The Downside of the Upside: Easing the Middle Class Property Value Squeeze

Introduction

Sometimes, when I’m getting too big for my britches, my father has the easy way to show me who’s boss. He reminds me that it is he and not I that is the true genius in the family. While I may protest, he has the ultimate proof of his point.

In 1963, a year before I was born, my mother and father purchased a limestone duplex on a park block in Park Slope. They paid $35,000 and were considered trailblazers in a beautiful but rough block in an edgy community. There is no way a young public school teacher and lawyer just starting a neighborhood practice could afford to buy that apartment today. It’s simply too valuable.

The Good News and the Bad News

Today, I want to talk about a real phenomenon in our city: the astronomical rise in property values. We should be thankful that so many people want to come and join in the miracle that is New York City. Low interest rates have fueled a real estate boom everywhere. Neighborhoods throughout the five boroughs have seen plots of land that were almost forgotten developed, and downtrodden parts of the City have been reborn. That has been a blessing.

But that’s not the whole story. For many middle class families, this rise has had a down side too. For too many small and medium sized businesses, it has made making ends meat more difficult. For many renters it has meant fewer choices and higher prices. And for starter families – latter day Morton and Frances Weiners – the boom in real estate has locked them out of our great city.

Don’t get me wrong. We want values to rise. But the challenge to New York is how we ensure that the growth is managed and that we help those in the middle class and those aspiring to get there.

Let’s take a look at what the real estate rise has meant to so many middle class families like the one I grew up in. My mom and dad are both retired. They aren’t rich. And they aren’t looking to move.
 
Like them, a parent in Sunnyside who has seen his house rise from $240,000 to nearly $500,000 is feeling strangely conflicted nowadays. His salary isn’t going up. In fact, real incomes in Queens have dropped. He isn’t selling because property everywhere is through the roof. Where would he go?

Renters are also affected. Astronomical property values and low interest rates have made it profitable to convert rental property units into condos. And since many New Yorkers can’t afford the downpayment to buy an apartment – most New Yorkers are renters – the growth in rental unit conversions has left more and more people chasing after a smaller universe of apartments.

The Challenge for City Hall

But this is more than just a challenge for New Yorkers who are struggling to pay higher taxes. It is a matter of whether New York will be a place where the middle class still comes to live and fuel our future.

Dr. Richard Florida has written about what he calls the “creative class.” These are the most mobile and in many ways most desirable citizens of the world. They are educated, energetic and eager to come to where “the action is.”

While they may not have always had this handle, these people are the ones that have always chosen New York over other places to live. As a result our city has thrived.

Now where does the brilliant artist go? The groundbreaking computer engineer? Or even the post graduate student? They have been priced out.

The Changing Face of New York

This is also changing the face of our neighborhood shopping streets.

How does the neighborhood pizzeria keep up with the spike? Or the shoe repair shop? Or the deli?

Well if my local street in Forest Hills is any indication they can’t. Empty storefronts now checker this middle class neighborhood. And between them are the only businesses that seem capable of paying the rising rents – Starbucks and Banana Republic. These are fine businesses, but they are hardly the entrepreneurial endeavors that have been the engine of the New York economy of the past.

In fact whole sectors are in danger of being swept under by the tide of high rents and property values.

Since 2003, more than 3,000 hotel rooms in the city have been converted to condominiums. That may be good news for hotel owners who can make millions selling converted luxury apartments. But as hotels shut their doors, it means fewer jobs for hardworking middle class New Yorkers. In fact, despite a boom in tourism, the number of jobs has actually fallen since June 2001.

And the effects are being seen throughout the Village and Chelsea.

For 120 years, New York’s flower industry was based on West 28th Street. Now, with the conversion of many of the buildings to luxury apartments, rents have skyrocketed, and the entire flower industry is looking – desperately – for a new place to set up shot. While they hope to remain in Manhattan, many think they are going to have to cross the Hudson.

There are two buildings near the intersection of 5th Avenue and 23rd Street -- not far from where we are today – that serve as the epicenter of the toy industry. Hundreds of companies have rented space in the buildings for generations, hosting trade shows for a $55 million industry. But the buildings were recently sold – and the new owner wants to kick the toy businesses out and convert the space into luxury condos. Meanwhile, the toy industry is looking for a new home – and they may be forced to look outside the five boroughs.

And I should mention Zito’s Bakery, a Greenwich Village business that was an institution for more than 80 years, and closed a year ago for a confluence of reasons – notably a rent increase.

The Weiner Plan

We can’t just sit back and hope that these problems will solve themselves. We need a comprehensive plan to make sure that rising property values don’t force hardworking middle class New Yorkers and the small businesses that serve them to leave the five boroughs.

1. Middle Class Tax Relief: The first thing I will do as mayor is cut taxes on the middle class. I have proposed a 10% cut on everyone making $150,000 or less, financed in part by making the tax code more progressive. Next year, a New Yorker from the outer-boroughs making $50,000 will pay the same marginal tax rate as those making $1 million or more. That’s not fair. When other candidates talk about helping the middle class, they talk about raising taxes. A billion dollar stock transfer tax would chase financial and insurance industries out of New York – and those are jobs that feed middle class families in all five boroughs.
2. Cut Government Waste: The second thing I’ll do as mayor is cut government waste. I will demand that every City agency identify the least efficient 5% of programs, and then that they either reprogram, or cut that funding from their budget. For example, we could save $125 million a year if we simply modernized Medicaid enrollment – a costly process that is currently done manually.
3. End the Ticket Blitz and Help Small Businesses: The third thing I will do is make it easier for small businesses to survive in New York. Just this weekend, Luigi’s, a legendary restaurant in Jackson Heights, Queens, which had been in business for 47 year, shut its doors because its new landlord decided to double the rent. It’s businesses like these, on the neighborhood shopping strip in the outer-boroughs that are being squeezed out to make room for the big businesses that can afford the rent.

There are a few things we can do right now.

I will end the ticket blitz. This past year alone, the city reported a 33% increase in the number of summonses for “quality-of-life offenses,” to 708,349. Parking tickets were up 20% to almost 10 million in one year.

I will streamline the process of applying to become a “Business Improvement District,” or BID, a program that empowers businesses in a neighborhood to assess fees, hire clean teams, and design streetscapes. And I will fight graffiti by employing the Doe Fund – a fantastic organization that helps homeless New Yorkers find jobs and homes – to patrol neighborhoods throughout the City.

Conclusion

Some New Yorkers have clearly benefited from the boom in real estate values. But too many hardworking middle class New Yorkers are being squeezed out. It’s time that City Hall began working on their behalf.

I've told you my solutions. But this is a choice, and it is based on how a candidate answers a straightforward question: how do you help hard working New Yorkers who are having a hard time affording this city? One view is that you raise taxes to solve the problem of the middle class getting squeezed. My view is to cut taxes and cut waste. I think the act of raising taxes right now creates exactly the harm you are trying to avoid. It makes it more difficult to afford living in the City. It’s a straightforward question of policy, not personalities or intent – two different visions of how you accomplish a goal.

Thank you.