-frill apartment is, and then add on costs for extras like included utilities, high floor, etc.?

Ted Colgate said...

Sometimes much higher than $2,000 for a studio: http://streeteasy.com/building/one-east-river-place/d-flrs2648

no_slappz said...

How to Spot a Market Bubble
Investors can get burned when the air rushes out of a hot market.
By Joe Light

Updated April 18, 2014

Investors have big fears about a small word: pop.

The bursting of two major asset bubbles—in home prices in recent years and Internet stocks at the turn of the century—has trained investors to scan the horizon for signs of where the next one might form.

Caution is well-advised for investors tempted to chase hot markets. At the same time, the "bubble" label sometimes gets slapped on assets too quickly, experts say.

"Prices can be both 'not cheap' and 'not in a bubble,'" says Vikram Mansharamani, a lecturer at Yale University who has written extensively on how to detect a bubble.

It isn't easy to tell the difference. But when stocks—or any asset—are in a bubble, the pop can cause values to plummet, by 50% or more in extreme cases.


Here is a guide to spotting bubbles, where they might be inflating now, and what to do when you find one:

Three Red Flags

The first sign of a potential bubble, and the easiest to spot, is a rapid rise in prices. The Nasdaq rose 110% in the 12 months before the dot-com bubble crested on March 10, 2000. Home prices in Las Vegas rose 41% in the two years before their April 2006 peak, according to S&P/Case-Shiller.

When bubbles are forming, the price spikes also tend to be interspersed with bouts of panicky selling, says Didier Sornette, who is director of the Financial Crisis Observatory at the Swiss Federal Institute of Technology Zurich.

Another warning sign is when prices break sharply from an asset's underlying value. With stocks, one popular way to measure value is to divide the market's price by 10-year average earnings after adjusting for inflation.

The third indicator of a bubble is that investors and analysts identify an exciting technology or innovation that serves as an explanation for the rapid climb in prices, such as the rise of the Internet in the late 1990s.

What a Bubble Does—and Doesn't—Look Like

Some investors have expressed concern that the broad U.S. stock market looks bubbly. That is reasonable, given the 32% gain that investors in the S&P 500 enjoyed last year, including dividends.

But on closer inspection, it is clear that U.S. stocks can't be called a bubble—at least not yet. To begin with, the Shiller P/E of the S&P 500 is 25. That is higher than the historical average but far below the dot-com era peak.

To meet Boston-based asset manager GMO's definition of a bubble, the S&P 500 would have to rise about 25%, says Edward Chancellor, an investment strategist on GMO's asset-allocation team.

Handle With Care

Even if you think a bubble could be forming, that doesn't necessarily mean you should give up the asset completely, says Stephen Utkus, director of the Vanguard Center for Retirement Research.

For one thing, you could be wrong.
"No one talks about bubbles that never collapsed. Everyone wants to time bubbles, but that's almost impossible to do," he says.

Bubbles are rare, which means it is uncommon to find assets displaying all of the warning signs at once. But investors also should keep an eye on assets that show one or two of the common red flags. Here are some current candidates.

Some companies, such as Amazon.com, AMZN +0.38% have achieved that performance without making much money, Mr. Chancellor notes.

Hot real-estate markets.

Home values in San Francisco, Honolulu, and Santa Cruz, Calif., for example, are at least 20 times as high as estimated average rents as of February, the latest data available, according to Zillow, which estimates home values.

Once home prices rise above that level, according to some economists, a market starts to look dangerously expensive.

no_slappz said...


50-story towers eyed for LICH site
The cost to keep a full-service hospital in Cobble Hill could be big and tall.


By Barbara Benson and Daniel Geiger
April 25, 2014 2:00 p.m.


The highest-scoring bid for Long Island College Hospital captured the support of surrounding Brooklyn communities and elbowed aside a deep field of competitors by pledging to preserve a full-service hospital at the Cobble Hill site.

But that pledge comes at a cost.

The would-be real estate developers of the medical campus are counting on high-rise residential towers of a scale never before seen in the heart of brownstone Brooklyn in order to make the deal pencil out, according to emails among executives involved in the bid.

Brooklyn Health Partners envisions raising at least two soaring residential buildings of up to 50 stories on the campus of low-rise buildings that make up Long Island College Hospital.

It has plans to build a 40- to 50-story condo tower on the site of a large parking garage on the corner of Atlantic Avenue and Hicks Street that is part of the LICH campus, according to emails from a financial adviser involved in the bid, which were obtained by Crain's.

Clarkson FlatBed said...

I hope they don't have to build that high, but after all, they're getting their hospital. If the community finds that a fair trade, then so be it.

The key part is that some level of discourse about trade-offs took place. And will continue to happen.

Lefferts has not been offered anything for the use of our air, which with any elected leadership to speak of, would not be taken from us or from the borough (read:Park).

To those who still claim that Brooklyn is over-served by hospitals, one should recognize that the statistics often trotted out by proponents of closings are completely false. They don't use the number of actual beds, but rather the potential, often twice as many as available. It's a sick secret that these numbers have over-counted beds for years. Further proof that politicians have been looking the other way...

Our borough is gigantic. We need the beds, and we need leadership on the issue. Yes the hospitals should aim for profitability, but when they're not, whose fault is that? The sick people themselves? Give me a break. A healthy society puts the health of its people first. THEY are our economic engine. And when they're not, by no fault of their own, it's important to remember that we are not in the business of assigning value to life. We'll leave that to Kenneth Feinberg.

no_slappz said...



SUNY ends negotiations with top LICH bidder

That means the State University of New York will now negotiate a deal with developer Donahue Peebles on the future of Long Island College Hospital.


By Daniel Geiger

May 5, 2014

The State University of New York on Monday said it was unable to reach a contract agreement with Brooklyn Health Partners on the redevelopment of money-losing Long Island College Hospital.

The two had a deadline of May 5 to reach an agreement. SUNY, which owns the Cobble Hill, Brooklyn hospital, said it would move on to the next highest-ranked bidder. The announcement is the latest twist in a saga that has cost the state hundreds of millions of dollars to keep a near-empty hospital open.

"Following good faith negotiations over the last thirty days," SUNY said in a statement, "[it] is unable to execute a satisfactory contract agreement with BHP. SUNY remains unwavering in its commitment to protecting community health care services and a viable long-term solution for LICH. Therefore SUNY is moving forward with the second highest scoring proposal consistent with the Request for Proposal and the court-ordered settlement."

That means developer Donahue Peebles, whose proposal to buy the Cobble Hill complex and turn it into a mix of housing and outpatient clinics was rated No. 2 in a scoring process, is up to negotiate with SUNY.

BHP had won the right to negotiate exclusively with the hospital's owner, but the firm lost the support of Mayor Bill de Blasio and the unions that represent LICH employees, who doubted the feasibility of the proposal after SUNY indicated it was unlikely to reach an agreement.

BHP, in turn, sued SUNY, alleging it had negotiated in bad faith, only to be told by a state judge to return to the negotiating table. Brooklyn Health Partners said on Friday that it was "prepared to close its transaction" with SUNY on May 5.

Now that SUNY has moved on, BHP may yet sue the university system. On Monday evening, a spokeswoman for the would-be developer said it was "currently meeting with its attorneys to determine its next course of action."


Meanwhile, the spotlight turns to Mr. Peebles, a Florida real estate investor who has had limited experience in New York City real estate and no experience operating medical facilities.

He came in second place in the bidding process and would have the chance to buy LICH. Unlike BHP, Mr. Peebles' health care partner, North Shore-LIJ Health System, would be eligible for a temporary license to operate LICH after SUNY shuts it down. That is expected to happen May 22.

Mr. Peebles bills himself as the biggest African-American real estate developer in the country.

Last week, in an interview with CNBC, he said he'd be interested in buying the Los Angeles Clippers from owner Donald Sterling, whose racist comments led to his lifetime ban from the NBA.

Mr. Peebles' previous forays into New York have produced mixed results. In 2009, he lost a bid to develop an electronic casino-gaming facility and restaurant and bar at the Aqueduct Race Track. Malaysian casino operator Genting won the racino contract.

Mr. Peebles made his first deal in the city last year, when his firm won an auction to buy the city-owned office building 346 Broadway for about $160 million. At the time, he told Crain's that he planned to convert the property into a hotel with residential condos above.

alicekeysmd said...

Thanks for a well thought and written article on the housing bubble in your town.

We are riding a similar housing price and rental price bubble in Santa Cruz California. Rent prices are thirty to fifty percent higher this year than last. A single friend had her rent raised by 700 bucks a month this year to $1750 for her small place.

Housing has been priced out of the reach of ordinary people as speculators gamble that they can find and kill the rare big fish.

"For sales" are taken on and off the market and re-priced ever higher to give the illusion of a tighter and faster-moving market than exists. Most buyers are "investors". Realtors gang up as "investment groups" to buy and "flip" houses. Even rentals are posted and re-posted at increasing prices without being rented to anyone. Cheap rentals go fast. The rest sit empty. This is not a normal housing market based on supply and demand.

Folks around here say this is such a special place that this is not a bubble. I feel like a nasty splat has to come soon here on the "left" coast.

Thanks. After reading your article, I feel oddly reassured.

Alice

no_slappz said...



Tentative deal is reached, but it won't save LICH

Community groups threw in the towel on a full-service hospital; emergency services to continue. The hospital will shutter at midnight.

By Irina Ivanova

May 22, 2014

Community activists have given up their fight to keep a full-service hospital at Long Island College Hospital in a tentative deal that would keep a slimmed-down emergency room at the site in Cobble Hill, Brooklyn.

All services at the hospital will shutter at midnight with the exception of the emergency department, which will remain open until the State University of New York hands its ownership off to another operator, North Shore-LIJ and developer the Peebles Corp., with the goal of wholly managing the site by Sept. 1st.

Even then, however, LICH will not return to its full-service ways. An agreement reached Thursday morning between the bidders, LICH and the community groups that had sued to keep it open states that only an emergency room will remain, and it will not include an intensive-care unit.

The emergency room is no longer accepting ambulances, but the agreement states that ambulance service will return as soon as possible and no later than July 15.

"The continuity of care of services offered at LICH is paramount," according to an agreed upon "statement of principles".

But those principles, and the community groups behind them, finally bowed to reality. Despite politically charged rhetoric and headline-grabbing lawsuits, the community activists were unable to find a hospital operator willing to keep LICH open.

Their attorney, Jim Walden, conceded as much Thursday. In exchange for dropping all litigation against SUNY and the state Department of Health, Mr. Walden agreed to the statement of principles that simply requires the Peebles Corp. to commission an independent community needs assessment, which would establish whether or not a full-service hospital is needed in Cobble Hill.

Clarkson FlatBed said...

Congratulations Slappz. Must be feeling pretty good right now, huh? Interestingly I was in Kevin Parker's office this afternoon and he was giving me the history of the State's failure with SUNY. They hadn't had their eye on the ball for years. Another one bites the dust.

It would appear that the hospitals need to specialize in order to survive, rather than all trying to do all. Though when you think about it, profitability is pretty beside the point, when the main income is from a government subsidy (medicaid/medicare). What would have been nice here is a slimmed down hospital with a particular niche AND a great emergency room. Instead, we get a few hundred more wealthy apartment dwellers. Mark it down to progress I guess...