CITY LIMITS

FEBRUARY 1980
$1.50 VOL5NO.2

SWEAT EQUITY

REHABILITATING SWEAT EQUITY -PART I

Sweat equity homesteading produces good quality housing, but can a program that takes on the city's neediest buildings using the most shallow of subsidies survive in today's economy? In this two-part series City Limits takes a look first at how double digit inflation and other factors have hurt the program. It's not cheerful reading. But do not despair. There are remedies. Next month we will explore the variety of tools that can and are being used to protect the program. by Bernard Cohen
Sweat equity, an ambitious attempt to save seriously deteriorated buildings in the poorest neighborhoods by using voluntary labor to keep costs low, is being battered by economic forces that experts say will probably make the housing too expensive for low income people unless the program is modified soon. Inflation, astronomical fuel prices and high interest rates have dealt a severe blow to an innovative program that is relatively unprotected by subsidy and geared for an income group that is already at the limit of what it can afford to spend on housing, many housing specialists agree. The rehabilitation and operation of housing are so much more expensive today than anyone imagined even three years ago, thanks to 13 per cent inflation and 90 cents-a-gallon oil, that architects of sweat equity are facing tough questions about whether the cost savings from contributed labor and other measures are sufficient to keep the housing affordable for low income people. Terms such as "borderline feasibility" are becoming common. Even at today's prices, sweat equity urban homesteading produces high quality rehabilitated housing at remarkably low cost, compared with other programs. But there is growing agreement in housing circles that unless a deeper subsidy is incorporated, combined perhaps with lowering the sights of the construction effort, sweat equity as it operates in New York City will either go out of business or be forced to serve a moderate to middle income population. "We are getting blown out of the water by costs," said Charles Laven, director of the Urban Homesteading Assistance Board, adding that privately owned and government assisted housing everywhere is suffering from the same economic woes, a conclusion widely borne out by studies and statistics. He and numerous other housing experts interviewed by City Limits reaffirmed their confidence in the concept of sweat equity and said there were many ways to keep the housing within the means of lower income people. Some of the cost-cutting tools are already being tried out in other cities. "I really do believe in the design of the program," Laven said. "It's the right set of goals. "
CITY LIMITS/February 1980

Sweat equity has been a creative response to two of the most scarring problems of the inner city: housing abandonment and unemployment. For many years, New York City has been losing housing through abandonment at the rate of about 15,000 to 20,000 units per year. The most recent job statistics show that unemployment here is about 9 per cent of the general population and more than 11 per cent for blacks and Hispanics. As it is generally defined, sweat equity involves community-based housing development that uses primarily untrained or newly trained labor for the construction and emphasizes user participation in and control of the project. Neighborhood residents form an organization, buy an abandoned building, obtain a below-market interest rate (1 percent to 3 per cent) loan and rehabilitate the structure. Their sweat, or labor, reduces devellopment and operating costs and serves as their "equity" investment in the building. For example, homesteaders in the three buildings sponsored by the Banana Kelly Community Improvement Association in the South Bronx are required to put in 600 hours of free labor and take turns guarding the buildings at night. In the early 1970s, homesteaders received little or no income during construction . That hardship was later eased with job training funds through CETA (Comprehensive Employment and Training Act program).
continued on page /6

Sweat Equity rehabilitation of 310 East 4th Street.

TAKING THE FIFTH

In contrast to that slogan of struggle, "One step backward, two steps forward," events in the West Side Urban Renewal Area seem to shift an equal distance backward for each movement forward. At issue is the fullfillment of a 20-year government commitment to lower income housing and preservation of economic integration in an area where private market development is rapidly occurring. Recent progress-the U.S. Supreme Court decision overruling environmental objections to constructing 160 units of low income housing-has been more than offset by the Board of Estimate's decision to delay indefinitely a housing management contract for the United Tenants Association, a low income group. The latest version of the Urban Renewal Plan, the Fifth Amendment, assured that 30 per cent of the development on the remaining sites within the 20-block WSURA would be devoted to lower income households as part of the total renewal plan commitment of 2,500 such units. The UTA management of 90 units was part of that commitment. It is jeopardized by the Board of Estimate's inaction and by efforts to obtain a court injunction by an organization called CONTINUE that represents some middle-class homeowners and tenants. Things do not look good for the other designated low income units in the Fifth Amendment plan, either. The majority are to be located in mixed income projects consisting of 30 per cent low income units. Developers agreed to this mix in order to be approved. There is substantial reason to fear that these commitments will be reneged upon. The increased market attractiveness of the West Side, the shortage of Section 8 subsidies and the possibility of further CONTINUE opposition will all serve to undermine the developers' commitments. Antagonism to lower income housing in the WSURA is fueled by The New York Times and Mayor Koch. The Times, in a continuing series of editorials, argues that the urban renewal commitment to low income families has been fulfilled and that the city should now capitalize on the current high values of the West Side sites and sell them off at maximum market prices. It is a case of editorial writer and former housing commissioner Roger Starr's attempt to press a viewpoint in the media that has not been

sustained by the courts. Mayor Koch has repeatedly made clear his sentiments that people should not live in housing they cannot afford. The battle for the West Side coincides with a peak demand for Manhattan housing. Newcomers to the neighborhood seem unfamiliar with and hostile to the traditional economic and racial diversity that was once considered an asset. They applaud gentrification while property owners cheer at the boom in real estate values. Displacement of lower income families is sweeping through Upper West Side blocks in order to accommodate affluence and speculation. The WSURA is only one of many battlegrounds in New York City where these competing forces are threatening the development and preservation of low income housing. The private market does not and cannot serve any except those able to pay $600 to $800 for a onebedroom apartment. Worse, people buying in at private market prices do not want anything or anyone around who could jeopardize their property values. The consequence is the war of attrition that has been fought on the Upper West Side. Armed with money and lawyers, CONTINUE has blocked all low income progress and watched the market improve. CONTINUE's partner, the private housing market, has attained a velocity that seems unstoppable. Clear-cut discrimination against the poor and minorities is cloaked in the holy shroud of objective market forces. The WSURA might be regarded as an anachronism, a vestigial urban renewal site left over from outmoded urban policies. But the implications are continued on page 15

tCITY LIMITS.
City Limits is published monthly except June/ July and August / September by the Association of Neighborhood Housing Developers, Pratt Institute Center for Community and Environmental Development and the Urban Homesteading Assistance Board . Subscription rates: $20 per year; $6 a year for community-based organizations and individuals. All correspondence should be addressed to CITY LIMITS, 115 East 23rd St., New York, N. Y. 10010. (212) 674-7610
Second-class postage paid New York, N.N. 10001 City Limits (lSSN 0199-0330) Editor ... . . . .. . ....... . ...... . .. . . . .... . .. . . . .. Bernard Cohen Assistant Editor .... . ... . . . .. . . . . . ..... . .. . ..... . Susan Baldwin Contributing Editor . ... . ... . .... . ... .. . ...... Howard Burchman Design and Layout .... . . .. . . . . . .. ........ . . . .... . Louis Fulgoni Business Assistant. . .... . .......... . .... . .. .. ..... Carolyn Wells Copyright 1980. All rights reserved. No portion or portions oj this journal may be reprinted without the express written permission oj the publishers.

This issue was funded by a grant from the Fund for the City of New York.
Coverphoto of 310 East 4th Street by Bernard Cohen.

CITY LIMITS/February 1980

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BEDFORD STUYVESANT SUPERMARKET

DOING WELL AFTER A YEAR IN BUSINESS
by Tom Robbins number of enterprises co-owned by a community development corporation and a private business. With almost a full year of operations under their belt, both Pathmark and Restoration feel they are well on the road to success and have built a relationship of mutual trust and cooperation. The Restoration Pathmark hasn't turned the corner into the black yet, although its first year of operation was slated to break even. Anticipated weekly customer counts were 30,000 but actual shoppers have been running at the rate of between 19,000 and 21,000 weekly. A big exception, Restoration officials happily point out, was the "great 39/lb. chicken sale" when shopping surged . January of 1980 was also a better than average month, thanks, Restoration believes, to both a big television blitz and the government heating rebates which arrived that month. But despite the slower than expected customer rate, both halves of the partnership are confident the enterprise will show a profit in the near future. "Things could not have gone better than they have," said Bob Wunderlee of Supermarkets General central's office in New Jersey when asked about his corporation's partnership with a non-profit community group. "fhen we were first approached we were hesitant on a number of counts," said Wunderlee. "Foremost was the size of the projected store. With the square footage available, there just wasn't enough room for a conventional supermarket. There was also concern about security. Many people think a supermarket becomes an island in a community-a world unto itself. But that's not true. Whatever problems are out there on the street are also going to be in the store. We had the concern of how to control the external environment. " That concern, said Wunderlee, has been more than adequately overcome with the assistance of the Restoration Corporation. Pilferage, Pathmark says, has not been noticeably higher than at other stores, nor has there been a problem with people hanging out in the store. What did draw Pathmark to Bedford Stuyvesant were two factors: the tremendous population base of potential customers and the track record and community support of the Restoration Corporation. But before Pathmark could be brought in, the pot was sweetened considerably. 4

In early February, the Bedford Stuyvesant Restoration Corporation called together a group of 75 community residents to hear their problems, complaints and evaluations of the one-year-old Pathmark supermarket in the Restoration Plaza at the corner of Brooklyn Avenue and Fulton Street. Complaints were surprisingly few. Some residents mentioned long lines, others spoke of not being able to get the items they wanted, but most criticisms were no different from those voiced by shoppers at many supermarkets. "The people are generally ecstatic," said Ruth Mitchell, assistant to the President at Restoration. "The prices are the lowest in the area, it's clean, and it's nearby," she said. But what is different, in fact unique in this area, is that the Restoration Pathmark is a joint venture of the Restoration Corporation and Supermarkets General (Pathmark's parent organization). With Restoration footing two-thirds of the $2.25 million package the store is one of a still very small, but growing
CITY LIMITS/February 1980

An Anchor Store For The Plaza Ten years ago when the shopping center was being planned, said Gene Coleman, economic development expert for Restoration, the intent was to get an anchor store for the plaza. "our idea was that we were constructing a convenience center-it was never designed to compete with downtown Brooklyn. The original plan called for a department store, and we were hopeful Macy's or Gertz or someone else could be persuaded to build here; but no one ever expressed any interest. " Despite the switchover to a supermarket instead of a department store, Restoration felt that the added retail food store was sorely needed in the Bed Stuy community. No new supermarkets had opened in almost twenty years in the area, and, in spite of the presence of small local markets ,the nearest large economy grocery store was a long bus ride away. "The next phase was to identify a local or a minority person to open a market, but there was really no wayan independent could be cost competitive with the chains. So that was where we looked next. We talked to the Fedco people, but all their stores were in the Bronx and it presented an immense logistical problem for them to ship to just one store in Brooklyn. A&P at the time was closing down a lot of their smaller stores and wasn't about to consider opening a new one. "And it was then," added Coleman, "that we approached Path mark with the model of the TWO-Hillman store on the southside of Chicago." TWO (The Woodlawn Organization) did the first joint venture between a community group and a supermarket chain when it opened its store in 1972. Smaller than the Restoration Pathmark, the TWO-Hillman has been successful in its 8 years of operation, and offered a model and experience to draw on. Pathmark, however, still saw a risk, and it wasn't until the two-thirds l one-third financing agreement was broached that they overcame their reluctance. Restoration was able to turn to Citibank and Chemical Bank for the needed financing, and then went ahead and built the market at the far end of its Restoration Plaza. As owner of the store, Restoration signed a fiveyear renewable lease with Pathmark and also signed an agreement giving Pathmark the management control. At the end of the lease, either party has the right to pull out, but Coleman says it is not anticipated that Restoration would want to take over the store. "We haven't got the management expertise," Coleman said, "nor could we expect to sell at as Iowa price as Pathmark does. " Pathmark brought in a twelve-year veteran of its organization, Dave Harris, as manager. Harris, who had managed eight other Pathmarks before coming to Bedford Stuyvesant, was pleased to be part of the experiment. "It' s a good thing for the community," he said recently from his office perched above the crowded checkout lines. "Aside from some of the usual problems a store has when it's just starting out, it's working out

fine. " Another 20 Pathmark employees were shifted to the new store, and the rest of the 150 store workers were taken from Restoration's lists of community people in need of employment. All workers are members of Local 1500 of the Retail Clerks Union. While the marriage of Pathmark and Restoration still appears to be in its honeymoon phase, there have been and still are several kinks in structure and operation which both partners and shoppers agree need to be ironed out. Gwendolyn Kannett, a Restoration Pathmark shopper for the past eight months, paused from her weekday shopping after sending one son off to find a jar of mayonnaise and another in search of cat food to give her response to shopping at the new market. "My only complaint," she said, "is that I often can't find the items I want. This is the third time I've been here looking for Pathmark brand soup, and each time I come they're out of them. There's only this tomato soup here," she said gesturing at a shelf almost barren of soup cans, while the one above it burgeoned with Campbell's brand soups. "Other than that," she continued, "I love being able to shop here. I used to take the bus to the Pathmark at Albany Avenue, but now I come here, and other than not being able to always buy what I want, I like it." Shortage of items was a frequent complaint heard at the community feedback meeting held by Restoration, and Pathmark officials and store manager Harris readily agree it's a problem. The store has 30,000 square feet of total space, with 18,500 given over to the marketing area. Large Pathmarks, says Harris,are usually from 48,000 to 56,000 square feet, and there is adequate room for storage and shelf space . In the Restoration Pathmark, as a result of the smaller physical plant, goods tend to be piled higher and sales items exhausted quicker than at other stores . The store's smaller size also leads occasionally to lines at the checkout counters that back up the aisles. Thirteen checkout lanes are in operation during peak buying times, and during a recent early afternoon weekday visit 10 lanes were operating. "Some people have complained that the cashiers are too slow," said Mitchell, "but then many of them are still being trained. And as one person at our community meeting responded to that comment, 'If we're not going to train our youngsters, who is?' " According to Pathmark's New York area office, the one identifiable problem that is still outstanding in running an inner city market is that the lines are erratic. "If you watch what occurs at a checkout counter," said Wunderlee of Supermarkets General, "you'll see continued on page II

Tom Robbins is a former housing organizer and a freelance writer who will soon be joining the staff of City Limits .

CITY LIMITS/February 1980

further fragmentation of the state's housing programs. "This is an attempt to consolidate and put programs together according to function," she stated. Coordination would come from a new Council on Housing and Community Development, made up of the heads of UDC, DHCR, HFA, PFA, DOS and other agencies, After months of rumors, Governor Hugh Carey has announced a major reorganization of New York State's with an outside chairperson appointed by the Governor. administration of housing and community development Frangos claimed that this Council will not only mesh programs. While a promised concrete plan had not been administrative gears, but will develop a "housing policy released as City Limits went to press, interviews with a for the 1980s" as well . Other Albany sources expressed skepticism. While number of sources indicated the general direction of the reluctant to criticize a plan they had not seen, many proposed restructuring. New York presently has a number of agencies and nevertheless predicted increased administrative public authorities which deal with housing and related problems under such a structure. A common reaction programs, with confusing overlap of functions and was that the Carey Administration should discuss housoften competition between them. The principal agency, ing policy before structure. One described the plan as in title at least, has been the Division of Housing and "an attempt to look like they're doing something." One critic pointed out that California and New Jersey Community Renewal. In its heyday, it supervised the development and construction of numerous state- recently reorganized in the opposite manner, by merging assisted apartment developments, including Co-op City. several competing housing agencies into one. DHCR With the creation of the Urban Development Corpor- could be upgraded from a division to a department, for ation by Nelson Rockefeller in 1968, however, DHCR example, with strengthened rather than diminished began to lose the money and the action, and with them a functions. Such an enhanced shop might attract a strong clear definition of purpose and responsibilities. Prac- commissioner who would stay on the job for more than tically everyone in state government agrees that DHCR a few months. Staff morale at DHCR, which has been bad for some is a poorly-functioning agency. Frequent turnover at the top, with three commissioners since 1976, hasn't helped. time, is at rock bottom. 0 Michael McKee Neither did a state report last year that was strongly critical of DHCR's past supervision of construction; correction of structural defects at numerous projects remains a major political headache for Carey. (The UDC bubble burst in 1975, triggering state and city fiscal crises and a rapid decision by Carey to get the COMMUNITY CREDIT UNION state out of the housing production business. Some say that was the last housing policy decision he made.) Under the reorganization plan, some of which would The membership of five churches and two community need legislative approval, DHCR would lose the Neigh- service organizations in Crown Heights has banded borhood Preservation Companies program, as well as together to form a community-based credit union, and coordination of Federal Community Development pro- after one month's existence has raised $43,000. grams to the Department of State. Traditionally a Officially opened January 18, the Crown Heights licensing agency, DOS recently opened a Community Community Federal Credit Union claims 290 members Affairs Division and has been given supervision of and expects in one-year's time to be able to be paying its several Federal and State grant-in-aid programs, includ- members interest at the rate of five or six per cent. ing Section 701 of the Housing Act of 1974. Seed money for the credit union came from a grant of According to Judy Frangos of the Governor's staff, $4,800 from the Campaign for Human Development DOS is seen as the logical choice to administer "devel- and a loan for the same amount from the same source. opmental" programs and is being given all such in order Commenting on the grant and loan, Sister Mary to coordinate them. DHCR will remain as a "regula- Hegarty, diocesan administrator for the Campaign, tory" agency, with such functions as rent-setting for the said, "This is number two. The North Brooklyn Federal state's Mitchell-Lama moderate-income housing devel- Credit Union-that was number one-is about to open opments. She described the "third component" of the a second branch and its assets are over $140,000." reorganization as "the financing agency," but spoke of The five churches participating in the credit union are several existing public authorities such as Housing St. Ignatius, St. Matthew, St. Joseph, St. Teresa and St. Finance Agency and Project Finance Agency continuing Gregory. The community organization sponsors are the to function separately. Crown Heights Pastoral Council and the Crown Frangos denied that the reorganization represents Heights Progress Council. 0

CAREY DISMANTLES STATE HOUSING UNIT

.I

CITY LIMITS/February 1980

SECTION 202 FUNDS

The area HUD office is accepting applications for the new construction or substantial rehabilitation of 1,190 units to be funded with Section 202 monies for elderly or handicapped housing. The amount of the direct loan for New York City is $58,463,000. March 31 is the deadline for applying for the funding. Under this program, known as Section 202 of the Housing Act of 1958, as amended, HUD makes direct loans to sponsors of housing for the elderly and handicapped. It also provides Section 8 rent subsidies to be used in conjunction with the Section 202 program so that no tenant falling into the low and moderate income category will have to pay more than 25 per cent of his income for rent. The head of an elderly household or applicant must be 62 years old. A handicapped applicant must be at least 18 years old to be eligible for the project. The mortgage loan is good for a maximum of 40 years. Eligible applicants must be private, nonprofit corporations controlling a developable site who have shown their ability to undertake development responsibilities. Under the Section 202 regulations, sponsors must have a board of directors with at least 30 per cent of its members residing "in the community in which the project is to be located and may not be representatives of any national organization serving as the sponsor of the project." The largest number of housing units to be considered for anyone sponsor is 300. Also, the sponsor must invest five per cent of the mortgage amount, not to exceed $10,000, a figure that is repayable to the sponsor. The application package and instructions are available at: The Processing Controls and Reports Unit Housing Division New York Area Office HUD 26 Federal Plaza Room 32-110 New York, New York 10007. 0

FOUR BANKS COMMIT TO NORTHWEST BRONX

After years of battling against redlining in its neighborhoods, the Northwest Bronx Community and Clergy Coalition has won a commitment from four savings banks to set a goal of financing the upgrading of 200 buildings in 1980. The investment commitments are described in a "proclamation of cooperation" signed by each of the banks, Eastern, Anchor, Northside and Dollar. Each bank also agreed to aggressively advertise the availability of mortgage funds, to provide financing for both one-to-four-family and multiple-family buildings and to enforce the "good repair clause" which gives banks the power to foreclose on the mortgages of properties that are not being maintained. The 200 "investment projects" will involve financing for moderate rehabilitation of the buildings, including systems upgrading, replacement of windows and new wiring, according to Bill Frey of NWBCCC. The breakdown by banks is Eastern, 30 projects; Anchor, 20 projects; Northside, 50 projects; Dollar, 100 projects. In addition, Aetna Life and Casualty, the nation's largest diversified financial firm, has agreed to finance moderate and major rehabilitation of multi-family buildings in the Northwest Bronx, part of a $15 million investment commitment by the company in four cities. Frey said the leverage provided by the federal Community Reinvestment Act, under which banks can be challenged if they are failing to meet the credit needs of neighborhoods from which they draw substantial deposits, enabled NWBCCC to win the agreements. Noting that current interest rates average about 12 per cent, Frey said efforts would be made to reduce the interest charges for buildings that can't afford the market rates by enlisting the participation of the city. He added that most of the loans could probably be done by the banks alone. The NWBCCC is made up of 11 neighborhood associations and 90 tenant associations. 0

MARION GRIMES DIES

Utica-Marion Grimes, executive director of Corn Hill People United, died on February 3 at the age of 54. Grimes played a major role in helping found Corn Hill People United and served from 1974 until her death as its executive director, during which time the staff grew from two people to nine. She led the organization in its four-year struggle for the incorporation of the Utica Neighborhood Housing Service and was a participant in the New York State Tenant and Neighborhood Coalition and chairperson of the board of Peoples Housing Network. 0
CITY LIMITS/February 1980

The Middle Atlantic Regional Council of the National Association of Housing and Redevelopment Officials is sponsoring a conference on the South Bronx, including a tour, on May 21-22 at the New York Sheraton Hotel, Seventh Avenue and 54th Street, in Manhattan. For further information, contact Eli Hankin at 488-7181. 0

CITY -OWNED BUILDINGS: A HARD SELL

by Bernard Cohen
The sale of city-owned buildings to low-income tenant and community organizations skidded sideways in early February when the Comptroller's office faulted the latest proposed policy. Representatives of the Comptroller questioned the already-approved $250-perunit sales price and said the policy overlooked the possible recapture of funds invested by the city in the buildings. An executive session of the Board of Estimate was presented on February 6 with a policy that dealt with conditions for resale of entire buildings and apartments within the buildings. The policy was hammered out after discussions between HPD and housing leaders, some of whom called for strict restrictions to preserve the low cost while others urged a more flexible approach that would leave the actual terms up to each individual co-op. The policy is in the form of an amendment to a resolution adopted by the Board of Estimate on March 22, 1979, approving the sale of city-owned buildings in lower income neighborhoods to community organizations and tenant associations, generally for $250 per unit. There are approximately 200 buildings currently in the pipeline to be sold, the major goal of a set of city programs created in the aftermath of an epidemic of . -building abandonment in New York City in the 1970s. Sales have been thwarted by the inability to win agreement on a sales policy and the failure of dragged out efforts to come up with a prospectus or offering plan that will satisfy the state Attorney General's office at a price lower income people can afford. The amendment, which was laid over until February 21 because of the objections raised by the Comptroller's office, provides that buildings coming through the Community Management program may not be re-sold for 15 years and buildings coming through the Tenant Interim Lease program may not be re-sold for 10 years without the prior written approval of the housing commissioner. The amendment also sets conditions for the re-sale of individual apartments. Because substantially more public funds have been invested in community-managed buildings than in tenant-managed buildings, the re-sale terms are different. The following are the proposed ,terms for communitymanaged buildings that are sold: In the first three years, a selling co-operator may recoup the original purchase price and his share of any
CITY LIMITS/February 1980

special assessments for building-wide capital improvements. Any additional profit will be retained by the coop as a reverse for capital and operating expenses. After the first three years, a selling co-operator may recoup the original purchase price, his share of any special assessments for building-wide capital improvements, up to $1,500 for improvements to his individual apartment and up to 30 per cent of any additional profit, if the co-op approves. The following are the proposed terms for tenantmanaged buildings that are sold: In the first two years, a selling co-operator may recoup the original purchase price, his share of special assessments for building-wide capital improvements, the documented amount spent for improvements to his apartment and up to 30 per cent of any additional profit, if the co-op approves. After two years, the selling co-operator may recoup the original purchase price, his share of any special assessments for building-wide capital improvements, the documented amount spent for improvements to the individual apartment and up to 50 per cent of any additional profit, if the co-op approves. At a briefing on February 13, HPD officials distributed the incomplete draft of a prospectus containing 17 documents, of which 14 would be "boiler plate" or standardized forms and three would be tailored for individual buildings. They said they hoped to have a finished version by April or May and begin selling buildings after that. The briefing was led by HPD's chief counsel, Robert Robbin, Deputy Commissioner William Eimicke, and Assistant Commissioner Philip St. Georges. Among the points made were: HPD will have full legal and financial responsibility for preparing the prospectus, although tenant and community organizations may incur legal and incorporation fees. No buildings will be sold unless the rent roll is sufficient to meet operating expenses, meaning rent increases for most of the buildings. Agreement by 60 per cent of the tenants to buy their apartments-a much higher figtl're than usual for housing co-operatives-will be required for the sale to be approved by the city. All purchasing tenant and community organizations will be required to retain a lawyer to advise them on the sale. The major issue raised by the 60 or so community rep-

resentatives at the meeting was the uncertain viability of these buildings after sale and the lack of any effort by the city to provide follow-up assistance to them. "This is a disposition program, not a housing program," Ron Shiffman, director of the Pratt Institute Center for Community and Environmental Development, said of the sales policy. He and others cited the need to tie the buildings into other available counseling and low interest loan programs and to make sales an integral part of a larger housing plan. "You've limited the profits in these buildings," Shiffman told the officials, "but you've done nothing to limit the risks. The total risk is on them . " Some suggested delaying the sales policy currently before the Board of Estimate to provide additional time to work out problems. In response, Eimicke said HPD "is under enormous pressure" from HUD and city hall "to sell buildings responsibly in a very short time" or else they may end up back on the auction block. Another problem raised by one of the tenants in a building they want to buy is the lack of guidelines about the level of repairs that will be made by the city in buildings prior to sale. St. Georges responded that inadequate funding of the tenant management program made it difficult to establish those kinds of guidelines. Among the issues left unclear at the briefing were whether co-operators should have the power to evict nonpurchasing tenants and what legal and financial responsibilities will be incurred by community organizations that buy buildings from the city to resell to tenant organizations as co-ops. Some of those who attended the February 6 executive session of the Board of Estimate said the objections of the Comptroller'S office came late in the meeting and took many people by surprise. However, Robert Pam, assistant to Comptroller Harrison J. Goldin, said the issue had been brought to HPD's attention a few months ago. Pam said the sales policy needs to address the question of whether the city should be allowed to recapture some of the federal Community Development funds that have been invested in city-owned buildings after they are sold. He declined to say what amount of recapture for what buildings his office had in mind. "That is one part of a discussion that has to occur," Pam said. "There are a whole variety of ways that issue could be addressed. " Asked if the city would consider the investment of Community Development funds a grant, Pam said possibly, but "I don't think it should be a given. It may be appropriate for some funds and some buildings. I'm not sure we should start with that assumption." Some sources said the Comptroller's office wants the city to get 50 per cent of any profit made from the resale of individual apartments. Asked for a comment, one high HPD official called the Comptroller'S move "typically asinine, cost ineffective and probably administra-

tively impossible." At a meeting between officials of HPD and the Comptroller's office on February 14, Richard Wells, another Goldin aide, reportedly objected to the $250 pricetag, which was approved last March by the Board of Estimate. HPD officials stuck to the existing policy, sources said, as a way to expedite sales to stable tenant organizations with a stake in preserving the buildings. The meeting ended, according to one person in attendance, with Wells indicating he would drop the demand for recapture if the city replaced its $250 policy with a formula that would set different prices depending on specific market conditions. Wells could not be reached for comment. Whether the Comptroller's office can force that view on the Board of Estimate is uncertain. "We're opposed," one housing official said. The issue may be settled before or at the next Board of Estimate meeting, on February 21. 0

EIMICKE ULTIMATUM
Calling the official 40 per cent rent collection rate in city-managed buildings "an embarrassment," Deputy Housing Commissioner William Eimicke has named a committee to be responsible for improving the record of rent payments. "It is even questionable whether the totally inadequate 40 per cent collection rate we now report is accurate (better numbers might show an even lower number,)" Eimicke said in a January 28 memorandum to the Office of Property Management staff. The memo noted that rent collection in city-owned buildings that are managed by tenant associations and community organizations is closer to 85 per cent. To address the problem, Eimicke said the Accounts Receivable unit has been moved to 75 Maiden Lane with the rest of the Office of Property Management. Eimicke also designated Terry Krueger as project manager of the Rent Improvement Program . In addition, a Rent Collection Improvement Committee was established to monitor the improvement of rent collections and implement changes in procedure. The committee, chaired by Krueger, is made up of John Autorino, Denny Kelly, Bob Moncrief, Bill Murphy, Marty Paikoff, Shirley Unger, Joan Wallstein and Howard Wasserman. "I expect that major improvement in rent collection percentages and dollars will be evident no later than April, 1980, or drastic operations and personnel actions will be taken," the memo said. 0
CITY LIMITS/February 1980

STUDENTS HELP SAVE A BUILDING FOR SIX FAMILIES IN BROOKLYN

by A. Sandra Abramson
What does a neighborhood-based housing organization do when it is offered an abandoned, eight-unit masonry building for the cost of approximately $5,000 in back taxes? It accepts-and then works to develop a viable plan for rehabilitating the fire-damaged building and to find local residents interested in owning it cooperatively. That is what the St. Nicholas Neighborhood Preservation & Housing Rehabilitation Corporation did with 137 Guernsey Street in Greenpoint, Brooklyn, a neighborhood of light industry and small multifamily, often owner-occupied buildings. St. Nicholas, a non-profit, non-sectarian organization, has been working for the past four years to improve the housing, social and cultural conditions in the Williamsburg-Greenpoint section of Brooklyn. Among the group's varied activities have been the cosponsorship of 150 newly constructed and rehabilitated units of senior citizen housing (Jennings Hall) and the management and rehab of city-owned buildings through New York City's Community Management program. However, until last year, St. Nicholas had never rehabilitated any of the smaller vacant multi-family buildings that are the backbone of the community it serves. So when the owner of 137 Guernsey Street offered to donate the building to the organization in December, 1978, St. Nicholas accepted the challenge and began to assemble the financial, labor, architectural and legal pieces that would make the puzzle of rehabbing the building fit together. Through the Pratt Institute Center for Community and Environmental Development, St. Nicholas learned about the Adelphi Street project in Fort Greene, Brooklyn. There, 30 students from Westinghouse Vocational and Technical High School in Brooklyn worked under the supervision of their teachers and a general contractor as the construction crew to rehab an eight unit building into a four-unit tenant owned cooperative. A new generation of workers was learning skills while contributing to the growth of a new generation of homeowners. Excited by this project, we contacted Norman Shapiro, then principal of Westinghouse, to discuss the prospect of helping students to expand their skills by working at Guernsey Street once Adelphi Street was completed. With formal agreement by the Board of Education's Youth Training Program (YETP), which administered the student's CETA program, we had the labor piece of our puzzle in place. To make the project feasible, we needed architectural and legal assistance. Several months earlier, St. Nicholas had been approached by staff of Con Edison's "Renaissance in Brooklyn" project interested in working with local community groups. After much discussion, Con Edison agreed to provide the professional assistance we needed and to supply each of the six new apartments with a stove and refrigerator. In addition, Con Edison also loaned St. Nicholas $5,000 to pay the back taxes. This will be repaid after permanent closing. Next, with the assistance of our local City Councilman, Abe Gerges, we negotiated a $115,000 construction loan and permanent mortgage for 25 .years at 9 Y<I % with Williamsburgh Savings Bank. As with the Adelphi Street project, the bank waived most of its normal processing fees. Finally with demolition work begun by B & J General Contractors and the Westinghouse students, but no bank closing in sight, we turned to the ConsumerFarmer Foundation to carry us through this lean time. That organization responded quickly and generously with an interest-free $10,000 loan since repaid in full, that helped us keep the students supplied with materials they needed to continue working and learning until the closing in August, 1979. We also borrowed $5,000 from the newly opened North Brooklyn Federal Credit Union

1.0

"

A. Sandra Abramson is the housing coordinator of the St. Nicholas Neighborhood Preservation & Housing Rehabilitation Corp.
CITY LIMITS/February 1980 10

Student construction crew at 137 Guernsey Street.

to tide us over until the construction loan closing in August. As work began, it became increasingly clear that neither the short-term nor the permanent financing from Williamsburgh would cover the actual project cost of $157,000. Thus, in August, we began negotiating a Participation Loan with HPD for $139,000, in which Williams burgh would provide 400/0 ($55,600) at 9 V2 % and the City 60% ($83,400) at 1%. This reduces the equity necessary ($18,00) by one-half to an average of $3,000 per unit and the monthly carrying charges to approximately $225.00 for a large 4 V2 or 5 Y2 room apartment. However, after nearly six months of negotiating with the Department of Housing Preservation and Development, we are still awaiting the final commitment letter and an agreement to place the City'S share in escrow, a requirement of the bank. Thus, in less than one year, Westinghouse students completed rehabbing the Adelphi Street building and began work on Guernsey Street. The original students have all graduated now and many have ', noved on to jobs in the construction field. A new group is now working with st. Nicholas and learning skills while gaining valuable experience. One group of co-operators has moved into Adelphi Street-a new group is getting ready to move into 137 Guernsey Street, hopefully by April, 1980. 0

but not by a community organization as deeply-rooted and competent as Bed Stuy Restoration. "We've said that our number one reason for going into Bed Stuy was because we had a strong partner," said Wunderlee, "but we're not in a position yet to consider another joint venture. We still have to figure out the successful formula for operating an inner city store." But just as Restoration-Pathmark was inspired by the example of TWO-Hillman in Chicago, the Bed Stuy store helped encourage a joint venture in Washington D.C. between a community development group and a supermarket chain. On October 10th of last year Giant Foods and the D.C. Development Corporation opened the doors to their jointly financed market and are more than pleased with their experience so far. "The store is doing tremendous," Barry Scher of Giant Foods reported recently. "We thought it would be a high volume store-instead it's been a very, very high volume store. We feel we owe a lot to the folks in the community who take a lot of pride in the store." As in the Restoration Pathmark, the D.C.-Giant Foods venture has placed an emphasis on hiring people from the neighborhood . Sixty of the 90 workers there were hired locally, and Giant Foods's Scher attributes a good deal of the store's success to that move. Community employment at the store itself was only one of the hoped for benefits of bringing Pathmark into the Restoration shopping center. Beyond immediate employment, Restoration hoped the new supermarket would increase sales at other Plaza stores as well as along Fulton Street. This they feel has happened. As an incentive for new retail stores to open on their own, however,Coleman feels that time hasn't come yet. "According to our research," he said, "Bed Stuy has as much occupied retail store space as the community can support. Right now we're looking towards labor-intensive industrial development in this area. We want to retain the businesses that are here and get new ones in. With industrial development the dollar turns over 4-5 times as fast, and by increasing industry we can increase the amount of disposable income in the community." The chances for other community development corporations to duplicate Restoration's example seems to hinge on whether they can put together the kind of organization that inspires the confidence of private business the way Restoration has. With a long history of involvement from such corporate magnates as Thomas Watson of IBM, William Paley of CBS and others, Bed Stuy had a running start when they began their search for a joint venture partner. Their connections and experience appear somewhat unique in the metropolitan area. But with joint ventures underway with apparent success in New York, Washington and Chicago, both private businesses and community groups will be looking hard at ways of satisfying requirements of each other. 0
CITY LIMITS/February 1980

SUp"ermarket continued
sometimes the lines are 5-6.customers deep, and then 15 minutes later there is no line at all. The customers come in waves, and we get a lot more walk-in customer traffic, making smaller purchases that we do elsewhere. Twothirds of the difference between what we pay for an item and what we sell for goes to labor costs. Since you can't schedule workers in 15 minute increments we've got a labor cost problem, and right now, how to better operate the front end of the Bed Stuy store is something we have to figure out." Other Communities Want In Wunderlee says Pathmark has been approached by other communities since the Restoration store opened,
11

1,000 BUILDINGS TO CLOSE BY FALL: TENANTS SHUN CITY RELOCATION SITES

by Susan Baldwin

"What do you think, Sarge. Should we move, and if so where should it be? Around the corner, across the street? But, we're used to it here. If only they would fix up this building, we could stay here." Andy Wonczuk, an elderly Ukrainian immigrant who has spent the last 17 years in a modest, three-room apartment at 632 East 9th Street, spoke to his constant companion-a burly black dog named Sarge as he wondered out loud about an imminent move from his home. "Sarge does everything for me," he continued, as he played with his two-and-one-half-year-old protector . "He gets my shoes, my money, he even carries my bags. Sarge knows everything." Wonczuk is one of eight tenants left in this deteriorated city-owned building on Manhattan's Lower East Side that is slated for consolidation or closing because it is under-occupied and deemed uninhabitable by city housing officials. According to Assistant Housing Commissioner Manuel Mirabal, head of the city's consolidation unit since it was formed in December, 1978,489 city-owned buildings had been closed by December 31, and 1,729 households were relocated during 1979. A total of 1,000 buildings are slated for consolidation by September 1, 1980. "In general," according to the city's first annual report on In Rem housing dated September, 1978, to September, 1979, "buildings selected for consolidation are emptied if they are unsafe or structurally unsound, less than 50 per cent occupied, the projected repair cost is excessive, and the surrounding neighborhood will not support the continued maintenance of the building." With a budget of $4 million for CD year V, the program, staffed by 60 employees, operates out of six decentralized area offices-Bronxchester, East Harlem, Cooper Square, Brooklyn East, Brooklyn West, and Manhattan West. This budget includes an allocation of up to $2,500 per relocation apartment to cover rehabilitation costs. To date, the unit has spent about $2 million. The Lower East Side is one of the few neighborhoods in the city where consolidation of buildings is taking place. Although isolated instances of consolidation have occurred in the Bronx and Brooklyn, East and Central Harlem are the only two other areas where city tenants have been receiving notices announcing building closings.
CITY LIMITS/February 1980

Inferior Apartments Critics of the program have charged the city with selecting relocation apartments that are inferior to ones already occupied by tenants, closing down viable buildings when tenants seek basic services and forcing tenants to go through too much bureaucracy to be relocated. "There are just too many bosses and too many steps that people have to go through in order to find another apartment," Julia West, housing coordinator for Neighborhood Board 3 in Central Harlem, said of the city's newest controversial program. "They scare tenants with written ultimatums under the door telling them to move out with no explanation of the situation, and they direct tenants to apartments that are in a shambles, often with no front doors and with rubbish all over the floors, and, of course, tenants don't want to move into these places," she added, asserting that the city's excuse naming potential vandalism of vacant apartments was "not good enough" to justify showing tenants gutted apartments with promises to fix them later if the tenants first agreed to move in. The tenants at 632 East 9th Street agree with West's assessment of consolidation and have expressed their resistance to the program by ignoring pressure from the city to move because, they maintain, all the available replacement or resource apartments are worse than the ones they now occupy. City-owned since May, 1978, 632 East 9th Street shares a nonfunctioning boiler with 636 East 9th Street and until May, 1979, was fully occupied. Following rent strikes, a fire, and the discontinuance of basic services, early in October the remaining tenants received notices from the city's consolidation unit telling them they must move. "We were happy at first to take tenants around to see the resource apartments, but it got ridiculous taking them to other places without water and stoves that were much worse than where they already were," said Inez Roman, a housing organizer with Adopt-a-Building, a community-based organization serving tenants on the Lower East Side. Rats As Big As Cats "Some of the resource buildings are unbelievable," she added . "You should see 316 East 8th Street where one of the tenants yelled out the window, 'Don't move in here. The rats are as big as cats.' They have pictures

12

to prove it. " "Sure, my mom knows she has to move, but there's no place to move," concluded Erasmo Duran, a resident for 12 years of 632 East 9th Street. "She wants to move but not into another dump. She's looking for a place that will be good for a few years, but everything they show her is worse than this . .. Even welfare has given up trying to help her." Duran's complaint defines the central problem that the consolidation program must address: spending the money necessary to provide livable apartments in the resource buildings prior to asking prospective tenants to relocate. Another Dump A recent visit to one such resource building-121 West 133rd Street-revealed why tenants may be reluctant to move. The small, dingy four-room apartment offered to 78-year-old Thomas Conyers and his wife for $90 featured a front door pried loose from its hinges, ripped out light sockets, and no heat. Lined up in the dark rooms were unopened cans of paint provided to the prospective tenant to cover walls badly in need of plastering. How long had the building been without heat? "The boiler's been down and has been like this for a couple of years," one resident was quick to tell Conyers. But, a trip to the East Harlem In Rem office led to the assignment of better housing for Conyers the following day. "A lot of seniors like him pay rent before they eat, and some of the places they are forced to live are unmentionable," said Earle Murray, the area director, as he discussed Conyer's housing predicament. "I think you should ask the mayor about this housing crisis. Rest assured, however, that Mr. Conyers will get a place because this has been brought to my attention. But how many others like him," Murray concluded, "will come to J;Ily attention or just slip through the cracks?" There have been instances of buildings that were closed and emptied out hurriedly when it was supposed to be used as a resource building. In East Harlem, 112 East 102nd Street is such a building. Originally approved for management by a community-based organization, the building's population was reduced to four tenants after the real estate manager left yellow slips of paper under doors telling the residents they had to move out. "It's just crazy the way different departments at HPD don't communicate with each other," said George Aspata, director of community management at Nuevo El Barrio Para La Rehabilitacion de la Vivienda Y La Economica, Inc. (N.E.R.V.E.), the organization that was to manage the 102nd Street property. "We tell the tenants that we're going to fix up their building and to pay rent for services while the real estate manager comes around and tells the tenants to get out

because the city is closing the building," he explained. "Then we lose the building for our program, and the tenants lose their apartments and just disappear because they are frightened and don't know where to go." Fully occupied a few months ago, 112 East 102nd Street has been reassigned to community management but with only a handful of tenants left and few prospects of new occupants in the near future. In an effort to avoid similar problems in the future, Mirabal's office is trying to work with neighborhood groups and the community boards. According to Marian Fox , head of Manhattan Community Board 3's housing committee, "We are scrutinizing each case and are hopeful that so many terrible things that have happened in the past will not be repeated. " Mirabal admitted that there are problems with making the program run smoothly but asserted that its chances of succeeding should be increased significantly with improvements scheduled to take effect within the next few months. "Under the new rules and regulations that we plan to institute by Mayor June, we will spell out our authority to impose a time limit for relocation of tenants out of consolidated buildings and tie in a benefit structure that will provide an incentive to tenants to move out," he explained . continued on page 18

Andy Wonczuk

13

CITY LIMITS/February 1980

BROWNSTONERS ASK COURT TO BLOCK 2,500 LOW -RENT RENEWAL UNITS

by Susan Baldwin

Manhattan brownstone owners, who for years have been predicting the flight of the middle class from the West Side Urban Renewal Area, have filed a lawsuit in the State Supreme Court seeking to block efforts by the city and a local tenants' association to provide 2,500 units of low rent housing and to manage city-owned properties for low income residents. The suit, brought February 7 by the Committee of Neighbors to Insure a Normal Urban Environment (CONTINUE), an organization of middle class homeowners and residents who claim a membership of 4,000, names as defendants the city of New York, Mayor Koch, the Board of Estimate, the Department of Housing Preservation and Development, and the United Tenants Association (UTA), the community-based organization that is currently monitoring maintenance and repairs by HPD work crews to city-owned apartments on 20 sites. Alvin C. Hudgins, who owns 27-29 West 94th Street, and five other CONTINUE members have demanded a restraining order that would stop implementation of the Fifth Amendment to the WSURA plan and would kill a January, 1979, agreement (memorandum of understanding) between UTA and HPD under which the city has committed itself to correcting building violations on urban renewal properties occupied by low income tenants. Responding to CONTINUE's lawsuit against the city and UTA, Robert Robbins, HPD's chief counsel, said, "We think they're wrong'l and we're going to say so in court." He also asserted that the city has no intention of asking the court for a postponement to answer CONTINUE's charges, adding that the city plans to fight this case to the end. Neighborhood groups which support low income housing see CONTINUE's latest lawsuit as a renewed attempt to prevent low income residents from remaining in the WSURA. [See editorial this month] This suit comes on the heels of the January 7 Supreme Court decision favoring the construction of 160 units of low income housing on the controversial Site 30-a case that was argued for almost ten years in the courts. Fifth Amendment A reaffirmation of the original 1962 urban renewal plan's commitment to low income housing, the Fifth Amendment guarantees at least 2,500 units of low income housing in the disposition of the remaining 11 undeveloped sites in the WSURA. Proposed by Community Board 7, the Fifth Amendment, following the city's Uniform Land Use Procedure
CITY LIMITS/February 1980

(ULURP), was approved by the Community Board in June and the City Planning Commission in September. After a stormy session November 15 when community testimony for and against the amendment ran late into the night, the Board of Estimate unanimously approved this amendment which is presently before HUD for final consideration. UTA members are concerned that CONTINUE's lawsuit may figure in holding up the Board of Estimate's approval of its $600,000 community management contract with the city, which was laid over indefinitely at the Board's January 24 meeting. Under the eight-month contract UTA would manage 90 units of housing and rehabilitate 25 on 12 sites. According to UTA officials, "The 90 apartments in the 12 UTA buildings would count as part of the city's commitment to provide a minimum of 2,500 low income dwelling units in the WSURA-a commitment not yet realized. " In its case before Justice Richard S. Lane, CONTINUE charges that the "original concept of the [urban renewal] plan contemplated the development of a balanced community integrated ethnically, economically, racially and socially. However, because of the large number of low income housing units already built . .. [numbering almost 5,000], it has been infected with serious problems of crime, vandalism, dope addiction, alcoholism, juvenile delinquency, etc ... Further Impaction "The further impaction of additional low income units for squatters, welfare and other low income families," it contends, "can only make the situation worse and will eventually lead to cancelling out of the gains already accomplished by the expenditure of hundreds of millions of dollars of public and private funds to upgrade the area under the terms of the plan." In response to CONTINUE's quest for a restraining order, UTA said: "The motivation of the Hudgins/ CONTINUE suit is clear from Hudgins's affidavit . .. Hudgins complains that repairs initiated by UTA in buildings where its members live are a 'breach' of the urban renewal plan and that Cle presence of low income families in the area is 'causing the value of my property to be reduced and my residency in the WSURA to be impaired. ' "This contention echoes the usual CONTINUE stereotype of low income persons as the cause of most social ills and as persons who-as CONTINUE attempted to prove in its suit to stop the construction of

14

low income housing on Site 30-are in effect environmental hazards." Environmental Impact According to Eugene J. Morris, CONTINUE's attorney, one of the reasons his client is seeking to impede the Fifth Amendment is that it has not been approved by HUD. For the amendment to go into effect, he explained, HUD must rule on its environmental impact on the neighborhood. "We're reviewing it [the Fifth Amendment] right now, and we should have a decision in about a month," said Alan Wiener, HUD's area manager. He also said that HUD was currently seeking a "legal opinion regarding the implication of the Supreme Court's decision" on Site 30. Referring to CONTINUE's attempt to enjoin the Fifth Amendment, Wiener added, "What are they going to enjoin? There's nothing to enjoin. We haven't approved anything yet. "

behind Site 30 and the Fifth Amendment. The majority of the community wants it. It is not being shoved down our throats. " Unless the Fifth Amendment is approved by HUD, the Fourth Amendment, which calls for the demolition of the buildings on the 11 sites, will go into effect. Meanwhile, CONTINUE member Roland Karlen, referring to the UTA contract, said, "At first they [the city] were talking about spending $5,000 per apartment to rehab these buildings. Now they're talking about $15,000 each. Then, UTA can manage the buildings for two years and then, through the city's $250 sales policy, they can buy these apartments for this low sum of $250. "This is ridiculous when you have private developers who will pay $40,000 for these apartments 'as is,' " he concluded, noting that the WSURA is "not eligible for CD funds anyway" because there is so much private market interest in the real estate area. "If we have to start a new lawsuit and challenge the whole urban renewal plan, we will," Karlen added. "There are still 11 sites left, and we were supposed to get 2,800 units of market level housing here. There is already too much low income housing up here." 0

Editorial continued
far broader than either historical curiosity or simply 20 blocks. The WSURA represents a prime example of what present-day planners and government officials would consider a highly successful public intervention in a neighborhood. They might not use bulldozers or construct new high-rise buildings, but the underlying theory of Neighborhood Strategy Areas and Urban Development Action Grants is precisely the same-the use of public resources to entice private development. Amid constant references to limited resources, today's planners have developed an ideal scenario wherein momentum-building Community Development funds will lure and ultimately be replaced by private investment. Once this has occurred, a neighborhood can be declared "cured" and the public dollars can proceed boldly to a new area. One glance at the WSURA will show the shortcomings of this approach. The WSURA represents more than just a chance to make a few measly bucks, as The Times urges. And it represents more than a chance to fulfill an outdated commitment. It constitutes the only opportunity to provide housing for the families that are every day being displaced from the Upper West Side. It is the chance to reaffirm a commitment to racial and economic integration. The New York Times should remember that the commitments of the 1960s to equality of opportunity were about a lot more than just 2,500 units of housing. 0 CITY LIMITS/February 1980

Doris Rosenblum, of Strycker's Bay Neighborhood Council, at WSURA victory celebration.

Commenting on HUD's delay in ruling on the amendment, Morris said "From what I understand from Mr. Wiener, no decision has been made yet and that he wants to meet with city representatives first to arrive at some understanding regarding the 11 unfinished sites and also that the city has not made up its mind as yet" about these sites. Supporters of the plans for 160 units of low income housing on Site 30 and UTA's management contract are worried that the city will renege on its low income commitment to the area. --At a victory party hosted by Strycker's Bay Neighborhood Council, the community group that defended Site 30 against CONTINUE's charges and appealed the case to the Supreme Court, neighborhood residents were exhorted to send telegrams and letters to Mayor Koch supporting the low income housing plans. Forest Hills "This is not another Forest Hills situation," said William Price, a member of UTA and a long time resident of the WSURA. "What you have here and what City Hall should understand is that the community is
15

Sweat Equity continued

Homesteading of multi-family buildings has evolved into a complex, sometimes unwieldy process involving the participation of at least two government agencies, a private lender, a community organization and a host of support personnel. Attempts to generalize about the success of sweat equity are difficult. Latest figures show 50 buildings totalling 583 units either completed or at some earlier phase of the rehabilitation program. Since sweat equity was never institutionalized, however, buildings were all packaged differently, and each has its own history. Most of the buildings have gotten high marks from housing specialists for the quality of the construction. In addition, the program has provided j~bs and training and stimulated the direct involvement of local organizations and individuals in rebuilding their neighborhoods. But many of the sweat equity buildings have suffered serious economic problems. Relatively few buildings are current with their mortgage payments, and some are far behind. Others have defaulted on their taxes. And all of the buildings are having a hard time making ends meet. Many are having to think about raising rents. "Honest questions have been raised about the ability of the projects, once rehabilitated, to sustain themselves," says an unpublished study of sweat equity buildings by Professor Robert Kolodny of the School of Architecture and Planning at Columbia University. A survey by Kolodny of seven buildings found that not one was current with its mortgage payments. The best performer had met only two-thirds of its payments during 21 months of operation . The worst had made only one payment in a similar period. Although it is now paying regularly, 519 East 11th Street, a Lower East Side tenement famous for the first inner city application of solar collectors and windmill energy,is 25 months in arrears on its mortgage. Other buildings, such as 251 East 119th St. in East Harlem, have defaulted on taxes. "We're feeling the pinch everyone is feeling," said Luqman Abdush-Shahid, a member of the Mosque of . Islamic Brotherhood, Inc., sponsor of the sweat equity rehabilitation of two buildings in Harlem that are up to date with their payments. "Everything has gone up, and basically our incomes are fixed. We find ourselves tightening a belt that has already been squeezed." Despite savings from ongoing maintenance by the tenants and cooperative buying, rents will soon have to be increased, he added. The mushrooming cost combined with the complexity of the process and the relative inexperience of all of the parties with this kind of program has led to a visible erosion of support for sweat equity. Chemical Bank, by far the most active private lending institution for sweat equity buildings, is thinking very seriously about dropping out. The U.S. Department of Housing and
CITY LIMITS/February 1980

Urban Development, whose agreement to provide up to $4 million in mortgages for the buildings greatly accelerated the rate of sweat equity rehabilitation, is now talking in much more cautious terms about a modest program for the immediate future. And a spokeswoman for the Department of Housing Preservation and Development said the city's sweat equity program is at a "standstill" because of the current cost problems . "Most sweat equity has been marginally supported by the powers that be as an interesting fringe activity," Laven said. "The reason it got started was because the numbers worked well and because we were clever at putting together a wide variety of funding and support. Now, people can start backing away and have other than political reasons."

The reasons for the dramatic increase in the sweat equity pricetag fall into three clusters: inflation that has sent costs soaring while incomes were increasing only marginally; problems coordinating separate government and private funding pieces; and the inexperience of all the parties to a complicated, new program. Costs Four years ago, the cost of materials alone for sweat equity rehabilitation was estimated at $10,000 per unit. That figure has risen to $17,000 per unit today and is expected to be closer to $20,000 for buildings scheduled for construction later this year, according to UHAB. A composite index of 100 different types of construction materials, compiled by the U.S. Labor Department, shows an overall price increase of 44 per cent between 1975 and 1979. Lumber rose 70 per cent in price and concrete was up 43 per cent over the four years. The cost of borrowing has also shot way up, mainly because of the ways the federal government uses the housing sector to curb inflation . Although the longterm mortgages have generally been subsidized at 3 per cent or 1 per cent (an exception is the city's Municipal Loan Program, which has a floating interest rate), the construction has been financed at much higher interest rates of between 10 per cent and 17 per cent. Except

16

where it has applied a cap, Chemical Bank ties construction interest to 1 Yz per cent above the prime rate, the amount banks charge their most credit-worthy customers. A look at what has happened to the prime tells the story. In 1976, the prime rate hovered around 6% to 7 per cent. In May, 1977, it was still at 6Yz per cent. By January, 1978, it had risen to 8 per cent. Twelve months later it was at 11 % per cent, and on November 16, 1979, the prime rate hit 15% per cent, the highest in U.S. history. Those buildings with long-term mortgages financed by the old Municipal Loan program, such as 251 East 119th St., have suffered financially as the interest rate has risen from 4 or 5 per cent to 8 Yz per cent. When you add in the purchase price, architect and legal fees, the standard contingency fund and other costs, the total development pricetag, according to current UHAB figures, is about $22,000 per unit, nearly 50 per cent higher than was estimated in 1976 and 9 per cent about projections of two years ago. For buildings that go into construction this year, the total development cost is expected to be in the $22,000 to $25,000 per unit range. Finally, there is the cost of maintaining and operating buildings. Here is where the leap in oil prices from above 45 cents a gallon in 1977 to 94 cents a gallon today has taken such a toll. For example, 519 East 11th Street estimates consumption of 7,400 gallons of No.2 fuel oil per year. In June, 1977, when the cost was 46 cents per gallon, the total fuel bill would have come to $3,404 or $261 per unit. Seven months ago, when the building's current operating budget was planned, oil was projected at 76 cents per gallon for a total fuel bill of $5,624 or $432.60 per unit. At today's price of 94 cents per gallon, annual consumption would cost the building $6,956 or each apartment $535. Further price hikes that could increase the price of oil to one dollar per gallon are anticipated. The simplest way to measure the impact of costs on sweat equity housing is to look at how rents have risen to keep pace. In 1973, when homesteading of multifamily buildings was really getting under way in New York City, rents of $23 to $25 per room were envisioned. By 1976, rents were up to $38 per room. The following year they rose to between $40 and $42. Today, it costs at least $50 per room to operate one of these buildings and payoff a rehab mortgage. That figure is already shaky and is expected to jump to as much as $60 per room for buildings that go into construction this year. Incomes, meanwhile, have stagnated in comparison. From 1973 to 1977, rents went up 9.6 per cent per year nationally while incomes rose only 5.6 per cent, according to a 1979 report by the U.S. Comptroller General entitled "Rental Housing: A National Problem That Needs Immediate Attention." New York City reported in 1979 that for the first time in recent history, more

than half (57 per cent) of all tenants were paying more than 25 per cent of their gross incomes for rent. Interviews with representatives of six homesteading organizations plus many others familiar with the housing program revealed a general belief that residents need annual incomes of $11,000 to $15,000 to support sweat equity housing, a sizable cut above the $6,000 to $8,000 income group for whom the program was originally designed. In contrast, the median income for the Lower East Side, according to the 1970 census, was less than $5,000 per year.
URBAN HOMESTEADING DEVELOPMENT COST, OPERATING COST AND MONTHLY CARRYING CHARGE Materials Soft Costs Contingency Allowance Total Mortgage Amount Development Cost/Unit Maintenance & Operation Monthly Carrying Charge $119,000

22,098
14,109

155,207 22,172
9,06OIyear
49.1 01 roo m

Seven-unit building completed in 1979. Courtesy Urban Homesteading Assistance Board

"I wish it was a low income program," said Eulogio Cedeno, director of the Renigades Housing Movement in East Harlem, one of the earliest sponsors of sweat equity projects in New York City. "There should be a subsidy," he went on. "If the city is interested in saving neighborhoods and providing housing for poor people, this is what has to be done." As it is, "We are just holding the fort is what we are doing here," he added. At today's costs, the 3 per cent sweat equity loan program "is not for low income people," said Herman Hewitt, a housing specialist with the Adopt-a-Building organization. "It's more for moderate income people, those who are upwardly mobile and want to stay in the neighborhood and live in decent housing." Other Factors A great many other factors have contributed to the escalation of costs. Most played delaying roles. Timing is critical in construction, and delays are very expensive. Since sweat equity is a relatively new program for multifamily buildings, all partners-government, banks and homesteading organizations-have learned on the job. All did things to slow the process. A major delaying force has been the inability of the partners to coordinate the various elements of the rehab package. Chronic processing snafus left sponsoring organizations with no money to buy materials, idling
CITY LIMITS/February 1980

17

their workers and throwing the construction off schedule. In many cases, CETA funds ran out, cutting off a crucial source of labor and forcing homesteaders to finish off the work themselves or hire outside contractors. Loan closing delays lasting months were also common. Part of the problem can be laid to the inexperience of community sponsors and the shortage of technical assistance. Weak administration, bookkeeping and accounting -critical backups for the rehab effort-hurts. And the construction work itself was bound to take longer when done by unskilled or newly trained CETA workers and homesteaders. Low pay, high turnover and, in some cases, poor work habits, did not help either. At the same time, community organizations were confronted with delays in getting vouchers and budget modifications approved, leading to chronic cash flow problems. One group leader said it took two or three months to get approval for a burner that cost $2,000 more but better met the needs of the building. Another said he could not accept delivery of cabinets because of a delay in being able to draw down the money to pay for them. "You take this one time and multiply it out and it really has hurt us a lot," he said. The organizations were also saddled with formidable bureaucratic requirements, especially under CETA, which was never designed for housing jobs and has never worked very well in this program. There are some today who advocate scrapping CETA altogether. In addition, some contracts did not contain enough funds to pay the real cost of materials or competitive wages for construction workers. The effect was to reduce the pool of qualified talent interested in signing on and, perhaps, the commitment of some individuals to the projects. To stay within the budget, groups routinely had to scavenge for materials. "Society has to keep pace with changing conditions," said Imam K. Ahmad Tawfig, leader of the Mosque of Islamic Brotherhood, Inc. "You can't expect people to build in 1980 at 1970 prices." Moreover, homesteaders moved into many of the buildings before the end of construction. Failure to finish off the jobs deprived them of the sizable property tax benefits to which they would have been entitled. And in old buildings, there is always the unforseen. In one, the rehabilitation was set back when a wall caved in. The staircase in another building collapsed. Demolition of a building next door to a third sweat equity building inflicted additional structural problems. As a result, many sweat equity buildings took longer to complete and cost more than was originally projected, and some are in danger of not finishing at all under the current program. The two buildings rehabilitate<:f by the Mosque of Islamic Brotherhood, 55 St. Nicholas Ave. and 132 West 113th St., finished six months late at 10 per cent over its approximately $300,000 budget. Residents moved in
CITY LIMITS/February 1980 18

during the summer of 1978, but because of a few incomplete items such as storm windows (not in the original work specifications, according to the Mosque) and window gates, the loan was not closed out until January, 1979. The organization attributes the $30,000 overrun to inflation and delays that prolonged the construction loan on which they were paying 13 per cent interest. The original timetable for 310 East 4th St., a 16 cunit building on the Lower East Side, called for completion by September, 1979. Today, the building is about twothirds finished. It will take an extension of the CETA contract to do the rest. A nearby building, 518 East 11 th St., was scheduled to be 85 per cent complete by June, 1979. Today it is about 30 per cent complete. Hewitt said Adopt-a-Building is committed to finishing both. What all of this says to many is that eight to tenmonth construction timetables are unrealistic. Two years may be more like it. "No sweat equity group with CETA funds can complete a building at more than eight per cent a month," said Ted Ferguson of Chemical Bank. "Historically, we've found it's more like five or six per cent." The cost problems, while worrisome, are far from insurmountable, advocates of sweat equity believe. There are alternatives. While most of them involve a larger direct or indirect commitment of public funds, the subsidies are still modest and nowhere close to the amount calculated for the Section 8 program. 0 Next Month: What Can Be Done?

Consolidation continued
New Regulations Right now, tenants frequently stay in consolidated building's without being threatened with eviction. Under the new regulations, they probably will be given anywhere from 30 to 45 days to move out and might be offered a cash payment of an additional month's rent as an inducement to move. Also, if tenants take care of their own moving expense, they can be reimbursed up to $45 per room, or this amount will be paid by the city to commercial movers to cover their moving costs. Referring to efforts to "tighten up" the program, Mirabal said, "We will put down formally in writing with the tenants what our responsibilities are and what the tenants are responsible for so there is no questions about what we each must do." In addition, he pointed out that the city will not offer apartments to tenants who have a history with the city of not paying rent and that his unit is arranging for the reservation of extra slots of public housing and Section 8 allocations, particularly for the handicapped and elderly. To carry out the program, the consolidation unit has sent letters to community groups throughout the city asking for their help. In the letter dated December 31, Mirabal announced

the creation of a special social services unit, noting that tenants of under-occupied, deteriorated buildings "may be living in buildings without heat and other essential services" and are "often reluctant to move for reasons ranging from lack of income to fear of new surroundings." The letter also called on neighborhood groups to provide caseworkers to visit tenants with problems, to help the elderly "pack and move their belongings", and

to "supply transportation to the elderly or handicapped to inspect potential new apartments. " Commenting on the communique from the consolidation unit, Sandy Abramson of the St. Nicholas Neighborhood Housing and Rehabilitation Corporation, said, "I can't understand why they're asking the groups to provide these services. Isn't this supposed to be HPD's job?" 0

STATE NPC GRANTS

The state Division of Housing and Community Renewal has announced first-year grants of slightly more than $1 million to 38 community organizations engaged in various neighborhood preservation activities. Half the grants are for $25,000, with a high of $50,000 and a low of $15,000. Liz Searles, new director of the Neighborhood Preservation Companies program, said of the funding, "The grants are smaller than I would have liked. There were too many outstanding proposals and too little money." DHCR had received 120 first-year applications for this funding cycle. A prime reason for the small grants is the recent impounding by the state Division of the Budget of almost half the extra $2 million appropriated last year by the legislature above the Governor's $5 million budget request. With the $5 million intended for second-year grants to more than 100 organizations already funded, DHCR was left with limited ability to bring new organizations into the NPC program. (None of the $3 .5 million in supplemental budget grants to politically-favored groups was impounded .) DHCR seems to be making progress on second-year grant decisions, with all but a few first-year grantees having received letters of commitment. A few contracts have been signed and some groups have received second-year funds, but most still have to go through that process. Searles reported that the Department of Audit and Control has agreed to rapid processing of checks (normally four to six weeks) once contracts are signed. The largest second-year grants are: Institute of Puerto Rican Urban Studies, Bronx, $75,000; Central Bronx Local Development Corporation, $80,000; St. Augustine's Center, Buffalo, $81,425; Flatbush Development Corporation, Brooklyn, $77,750; Community Planning Assistance Center, Buffalo, $100,000; and Bushwick Stuyvesant Heights Rehabilitation Center, Brooklyn, $72,500. The 1980-81 state budget unveiled last month by Governor Carey requests $6,786,500 for the NPC program, down from last year's appropriation of $6,925,000. The legislature has until March 31 to adopt the budget. Legislative sources have reported that the prospects for increasing the NPC appropriation are dim. Michael McKee

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19 CITY LIMITS/February 1980

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IN THIS ISSUE
Sweat Equity, Part I, p. 2 Bedford Stuyvesant Supermarket, p. 4 Sales, p. 8 137 Guernsey Street, p. 10 Consolidation, p. 12 West Side Housing Battle, p. 14
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