Putting A Value On New York City Public Housing

The disaster that is New York City public housing has been covered many times at this site, for example here and here.  But can we quantify the disaster?  How much value -- value that could be used to elevate the poor out of poverty -- is intentionally suppressed by keeping tens of thousands of apartments in socialist-model ownership where they can never be bought or sold or subleased or mortgaged or otherwise turned into usable income of any kind?

Historically, the instinctive answer to the question would be "not much."  When the New York City Housing Authority (NYCHA) projects were built (mostly in the 1940s through 70s), they were placed in areas that had little to no value in the real estate markets of the time.  That's how they could acquire the land cheaply!  At the time of construction of the projects, almost all of them went into areas in one of three categories: (1) slums, (2) industrial areas in the process of being abandoned with the decline of manufacturing, and (3) waterfront and near-waterfront areas, also in the process of being abandoned with the decline of shipping other than at massive new container ports, which are mostly in New Jersey.

Well, that was then.  Today, there is almost no such thing any more as a classic "slum" in New York City.  (The closest things today to that concept are certain neighborhoods with massive infestations of -- you guessed it -- public housing.  Exhibit A:  Ocean Hill-Brownsville in Brooklyn; Exhibit B:  parts of the South Bronx.)  The large majority of the formerly industrial areas have been transformed into trendy hipster districts where young people move in and turn one-time factories into "lofts."  (Examples: much of Willamsburg, Greenpoint and Red Hook in Brooklyn, Long Island City in Queens, and -- believe it or not -- increasing stretches of the South Bronx.)  And the waterfront?  Those parts of it that were not taken over by public housing when it was in vogue have now been completely transformed by private investment into highest-end housing.  See, for example, the entire Lower West Side of Manhattan from 23rd Street down, the entire Brooklyn waterfront from the Newtown Creek (northern border of Brooklyn) to Cobble Hill, and much of Long Island City and Astoria in Queens.  There are even plans afoot to build new high-end private housing on the waterfront at the southern tip of the South Bronx!

So, do the areas with the public housing remain valueless?  Obviously not.  But until recently it's been tricky to put a precise figure on their value.  The nearest new or upscale private housing would be at least several blocks away, and for anything closer, the proximity to the public housing tended to suppress the value.  

But guess what?  In the past couple of years development pressures have driven new construction closer and closer to the NYCHA projects.  Today there are new condominium developments going up right in the midst of some of the areas of highest concentration of public housing.  And, in the past few months, a couple of those developments have hit the market and started to sell apartments.  The prices give a rather precise estimate of the suppressed potential value of the public housing that is not just across the street, but literally surrounding the new development.

Consider 1399 Park Avenue.  It's at the corner of East 104th Street in Manhattan.  In case the name "Park Avenue" conjures up for you an impression of luxury, you should know that the area of Park Avenue lined with high-end condos and co-ops until recently ended rather abruptly at 96th Street.  That's where the railroad viaduct emerges from its tunnel and becomes elevated.  (All trains that go into Grand Central Terminal -- hundreds per day -- go down this viaduct.  Who wants to live next to an elevated railroad?)  The NYCHA projects start just 3 blocks up at 99th Street, and continue from there.  The first project, known as the Carver Houses, goes from 99th Street to 106th on the West side of Park Avenue, and from 104th Street to 106th on the East side. Here is a link to a map, and below is a picture, looking North from about 100th Street, where you can see some of the project in all its beauty, with the railroad viaduct on the right.

1399 Park Avenue is going right into the middle of this.  It has the Carver houses across the street both to the West and North, not to mention the railroad viaduct.  With that context, you might appreciate the sales blurb from the building's website:

At the crossroads between modern and classic is 1399 Park Avenue. Rising 23 stories, this 72-unit glass and architectural-grade concrete tower takes the best of this prestigious avenue and merges it with a thoroughly modern lifestyle.

Here is a rendering of what the building will look like when finished:

Notice that this view (like every other image of the building I can find) looks Southeast, the only direction you can look without seeing any of the Carver Houses.  Although the building is a long way from finished, sales have begun.  Prices are at the link, averaging around $1,250 per square foot, which would mean about $1.25 million for a standard 1000 sq. ft. 2 bedroom apartment.  Granted, that is cheap by Manhattan standards.  Still, if you put the same per square foot price on the Carver Houses, you get some amazing numbers:  assuming an average of 150,000 sq. ft. for each building of the 14-building complex, the value comes to about $2.6 billion.

But, believe it or not, there is an even more extreme example taking shape on the Lower East Side.  Down there, from just North of the Manhattan Bridge all the way up to East 14th Street, there is an almost-unbroken stretch of about three miles of one NYCHA project after another, around 100 buildings in total.  I say "almost unbroken," because somehow there managed to survive in there a couple of privately-owned plots, one of which contained a one-story supermarket.  Next thing you know, mega-developer Extell had bought that site and proposed putting up a very large (80-story) condominium building literally in the midst of all the projects.  After a few years of community opposition (why?  who knows?) they got construction under way, and now the concrete structure is nearing the top, although completion of the entire building is probably more than a year out.  Nonetheless they have started sales of the building, calling it One Manhattan Square.  This picture from last November gives a good idea of the extent to which this building is completely surrounded by projects (but note that the structure is much taller today):

Prices?  In this case they average around $2500 per square foot.  Hey, it's on the water (or at least close)!  And there's no railroad viaduct next door (just the FDR Drive viaduct between you and the water and also the Manhattan Bridge -- which carries four subway lines plus about a gajillion cars a day -- so close you can almost touch it)!  

What does that mean for the value of the 100 or so NYCHA buildings?  At about 150,000 sq. ft. per building and $2500 per square foot, I get something in the range of $35 - 40 billion.  None of which, in current socialist-model ownership, can be realized upon in any way, shape or form to pay property taxes, or to provide public safety, or to maintain or upgrade the buildings, let alone to elevate their residents from poverty.  It's just tens of billions of dollars down the rathole as far as I can tell.  Frankly, it's criminal.

Let me also remark on a couple of relevant newspaper articles.  In today's New York Post, Kathryn Wylde, President and CEO of the Partnership for New York City (the great and the good!) has an op-ed reporting on a meeting last week of some 50 New York business leaders with President Trump.  The idea behind the meeting was to convince (lobby) Trump to maintain funding for New York City priorities in his budget.  What priorities?  Well, "priorities like public housing . . ."  That's as far as I got.  Is it any wonder that the rest of the country thinks that New Yorkers are idiots?

Or there's the article from yesterday's Wall Street Journal reporting on the failing program in South Africa to build public housing for the legions of extremely poor people in that country (sorry, it's behind a paywall).  The subject of the article is one Patricia Makhetha, whose publicly-owned house remains half-built and unusable after more than five years of supposed construction.

The party of Nelson Mandela has sought to radically transform the South African economy through affirmative action and extensive social policies, including a housing program whose annual budget has climbed above 30 billion rand ($2.15 billion).  But the ANC’s ambitions have been undermined by allegations of corruption and patronage and controversies have consumed the presidency of ANC leader Jacob Zuma . . . .  

That's right, they chose to copy our very stupidest public policy, socialist-model public housing.  And it has failed disastrously.  Surprise!  The poor will remain poor.  Can somebody tell them that all they need to do is provide for private ownership of the property and the homes will magically appear without any need for government involvement, and meanwhile the poor people will start to build equity and move into the middle class?   Or do we now need to send everyone to a "safe space" before we can utter such words?