City Limits Magazine, November 1979 Issue

8/3/2019 City Limits Magazine, November 1979 Issue

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THE CHALLENGE OF COUNTING PEOPLE

by Bernard Cohen with Katie Hanner

On April I, 1980, every known household in theUnited States will be asked to fill out a census form, aone-hour task with a ten-year impact.

The population count and additional data collectedby the U.S. Census Bureau will become the basis fordividing up billions of dollars in federal and state aid,adjusting the balance of political representation inCongress and state legislatures and developing longrange social policies.

An accurate count in 1980 will have major importance for every block of every town across the country,but it is likely to be most critical in older urban areaswhere past censuses show the chances of a substantialundercount are much higher and the need for many of

the programs shaped by the census is much greater."I Count. I Answered the Census," is the CensusBureau's proud motto for 1980 . But ten years ago, atleast 5.3 million people, or 2.5 per cent of the generalpopulation, could not have made that claim becausethey were missed by the census . Officially, the undercount for blacks was 7.7 per cent, including nearly 10per cent of black men, and 14 per cent for Hispanics .Others with knowledge of minority population countsinsist these figures are too low.

The 1970 undercount is blamed in part on flawedmethods of collecting information, especially in theinner cities, and in part on a built-in resistance among a

sizable segment of the population to identifying themselves to the government. The Census Bureau says itrecognizes and intends to correct past problems withdata collection. That should improve the count.Whether the bureau will also be able to win cooperationfrom millions of undocumented aliens and others whoseattitudes range from apathy and fear to hostility is aquestion no one can answer for sure. Those who havecontact with this population group say they doubt itunless stronger protections against potential misuse ofthe census information is enacted.

"The almost universal reaction of the undocumentedaliens in the Diocese of Brooklyn at the present time to

the 1980 census is that they will not cooperate with thecensus count," Monsignor Anthony Bevilacqua,director of the Catholic Migration and Refugee Officeof the Diocese, told a Congressional hearing in NewYork City on October 22.

Thomas Sung, an attorney who practices immigrationlaw in Chinatown, agreed, adding, "The problem is notonly with the undocumented aliens. I t is also with thelegal aliens and citizens who don't want tn participate"out of fear .

CITY LIMITS I November 1979 2

The most immediate impact of the census will be jobs.The Census Bureau will be hiring approximately 15,000people in New York City alone to assist with the count.The higher-level jobs are being filled now under what isbeing called a "political referral system." The bulk ofthe jobs-enumerators paid about $4 per hour to visithouseholds tha t do not return the census questionnaireby mail-will be filled next February.

ProgramsPopulation count is at least part of the basis of an

estimated $50 billion in federal and state grant-in-aidfunds through more than 1 00 programs, including foodstamps, adult education, bilingual education, childwelfare , Community Development , employment and

training, legal services, public assistance and aid forsenior citizens .According to the government, New York City's

population reached a peak of 7.9 million in 1950 andremained at this level until 1970. The Census Bureausays the population dropped by 550,000 between 1970and 1977. In fact, many people believe the actual censusof the city, boosted by a large influx of undocumentedaliens, has probably remained about the same.

continued on page 20


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EIMICKE NAMEDTO DEPUTY POST

William J. Eimicke, deputy commissioner for administration for only a month at HPD, has been nameddeputy commissioner of property management, effective immediately.

He replaces Charles V. Raymond,who is leaving theagency to join an international network of hair stylingconcerns.

Asked to comment on his new position, Eimicke said,"When I came here a month ago to my present job, Iwould have preferred to be in the property managementposition, but it was filled then. What can I tell you? I' mas surprised as anyone else that it became open."

The new deputy commissioner plans to make consolidation one of his priorities in dealing with the city's3,600 occupied buildings which now have 26,000 unitsunder property management and 8,000 in the alternativemanagement programs.

" I would like to see an increased occupancy in ourresource buildings," he continued. "Right now ourbuildings are only 60 per cent occupied. I f we were toreduce our inventory by one-third, we would have onethird more money to spend on the better buildings. Thiswould result in our providing better services and morepeople paying their rent."

Eimicke also stressed the importance of increasing the

number of units in the alternative managementprograms and closing down buildings that are structurally unsound an d currently represent throwing"money down the drain." With the CD V and taxmoney he estimated that the city has $100 million to runits buildings and provide decent housing. The new CDbudget, he pointed out, puts an emphasis on consolidation by earmarking $4 million for its i m p l e m e n t . a t i ~ n .

A former professor of urban affairs and quantitatIvemethods, Eimicke received his B.A., M.A., and Ph.D.degrees in public administration from SyracuseUniversity. From 1975 to 1978 he served as fiscaldirector of the New York State Senate, and from 1978

until October, he was assistant director in the city'soffice of management and budget where he specializedin housing. Prior to serving in the state Senate, he wasdirector of the New York Commission on State andLocal Finances. He did post doctoral work at theUniversity of California at Santa Barbara and alsostudied at Manchester University in England.

A native of Brooklyn, Eimicke, a bachelor, lives onthe Upper West Side of Manhattan. 0

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To the Editor:Congratulations on an excellent issue! Your front

page story on the NYC fuel oil situation is certainlytimely. We couldn't agree more on the urgency of theenergy problem in our neighborhoods. The article gavea clear picture of the problem and the inadequacy ofproposed solutions.

Of course, we also were happy to see your story onour solar mechanic, Joan Altman. It's a great article.We really appreciate your consistently good coverage ofEnergy Task Force projects .

Again, our congratulations on a superior issue. Best

wishes for the heating season.

Sunniest regards,

Mary ChristiansonLarry LevanMargaret Morgan, for the entire ETF staff

_CITY LIMITS.City Limits is published monthly except June / July and Augu st / Sep

tember by the Association of Neighborhood Hou sing Developer s,Pratt Insti tute Center for Community an d Environmental ))evelopment and the Urban Homesteading As sista nce Board. Subscriptionrates: $20 per year; $6 a year for community-based organizations andindividuals. All correspondence should be addressed to CITYLIMITS , li S East 23rd St., New York. N.Y. 10010. (212) 674-7610

Second-class postage paid New York, N.Y . 10001City Limits (ISSN 0199-(330)

Editor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bernard CohenAssi stant Editor . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . Susan BaldwinDesign an d Layout . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . Louis FulgoniBu siness Assistant. .. . . . . . . . .. . . . . . . . . . . . . . . . . . . . . Carolyn WellsCopyright 1979 . Al l rights reserved . No portion or portions o f thisjournal may be reprinted without the express written permission o f hepublishers.

Cover drawing by Marie ThurmanThis issue was funded by Morgan Guaranty Trust Co.

and the Eastman Fund

CITY LIMITS I November 1979


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CITY LOSES MILLIONS IN 312 LOANS;HOMEOWNERS' DREAMS GO UNFILLED

by Susan Baldwin

I t sounds like a homeowner's dream come true. Allyou have to do is run down to Borough Hall, spendhalf an hour between errands filling out forms, andend up with a government-backed, low-interest loanthat will cover all the low -cost but necessary homerepairs that you, the homeowner, cannot get coveredby a bank loan.

Unfortunately, this federal rehabilitation program,known as Section 312 of the Housing Act of 1964, hasnot answered many New York City homeowners'dreams.

Under the terms of the 312 loan program, a low ormoderate income homeowner of buildings with up toseven units can receive a loan of up to $27,000 for eachdwelling unit at three per cent interest with 20 years torepay this amount . In order to secure the maximum lowinterest loan, the owner is only required to invest ten percent per dwelling unit during the processing and construction period, which should be completed in less thana year's time.

So far in the New York area, the 15-year-old 312program has been advertised in 22 neighborhoods designated as Community Development (or low an d moderate income) -eligible areas determined by the 1970census tracts.

An investigation by City Limits shows that New YorkCity has closed only three 312 loans, all in Staten Island,in the past year; that it had to give back millions ofdollars to Washington because of its inability to spendthe money and that the fast moving South Bronx Development. office, which was created to revitalize the SouthBronx, has asked HUD to bypass the city housingbureaucracy an d fund it directly under the 312 loanprogram.

Fo r the CD year ending September 30, New York Citywas originally granted $10 million and was finallyreduced to $7.1 million to run the 312 loan program,according to HUD's Washington office. The city isrecorded as spending only $1.5 million, mostly foradministration, during the fiscal year 1979. The totalnational budget for this period, according to Washington officials, was $200 million.

What happened in New York? Many things. An d thefinal result is that program money of up to $3 million,unspent by the end of September, has been "recaptured" or sent back to Washington and will be reallocated to other cities that have spent their 312 allocationan d are in need of more money.

"W e really didn't lose the money we didn't spend,"said housing official Jeffrey Heintz, who estimates that


at least $2.3 million from New York City's budget wasreturned to Washington. "Our problem is that we only

started to push this program last October. We hired 16new people who had to be trained, and the initialresponse to this 312 program was less than immediate.We also had no existing pipeline before we started."

As of October 1, 1979, only three 312 loans-all inStaten Island-have been closed in New York City. Onthe national level, the program has been used successfully by a number of cities since 1964 .

"I think it's a terrific program, an d I don't know whymore people don't take advantage of it," said MaureenO'Hare, of 11 Kirby Court, one of the three StatenIsland families that has taken advantage of this loanprogram. The O'Hares recently closed a $9,950, 20-yearloan that included installation of aluminum siding, anew front foundation wall, and insulation of their threebedroom house in Staten Island ' s New Brighton section .

According to O'Hare, whose loan payments are $55per month, application for the loan was easy.

"W e saw it [the 312 loan] advertised in the newspaperan d went down to Borough Hall," she recalled. " I ttook about half an hour to fill out the forms, and everybody was very helpful. I can tell you now, there is noway you could do this sort of repair with a bank loan . I twould take just ten years to complete their forms sayingwhat you would do."

Although the intent of this home repair law is tobenefit low and moderate income people, it has beenabused in areas where there is no pressure to funnelthese funds to families with modest incomes.

One Washington official at HUD reported thatcertain affluent neighborhoods "where there is savvy inpackaging this loan," have benefitted greatly from theprogram because there is no pressure to conform to thelow and moderate income limitations .

The 312 program, which was stifled under the NixonAdministration, was revived by the Democratic Administration that followed in the late 1970's and is now verypopular with Congressional advocates.

In New York City, however, political pressure supporting the 312 loan program seems to be confine .d toStaten Island.

"W e knew from the beginning that New York wassupposed to receive at least $7 million for this program,an d Borough President [Anthony R.] Gaeta is the onlyborough president who grabbed the bull by the horns,"said Jack Kelly, one of Gaeta's aides who has helpedresidents process 312 loans. "W e pushed this program,


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New siding using a 3 J 1 loan at J I Kirby Court.

and we've pushed to have the eligible boundaries extended because we can see that it can work here in

Staten Island."Staten Island has attempted to extend its 312-eligibleboundaries past the CD-approved North Shore area inorder to take in neighborhoods that are faced withmajor engineering changes to accommodate the installation of sewer systems.

Official figures for the 1980 budget are no t availablenow, but the projected budget that Congress is expectedto pass in November calls for $185 million for the 312loan. New York's allotment is unknown, but Washington officials say that the city is committed to spend atleast $4.6 million from its 1979 budget during the nextfiscal year.

New York City now has about 1500 applications forthe 312 loan, but with the exception of the three StatenIsland loans, its only other use of the program was thedramatic expenditure of $700,000 last spring for the gutrehabilitation of 13 houses on Pine Street in Brooklynafter fire devastated this old, deteriorating neighborhood.

"Our staff is overworked, bu t we are trying very hardto make this succeed," Rose Brown, director of the 312program at the city's Department of Housing Preservation and Development said recently when asked whythe program was moving so slowly. " I came on boardhere last year when there were only three staff membersand the outreach was very slow. Now we've hired allthese new people, and we're all being trained at the sametime . . . We've pushed the program, and it's beginningto grow."

According to Brown, applications for the 312 loannumbered 35 in November, 1978, when the programfirst got of f the ground, but have soared in recentmonths to as many as 198 in August. She also reportedthat each HP D coordinator is handling about 80 cases,while the national average is about 20.

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City officials are worried about the prospects ofdelivering on the 312 loan in such a short period of time.

"There is no doubt that the funds are there if the citycan use them," said Sydelle Nepper, special assistant tothe area director at HUD. "The problem here is startingup the program . . . They did lose some money now, bu twe have a very strong monitoring system, and I amhopeful that they will get off the ground. This is a great

program and one of the few that can be used for smallhomes."Nepper is currently developing a special program for

50 HUD-owned homes in South Ozone Park in Queensthat will be repaired by one contractor with 312 loanmonies. They will then be sold to prospective lowincome buyers.

But, what does getting of f the ground mean?To Guillermo Echanique, of 123 Alden Place, Staten

Island, the second of three applicants to close the 312loan, it means a loan at $50 a month for $10,000 worthof repairs that resulted in a moderate rehabilitation ofhis 50-year-old house.

"I t was a lot of trouble, but it was worth it ," Enchanique said. " I was always going down to Gold Street[HPD] to deal with some paperwork, an d it took a lot oftime. But the work I got on my house was very fine. TheHP D inspector checked everything. I could never havedone this with a bank."

HPD's 312 processors also complain about paperwork and fear new problems that will arise with theincreasing workload.

"We want to help everybody and try to do as much aswe can, but we are having problems because we'reswamped with applications," said Jack Costi of HPD's312 unit, noting that his office is getting help from the312 office in Poughkeepsie which has learned to use theprogram very successfully.

"It 's also hard to counsel people about the loans,"Brown concluded. "A lot of them just have troublebuying homes and keeping them going. We don't wantpeople to get in over their heads, and some houses needrepairs that people can't afford." One of the areas thatHP D is looking into is aiding homeowners to refinancetheir bank mortgages with the 312 loan over the 20-yearperiod.

In the meantime, officials connected with the newrehabilitation program for the South Bronx recentlycalled on HUD to issue $5 million from New YorkCity's 1980 budget to support 312 loans in this targetarea.

Following local and Washington talks, they are nowseeking between $2 and $3 million of New York'sallotment that would be funneled directly to this SouthBronx office, whose executive director is EdwardLogue. Logue, the former head of the Urban Development Corporation (UDC) , is developing a comprehensive plan for the revitalization of the South Bronx-a plan that is focusing on the neighborhood's strengths




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SOUTH BRONX RESCUE PLAN-AGAIN

by Peter MeIser

After two years in which we have seen a Presidentialvisit, two still-born "plans" an d the resignation of adeputy mayor, the beginning of a South Bronx plan istaking shape. In August, the South Bronx DevelopmentOffice, directed by Edward Logue, released its InterimReport to Mayor Koch. The report, produced fourmonths after Logue began funded work, consists ofthree substantial volumes .

The first volume provides an overview, and contains abrief analysis of problems , statements of" planningobjectives and approaches and summary statements ofthe "early action projects" which make up the substance of the plan. Volume Two is a more detailedpresentation of the early action projects, while VolumeThree gives the budget and administrative proceduresfor developing and implementing proposals. During thenext year the SBDO will package the early actionprojects for implementation and prepare a morecomplete physical plan for the South Bronx.

The Interim Report proposes the expenditure of some$420 million on early action projects and additionalsums on proposals to be detailed later. Most of thismoney is already available in existing programs.Logue's effort has been to direct expenditures of publicfunds to specific areas, to coordinate ongoing development work, an d to ensure that all available funds areutilized fully and promptly. The report also identifies

the expenditure of $84.6 million, or20070

of the total, ofwhat it calls "new money."Logue's plan is comprehensive as it claims to be, in

that it addresses a wide range of problem areas. Projectsdeal with economic development, manpower training,open space and recreation, housing, human services andvarious "neighborhood improvements . " The proposedexpenditures are, however, more concentra ted. Seventyfive per cent of the project funds, or $304 million, isallocated to housing, and $65 million of the remainder isto be spent on economic development and manpowertraining.

According to Logue's office, the housing budget will

buy 2,433 units of new construction, 3,062 units of substantial rehabilitation, 2,500 units of moderate rehabilitation and 150 to 250 loans for improving one-to-fourfamily homes. The housing will be produced usingSection 8, Section 235 mortgage insurance for singlefamily homes (the first such use in New York City), anew Section 8 moderate rehabilitation p rogram, Section312 low interest loans and mortgage refinancing. Abouthalf of the development will come through the NewYork City Housing Authority .


The largest economic development expenditures areloans to South Bronx firms, $20 million, and an allocation for the purchase of land for industrial purposes.

These numbers convey part of the context of the plan,Jut more important is Logue's underlying strategy fordealing with the problems of the South Bronx. Thereport begins with a cursory and rather misleading statement of the factors that led to the decline and devastation of much of the South Bronx. The decline of theSouth Bronx is portrayed as an accidental consequenceof the realization of the suburban American dream byformer residents of the area, and as the unintendedconsequence of Federal housing and transportationpolicies. The role of redlining, the withdrawal of privatefinance, and the withdrawal of public services in thecollapse of South Bronx neighborhoods is not discussed, although these factors ar e very evident in theproblems the report identifies. This omission isimportant because it obscures the forces with which anyrevitalization effort must con tend.

The merits of the SBDO plan derive from Logue'spragmatism. His priorities are cutting through red tapeand getting the most housing for each public dollar. Theproblems the plan is able to address are restricted by theavailability of the programs. Although Logue does notlike the waste of public money that Section 8 tax sheltersinvolve, he must use the program because of the

resources it offers. But these programs and probablyLogue's own inclination give an over-emphasis to physical redevelopment. In this approach, the primarybenefits go to outside developers and tax shelterinvestors rather than to community residents. It alsomeans that the projects do not address the more fundamental problems as directly as they might or reinforcecommunity-based revitalization efforts as effectively asthey could. This is evident in the plan's emphasis on themore stable Grand Concourse.

The central theme in the SBDO approach is conveyedby the title of the report: "Areas of Strength/Areas ofOpportuni ty. " The text expands on this idea.

The approach of the South Bronx Plan whichhas emerged in the first 120 days of work isalready clear: where there are strengths, tobuild on those strengths; where there are viableneighborhoods, to revitalize those neighborhoods; where there has been abandonment, toclear an d spruce up the areas of disintegrationto begin the process of creating a new environment.

On the basis of this decision, Logue chooses to


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concentrate resources on the most physically stableareas; the Concourse, areas of 1-4 family housing andtwo major commercial areas, leaving more devastatedareas for redevelopment as industrial parks or sectionsof new single family housing. This approach involves anew kind of triage: instead of concentrating on themiddle third, it devotes major resources only in the bestareas.

This approach,however,does not address the underlying problems. I t can be agreed that if the Concoursecollapses then there won't be much left of the SouthBronx. Yet the future of the South Bronx does notdepend only on what happens on the Concourse. Itdepends more on what happens to the sizable stock ofoccupied city-owned housing stock; the housing that hassuffered most from the withdrawal of private financewithout yet being abandoned by its tenants. In hisallocation of funds, Logue ignores this class almostcompletely. His proposals are limited to the training of300 superintendents for city owned buildings and"improving the flow of welfare rents." He could

propose projects to increase housing managementcapacity, to train housing repair crews, to develop costeffective rehabilitation methods and to support theefforts of community organizations to manage cityowned housing and organize tenant associations. Byneglecting city-owned housing, Logue is implicitlysupporting a policy of planned shrinkage and ignoringthe needs of those residents who have borne the brunt ofhousing abandonment in the South Bronx. Ignoring thishousing probably also serves to undermine the "areas ofstre ngth" that he has chosen for concentrated effort.

The SBOO proposals also appear to fail to take fulladvantage of the construction activity it is generating to

create employment opportunities for local residents.The report identifies the lack of earned income asperhaps the majo r problem facing the South Bronx andits residents. Fo r this reason the plan devotes a lot ofattention to economic development and manpowertraining. The report proposes to establish industrialparks and it lists an impressive number of business firmswhich would either remain, or establish themselves, inthe South Bronx i f publicly funded loans were available.These proposals are good ones, but they do not offerany guarantee that the jobs they create will go to localresidents. As well, the strategy of attracting industry tocreate local jobs has nowhere fulfilled the expectations

planners have held for it. More fundamentally,however, this strategy fails to capitalize on the onlyresource that Logue can justifiably rely upon: the jobscreated by the construction activity his plans generate.Construction-oriented job training, assistance to localminority contractors, and requirements that construction contractors hire locally resident labor are likely tocreate more local jobs quickly than are efforts to attractnew businesses. Increasing local employment would alsohelp boost local income with the secondary effect of

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improving the market for local shops.Another aspect of the SBDO plan is the working

relationship it establishes with the people of the SouthBronx and their representative institutions and withcommunity-based organizations. This has two aspects:participation in the planning process and the extent towhich the plan itself helps to reinforce the existingefforts of local residents. The report states an

emphatic commitment to both objectives. Concerningthe first, it says,This will not be one of those efforts, not uncommon years ago where some scheme fromon high is imposed with no input from thosewho know the needs and problems intimatelyfrom their own personal experience. We havebeen searching for-and we have foundmany priority ideas flowing from the neighborhoods concerned and, of course, from Cityagencies working in tbe communities.

The reality is more ambiguous. Logue and SBOOstaff have established firm relationships with Com

munity Boards, meeting with them separately and collectively . Logue reviews his proposalswith the Boards, and according to some people I spoketo is responsive to what he hears. Relationships withcommunity organizations are less well developed.Although the director of one community group said thatLogue was actively supporting some of his group'sprojects, others said that they had n o ~been consulted orhad had only one rather general meeting with an SBOOstaff member. This is an important omission in that asimplementing agencies, community organizations dohave ongoing programs and substantive plans for futuredevelopment. Community Boards, while bejng more

broadly representative, have more of a review functionand lack the staff to initiate substantive planningproposals. Most of the proposals in the Interim Reportand early action projects appear to have been developedprimarily by Logue's staff, probably in consultationwith the South Bronx Policy Group, a task force of cityand federal officials of which Logue is secretary butwhich has no South Bronx community leaders or representatives.

The plan is similarly emphatic on the need to reinforce and build upon the efforts of indigenous community organizations. I t states,

and,

Even the casual observer is struck by the pro

liferation of active and involved communityagencies, most of them small and underfinanced, but many with impressive records ofaccomplishment. The vigor and verve of itsindigenous community agencies is perhaps its[the South Bronx's] most precious resource. Adevelopmental approach that ignores thestrong local efforts already in place would bedoomed to failure . . .




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Hue HOMEOWNERS WINCLASSACTION SUIT

After six years of court battling, some 23,000 homeowners who lost their federally insured properties afterbeing rejected for a HUD program designed to helpprevent foreclosure have won a class action lawsuit that

will enable them to return to their homes at formermortgage interest rates.

In a case known as Ferrell vs.HUD, an order signedby U.S. District Court Judge Hubert Will in Chicago onNovember 8 requires that all members of the classaction be notified in writing of the settlement beforeHUD can begin reprocessing applications for themortgage assignment program. The decision also stipulates that the former homeowners be given 30 days oruntil December 18 to respond to HUD's notices and tha ta 60-day moratorium on foreclosures and evictions beinstituted, beginning November 8. An extension will begranted for good reason.

The HUD mortgage assignment program, formallyestablished in May, 1976, helps prevent homeownerswith FHA-insured mortgages from losing their homes ifthey are unable to meet monthly payments because ofunexpected financial hardship or prolonged illness .

Under the present regulations, if a homeowner qualifies for the assignment program, HUD buys themortgage from the mortgage company or bank(mortgagee) and develops a payment plan for themortgagor-a plan that can suspend payments for up to36 months and extend the matur ity date up to ten years.In order to qualify for the program, a homeowner musthave defaulted on three full monthly payments.

Homeowners affected by this decision are those thatwere rejected from the assignment program and losttheir homes from May 17, 1976, to January 31, 1979. I fa homeowner's property has been resold to anotherbuyer, HU D is required to offer him another comparable home from its inventory.

"This is a very important decision for low incomehomeowners who lost their houses all over the countryfor one reason or another," said Barbara Ziony, anattorney with South Brooklyn Legal Services who hasrepresented many Brooklyn clients who have had problems with HUD and its FH A programs. "This is truly avictory because even those homeowners who never

applied for the assignment program and never got aletter from HU D about foreclosure proceedings, willhave a chance to get their homes back."

Ziony also said that HU D agreed in the law suit tocontinue to use the current revised mortgage assignmenthandbook, which is sympathetic to homeowners, for thenext five years and, after that, to adopt the same or asimilar set of guidelines to implement the program.

Asked why the assignment program worked so badlyfor so many years, Ziony said, "For two or three years


the money for the program came in very slowly. Therewas no training to speak of for area employees who ra nthe program . The mortgagees didn't follow the regulations because they found them to o complex, and HUDignored, even showed hatred of, the program until thenew administration came in in September, 1977.

She also explained that when homeowners lost theirproperties, HUD refused to allow them to stay on and

pay rent. At the same time, she added, existing tenantsin the buildings were kept on and often were offeredoptions to buy.

Shortly after the program began in May, 1976, Zionysaid, it became evident that HUD was mismanaging it.Procedural errors were the rule, rather than the exception, acceptance criteria were distorted and misapplied,and applications were denied for unfounded or noreason at all. In mid-September, 1977, audits wereconducted in HUD's field offices and, with the exception of the St. Louis and San Francisco offices, thoseaudits revealed gross deficiencies in program administration.

Under the agreement of the Ferrell vs. HU D suit, allthe area offices will be required to reprocess applications with the exception of these two offices.

According to Ziony, processing was particularlydefective in the southern offices and, in Baltimore, shenoted, only one assignment application was completedduring the three-year period.

In a letter, dated October 1, from HUD AssistantSecretary Lawrence B. Simons, all HUD-approvedmortgage companies have been requested to "withholdall foreclosures of insured home mortgages, acceptanceof deeds in lieu of foreclosure, an d related evictionactivity until January 18, 1980, with respect to allmortgages that HUD rejected for assignment betweenMay 17,1976, and January 31,1979 ."

For more information, call Barbara Ziony at SouthBrooklyn Legal Services, 855-8003 or 855-5463, or theManhattan Community Action for Legal Services(CALS), 431-7200 . 0

FREE LEGAL HELPEXPANDS IN HARLEM

Free legal assistance for low income tenants (orowners) of buildings in the Harlem area that are suffering severe disrepair is being expanded in a trial effort to

save the housing from falling into abandonment andforeclosure.

The Community Law Office, based in East Harlem,has established a new housing unit whose function willbe to assist tenant associations in neglected buildings orlandlords who want to make improvements to takewhatever legal steps are necessary to upgrade theconditions.

Four lawyers plus a staff of community consultants toprovide technical assistance for buildings in most of


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northern Manhattan will comprise the full-time staff ofthe housing unit under a one-year, $249,000 contractwith HPD. The unit will also draw from a pool of 100"participating" lawyers who have volunteered theirservices.

There are many legal steps tenants can take to pressure an owner to fix their building or to take on theresponsibility themselves if the landlord won't. In addition to representing tenants in this way, the legal unitwill also advise them on how to establish organizations,help steer them to rehabilitation finance programs andassist them in purchasing thdr buildings. I t will also aidlandlords to obtain loans for repairs and to restructurerents.

The contract calls for 200 buildings housing anestimated 4,000 families to be represented by the CLO .unit during the year. The goal is to intervene earlyenough so that buildings can be rescued before conditions become so bad that abandonment cannot beavoided, leaving the city with another lifeless structure.

CLO is part of a newly created "volunteer division"

of the Legal Aid Society. For the past ten years, CLOhas offered a full range of free legal assistance toHarlem residents, utilizing a small full-time staff oflawyers and farming out many cases to hundreds ofprivate attorneys who take individual clients on a "probono" basis. The housing unit will be completely inaddition to the broader range of existing legal services,said Sheldon Halprin, head of the unit.

David Weschler, director of CLO and head of theLegal Aid Society's volunteer division, said the pilotlegal program will strengthen the effectiveness of existing city housing programs. "What has been lacking inthe past is that there has not been a community-based

lawyer to facilitate the process . . . to help keep buildingson track and iron out problems, " Weschler said.Assistant Housing Commissioner Joseph Shuldiner

said that while the city does initiate legal action forhousing problems, tenants and owners need representation "that goes way beyond what we feel we can live upto because we can't represent parties or get close toowners and tenants."

Shuldiner said he expected to take an "evenhanded" approach in deciding whether to represent thetenants or the landlord in a given building. Even so, heacknowledged, "probably 85 per cent of the cases" willinvolve representation of tenants.

Both Shuldiner and Weschler acknowledged thepotential for a conflict of interest in cases where CLOlawyers were representing tenants in city-owned buildings, but both discounted it as a problem. "W e all dowant the same thing," said Shuldiner.

Asked how he would assess conditions in Harlemafter several years of working there, Halprin replied, " Iwould say there are a lot of very vocal, effective peopleamong the residents of East, Central and West Harlem,a lot of interested people. The area you are talking

9

about varies greatly. It has middle class blocks, terribleblocks and everything in between.

"The more you look at each part of Harlem the moreyou see it as combining different types of people in littleneighborhoods-it is not a monolithic whole. You havepeople who are making progress. We've seen buildingsthat have been saved. It's an uphill battle for peopleliving in these communities, but it's a battle that people

still are waging and, in various instances, are stillwaging effectively. A lot of people are getting togetherand trying to do things. Tenants working as a group canaccomplish a lot." 0

LOW INCOME TENANTSWIN RENT REFUND

As a result of a successful class action lawsuit againstHUD, low and moderate income tenants in 4,800federally financed housing projects across the countryare eligible to share $60 million in rent refunds for overcharges mandated by HUD five years ago. The increaseshad come in response to utility and tax hikes incurredduring the Arab oil embargo.

New York City residents of some 100 projects with45,000 units built with a federal Section 236 mortgageinterest subsidy will participate in the settlement of thelawsuit, initially based on II nationwide claims, thatalleged illegal rent increases between February, 1975,and September, 1977, for as many as 750',000 familiesthat occupied these government-subsidized apartments.Under the 236 program, no eligible family pays morethan 25 per cent of its income for rent.

Each family is eligible for rent refunds of up to $500.Tenants who are still living in complexes affected by theincrease are encouraged to apply for the refund and tosupply information about neighbors who have moved.

The national $60 million limit on refunds was negotiated last January after the government learned thelawsuit could cost at least $140 million if taken to trial.

Legal aid offices are displaying posters in English andSpanish explaining this decision. A toll-free telephonenumber has also been set up to answer tenant questionsand help in locating missing eligible families. Thenumber is 800-824-7980. 0

The Task Force on City-Owned Property will hold aninformational forum for representatives of city-ownedbuildings in the interim lease program Saturday,December 8, from 10 a.m. until 1 p.m. at the HarlemState Office Building, 163 West 125th Street, in Manhattan.

The agenda will include discussion of the city's $250sales policy, building repairs, non-purchase of buildings, updating the interim lease agreement, and proposed plans for Community Development VI funds.

CITY LIMITS I N 'ovember 1979


10/24

CITY RECEIVES $16.5 MILLIONFOR SECTION 8 MODERATE REHAB

by Sus,an Baldwin

New York City has won a $16.5 million housingsubsidy to join the vanguard of cities in developing anew national moderate rehabilitation program to saveolder but solid housing stock in urban areas where bankdisinvestment is increasing and stable, private ownership and tenancy is declining.

The new HUD plan, announced in mid-October andknown as the Section 8 Moderate Rehabilitation Program, will permit the city to rehabilitate 4,084 units ofdeteriorating housing in 25 New York City neighborhoods at a cost not to exceed $15,000 per unit. Cityhousing officials hope to limit the renovating costs tobetween $7,500 to $9,000 per unit. The national minimum that can be spent for each apartment unit is$1,000.

This moderate rehab program will provide for theupgrading of substandard housing units to comply withcertain nationally recognized housing standards and willunderwrite the repair or replacement of major buildingsystems in standard housing.

Congress decreed that this program must not result indisplacing t e n a n t ~who cannot afford to pay the higherrents deemed necessary to cover modernization costsand repairs.

According to a HU D Washington official, the totalnational allocation for the program is $119,813,368 for34,294 units of housing. Originally approved for 4,235units, New York City recently was reduced 151 units forbudgetary reasons. The current projected amount of thecity's contract is $16,553,100.

Of the 4,084 units proposed for New York, 1,290 willgo for housing for the elderly, 2,079 for small families(up to two bedrooms), and 715 for larger families (threeto four bedrooms), according to Sydelle Nepper, specialassistant to Area Manager Alan Wiener at HUD.

City housing and planning officials have indicatedthat major problems with selling the program to neighborhood residents and developers will be the financing

arrangements and the higher restructured rents." I f you get a rent raise, you naturally expect to seesomething for your money," said deputy housing commissioner Charles Reiss. "Money is tight, loans are hardto get, interest is rising, inflation is hitting everybody,and if you're going to raise people's rent, they wouldlike to see something for i t - l ike a new lobby or amodern kitchen."

Although specific buildings in the 25 neighborhoodsin all boroughs but Staten Island have not been selected,


the city's Department of Housing Preservation andDevelopment is currently developing an administrativeplan tha t will be forwarded to HUD's area office withinthe next few weeks with the idea of advertising theproposed program to developers sometime early inJanuary, 1980.

Administrative Plan

Emphasi!> is being placed on the selection of new-lawtenements of 20 units or less that date from the postWorld War I era. The neighborhoods proposed for thismoderate rehabilitation program are those where thecity has already spent some money on revitalization andwhich are considered worth saving. Some of thesecommunities, known as neighborhood strategy areas,have already received Section 8 subsidies for substantialre):Iabilitation (NSA Section 8) or are known as Community Development target areas.

Others were designated as neighborhood preservationareas in the early 1970's when the state also authorizedthe city to establish the Rehabilitation MortgageInsurance Corporation (REMIC) program to insure upto 50 per cent of a rehabilitation loan in these communities and promote a concentration of private lendingactivity in these areas plagued by early signs of deterioration.

The 25 approved neighborhoods and their respectivehousing unit allocations using the original total are:Bronx-Grand Concourse, Kingsbridge, WestTremont, 780 units; Pelham Parkway, Soundview, 450,for a total of 1,230; Brooklyn-Bedford Stuyvesant,Bushwick, Crown Heights, 955; East Flatbush,Flatbush, Brighton Beach, 200; Sunset Park, 300, for atotal of 1,455; Manhattan-Clinton, 150; Gateway toHarlem, Manhattan Valley, 300; Washington Heights,Hamilton Heights, 400, for a total of 850; and Queens-Astoria, Steinway, Corona, East Elmhurst, JacksonHeights, Woodside, Sunnyside, 550; Fa r Rockaway,

150, for a total of 700.Neighborhood distribution of the 151-unit cut wasnot available at City Limits's deadline.

"We're going to try this program and know that wewill have trouble administering it because [the paperwork] promises to be labor intensive in the same wayour participation loan program is," said assistanthousing commissioner Jeffrey Heintz. In a participationloan, the city puts up a portion of the mortgage moneyneeded for the rehabilitation at one per cent interest and


11/24

the private lender puts up the rest at the prevailingmarket rate.

Both Heintz an d Reiss have expressed concern intoday 's volatile loan market over developing themoderate Section 8 program's finance plan,which runsfor only 15 years. Most mortgage programs last 20 yearsand some extend to 40 years. Fo r current constructionloans, Heintz estimated, interest rates l:range from 16 to18

per centand

threatento

goup

to 20 per cent in thenear future.Under terms of the moderate Section 8 program,

rents can go as high as 120 per cent of normal Section 8rent limits for existing housing. Under the 1978-79guidelines, fair market rents for apartments in elevatorserviced buildings range from $228 for a studio to $397for four or more bedrooms and from $206 to $360 innon-elevator buildings. Thus, the maximum rent thatcould be charged for a two-bedroom moderate rehabunder this program would be $364.80 for an elevatorbuilding and $330 for a walk-up.

$95 or $100 a Room

"This could mean that we would be charging peoplewho do not qualify for the subsidy $85 a room ormore," said Heintz. "And quite frankly, they may balkat paying this much if they've been used to paying a lotless for many years." He also expressed concern about abuilding's "making it financially if we have to askpeople to pay up to $95 or $100 a room to do therehab." Tenants meeting subsidy requirements wouldonly pay one quarter of their income. Very low incomefamilies would pay 15 per cent.

The HU D guidelines explicitly state that subsidizedan d fair market rents in the same building must be

equal. No building can have two different rent scales."This program will require a tremendous amount of

education for both the tenants and the owners whopropose to do the work," said Rafael Carmona,director of the multi-family housing unit at HPD."Whoever is serving as the loan project coordinator willhave to sit down with the families an d make it clear tothem just how much more they will have to pay. I f thisadds up to an unrealizable amount in order to make a goof the building, then the best solution would be not toproceed with the building. "

The city hopes to use the moderate rehabilitationprogram to save a substantial number of its betterpreserved, tax-foreclosed buildings and is looking at itsalternative management programs to become participants in the program.

The programs that could qualify for the moderateSection 8 plan are the tenant interim lease program,community management, the 7 A Administratorsprogram, and the Private Management in Partnership

. program (POMP)."The subsidy money will be attached to the housing

unit, not the individual," said Nepper, stressing that the

11

city only intends to implement this program in buildingsthat are still privately owned or are under communitymanagement or the interim lease agreement where anon-profit neighborhood or tenant group plans to buythe building.

" I agree with the mayor," she asserted. "The citycannot be the landlord of last resort. This is why wehave to make this program work. We have to save thesebuildings and the affordable housing they provide andreturn them to the private sector."

Although community groups, to date, have not beenconsulted about the selection of appropriate buildingsfor this program, city officials expect to confer withthem after interested developers have come forwardwith plans.

,

Little Information Available

" I know almost nothing about this program," saidLeah Schneider of the Manhattan Valley DevelopmentCorporation. "All I heard was the numbers for eacharea. There's very little information available. No one

seems to know much about it. But it certainly will bedifficult to make decisions about sharing units whenmore than one neighborhood is involved." She alsowondered about the cost of the program, alluding to thecostliness of the participation loan program it resembles.

Other neighborhood observers have questioned thecity's ability to find enough viable housing stock thatcan be rehabilitated within the moderate cost guidelines.

"This is one of the big problems they're finding withthe community management rehabs," said one cityhousing official. "When they start they plan to ~ p e n$7,500 to do each apartment an d then when they get

into the work they find ou t it will cost $17,000. What doyou do here if this happens? Abandon the project withthe building torn apart?"

"All we can do is try to carry ou t the program and beoptimistic about it even though it has the potential for anumber of problems," Reiss reflected. "I am nervousabout it, and right now I don't think it will have theearth-shattering impact on neighborhoods that somewould like it to have."

According to Reiss, the city is on schedule with thetimetable outlined for the program. "A s a matter offact," he added, "we're half a step ahead of HUD, andwe think we've picked neighborhoods that were focusedbroadly enough for this program to work. This also justmight mean the salvation of the cream of the crop ofour In Rem buildings."

In the next few months the city will also be talking todevelopers about the merits of the Section 8 subsidy,since many of the smaller owners are wary of becomingtoo heavily involved with government subsidy programs.

The city can start spending the rehab money immediately and will have until January, 1982, to carry ou t itswork on the approved 4,084 units. 0

CITY LIMITSI

November 1979


12/24

ALLSTATE TAKES HEATON INSURANCE NEEDS

Disclosure by insurance companies, placement otagents in Upstate New York cities, removal of the 50 percent surcharge on the basic policy for city-dwellers an d adiscount program for homeowners who undertake

repairs. These were among the major demands pressedby some 250 representatives of communities across thestate in a meeting with officials of the Allstate InsuranceCo. on October 27.

Allstate agreed to discount policies for homeownerswho undertake repairs to t h ~ i rplumbing, electricalsystems an d roofs within a five-year period and said itwould provide a 45 to 60-day grace period for correctingspecified conditions before cancelling or refusing torenew a policy. The company also said it would helpwork for specified reforms in the FAIR Plan program.

The most controversial issue was removal of the surcharge, which Allstate says applies to nearly all itspolicies an d neighborhood representatives argued isreally only levied for city-dwellers. Allstate refused tobudge on that issue, which brought on a round of "Nomore surcharge!" chants. The company also refused tocommit itself to placing agents in Upstate cities,although officials maintained that urban policies constitute an important volume of business. Allstate said itwould report back to the group on whether the companycan and will disclose by zip code the number and typesof policies, cancellations and non-renewals for manyUpstate areas .

The spirited meeting took place at the annual conference of the New York State Tenant and NeighborhoodCoalition in Marcy, N .Y., near Utica. 0

Neighborhood representatil'es meet with Allstate Insurance Co. officials.

WINTER UPDATE. A federally funded program designed to help lowerIncome people who face a crisis due to skyrocketingenergy costs this winter has been retooled to make ita ~ p l Yto multiple-family dwellings in New York City. I tWIll take effect December 1, according to a state official.

Called the Energy Crisis Assistance Program itprovides for payments of up to $400 per eligible h o ~ s e -hold to cover the payment of fuel/utility bills' theprovision of short-term assistance in the form of fuelsupplies, warm clothing, blankets, replacement ofbroken windows, temporary shelter, health an d othersupportive services, an d direct cash assistance of up to$50 where an individual has paid a fuel bill and faces anemergency. To qualify, the recipient can earn no morethan 125 per cent of the official poverty income level, or$6,700 for a family of four.

Congress has appropriated $250 million nationallyfor the program, of which New York State's share is

about $25 million and New York City's is about $9million. According to Eugenia Flatow, executive deputysecretary of state, here is how the program will work inNew York City:

Of the $9 million, $6 million will be earmarked formultiple-family buildings. Owners of buildings in designated low-income areas of the city who agree to certainstipulations will be eligible for $300 per dwelling unit forup to 60 per cent of the apartments in the building. The

payment will be in the form of a line of credit with the fuelsupplier rather than direct assistance to the owner.Owners will have to agree to continued maintenance ofthe building, to permit weatherization improvements

under another program an d to exempt tenantsfrom rentincreases based on higher fuel costs . The funds will beadministered by HP D through the Emergency RepairProgram.

The remaining $3 million will be used for the benefitof lower income homeowners an d tenants in one andtwo-family buildings. This money will be administeredby the city's Community Development Agency.

"What we are doing is trying to hold the landlords inplace for one more winter," said Flatow, adding thatexisting funds will probably take care of only ten percent of the income-eligible population. Legislation thatwould add $150 million to the program nationally ispending in Congress .

A whole set of energy assistance bills are in the finalstages of consideration at the state level. GovernorHugh Carey has signed two of them. One would enablefamiles in all income groups to borrow at low interest upto $1,000 to help with rising fuel bills and offer banks atax credit to make the loans. The customers would pay 5per cent; the oil dealers would be liable for 9 per centan d the state would provide participating banks with atax credit equal to I per cent. The other authorizes the



13/24

state to advance poor and welfare families $143 millionfor which the state will be reimbursed by slower-movingfederal funds.

Carey was reportedly undecided as to whether to signthree additional bills approved by both houses of theState Legislature. One would provide state funds for aprogram similar to the Emergency Crisis AssistanceProgram only for homeowners earning up to twice thepoverty level. The second bill would give senior citizens

earning less than $14,000-a-year an additional credit of$35 on their income taxes. The third bill would eliminatethe state sales tax on residential energy use, effectiveOctober 1,1980.0

Consolidated Edison has announced a new plan tohelp senior citizens and others on limited fixed incomesto pay energy bills this winter.

The program, which Con Edison calls CONCERN,offers to those who are on Social Security and thosereceiving Supplemental Security Income the following:a 12-month .billing plan; bill payments to coincide withdates when government checks arrive; modified creditprocedures to meet special circumstances; assistcustomers to apply for financial aid from variousgovernment programs; waive requests for deposits.

A postage-paid form to enroll in the CONCERNprogram is being included with November bills andspecially trained customer representatives are beingassigned to the program, Con Edison said. 0

ARSON TASK FORCE

The New York City Arson Strike Force has receivedthree grants totalling $247,900 for projects that willwork to apprehend landlord-arsonists and provideinformation to community groups.

According to Mayor Koch, the Law EnforcementAssistance Administration (LEAA) will allocate$195,900 to the strike force toward the development of acomputerized system that will detail ownership andfinancial history of properties that have previous arsonrecords.

Two additional grants will come from the Florence V.Burden Foundation, which is providing $32,000 for fireprevention projects in arson-threatened areas of Wil

liamsburg an d Park Slope, an d the United States FireAdministration with its allocation of $20,000 for anarson information clearinghouse in New York City.

In addition to the strike force, non-profit communitygroups participating in the project funded by theBurden Foundation grant are the People's Firehouseand Los Sures in Williamsburg, and the Fifth AvenueCommittee and Community Board No.6, all in Brooklyn.

The People's Firehouse Inc. in Brooklyn has

13

announced approval of a $47,400 grant from the federalagency ACTION to train and educate community residents to improve fire-protection and prevent arson.

The People's Firehouse is best known for its successful three-year battle with the city for the testoration offire service in the Northside community. 0

RENEWED J-51 LAW

EXTENDS TAX BENEFITThe City Council voted o v e r w h e l m i n ~ l yOctober 31 in

favor of the extension from 12 to 32 years of Section J-51 of the city's administrative code, renewing legislationthat in 1979 alone will result in rewarding owners whorehabilitate their multi-unit housing with $74.8 millionin tax exemptions and abatements.

Twenty-nine Council members voted in favor of the J-51 extension which provides for moderate rehabilitationof housing with tenants in residency. Seven wereopposed, an d three abstained.

Council critics of the legislation offered nine amend

ments that included such provisions as relocationbenefits for tenants of Single Room Occupancy (SRO)hotels who are forced to move during the renovationperiod, annual certification by owners of repairs madeto the buildings, anti-harassment guarantees fortenants, relocation benefits for businesses with 30 ormore employees, an d a December 31, 1981, deadline forconversions of SRO's under the J-51 program. All nineamendments were defeated.

According to James Meyer, aide to CouncilmanStanley E. Michels (D-Man.), several of the amendmentvotes produced as many as 19 supporters, two short ofthe number needed to pass the legislation.

Voting against the J-51 extension were: MaryT. Codd(D-L, S.L), Ruth Messinger (D-Man.), Carol Greitzer(D-Man.), Antonio G. Olivieri (D-Man.), Jane B.Trichter (D-L, Man.), Henry J. Stern (L-Man.), andMichels (D-Man.).

Those abstaining were Miriam Friedlander (D-L,Man.), Leon Katz (D-Bklyn.), and Robert S. Steingut(D-Bklyn.). 0

REHABILITATION FINISHED

Tenants, construction workers an d communitysponsors celebrated the opening of 153 Manhattan Ave.on Nov. 2, one of the first buildings in New York Cityto witness complete rehabilitation under the Community Management program.

Low and moderate income families were expected tobegin moving into the 21 two and three-bedroom apartments almost immediately. The gut rehabilitation tookten months and cost $17,000 per unit.

The work was done by the Manhattan Valley Development Corp. with federal Community Developmentfunds provided by HPD. 0

CITY LIMITS I Novemb er 1979


14/24

PROSPECTUS FOR LOW INCOME CO-OPSCOSTS MORE THAN THE BUILDINGS

by Bernard Cohen

In 1976, Barbara Pacheco and 15 other families paid$850 each as their initial investment in a low-incomecooperative at 931-933 Columbus Avenue in Manhattan. The two buildings had just been rehabilitated andthe families, most of them poor and receiving a federalrent subsidy, were anxious to assume the responsibilityand benefits of cooperative ownership .

More than three years later, the 16 families are sti11living as rental tenants. Their achievement of legalcooperative status has been frustrated by a state law thatis designed to protect them, but instead has made itfinancially impossible for them to proceed. "I don't feelI own this building. I don't think there is anyone in thebuilding who does," said Pacheco . "There isn't thementality that what you are paying represents the upkeep of your property. It's rent! It's sti11 the typicaltenant-landlord relationship."

Simply stated, the issue is the prohibitive cost of disclosure . Under state law, prospective buyers of a cooperative must be given sufficient information about thecondition of the building and the cost of operating it tomake an informed decision on the merits of the investment and to be protected from fraud. The law requires adocument, call a prospectus or offering plan, that isseveral inches thick with information and can easily cost

tens of thousands of dollars after legal, engineering andaccounting fees are added up. For the wealthy businessman who can pay $200,000 for a co-op apartment, thepassed-along cost of the prospectus is an acceptableaddition to the already hefty price tag. For a lowincome family paying $250 for an apartment, the costfor what is essentially the same document is way out ofline and the value questionable, at least in the minds ofsome.

John Falk, a former legal services lawyer who hasprepared "100-plus page offering plans" for abouteight low-income cooperatives, said he doubted theirusefulness. "It 's overkill for everyone, but for poorpeople it's double overkill because they are overwhelmed by the huge document they receive and do nothave individual attorneys to help them evaluate it ," hesaid.

The problem has been simmering for a long time, butit reached the boiling point in the past several monthsbecause the city is on the threshhold of what it hopeswill be a volume program of se\ling buildings to lowincome tenants who have been managing the properties.The sales cannot take place until the legal and financial


obstacles are removed."There are a number of buildings that are ready to

buy today that we are not selling today," said AssistantHousing Commissioner Philip St. Georges. " I t wouldbe fair to say that we are stalled, but it is probablybecause we want to be. "

Interviews with tenant advocates and city and stategovernment lawyers and housing officials producedabsolute agreement that the current disclosure systemdoes not make sense for low-income families. The disagreement lies in proposed alternatives, with one grouppursuing ways to make disclosure less costly and theother group arguing that there is no reason for substantial state regulation of low income cooperatives.

In a traditional housing cooperative, a corporationformed under the New York General Business Lawowns the land and the building as a whole. Individualownership is in the form of shares of stock in thecorporation. The stock gives the tenant-owner a voice incorporate affairs and the right to reside in the buildingas long as certain conditions are met. Shareholdersenjoy tax deduction benefits not available to renters.And co-ops are exempt from rent control and rentstabilization laws.

Cooperatives are regulated by the New York State

Attorney General through the Martin Act , or "BlueSkies" laws. The prospectus must be approved by theattorney general's office before the sale can go through.

The proposed prospectus for 931-933 ColumbusAvenue contains 35 separate documents. They include aphysical description of the buildings and their majorsystems; a description of the neighborhood; a budgetand anticipated carrying charges for the first year ofoperation; a history of the buildings; a lawyer's letter ofadequacy stating that the cost projections are reasonable; a legal opinion on the availability of tax deductionsfor the cooperators; a description of the structure anddecision-making process of the cooperative corporation, the conditions of residence; relevant correspondence with the city's housing agency; a managementagreement and applicability of the Section 8 rentsubsidy, to name only some.

Relatively few low-income groups have gone the routeof the Martin Act cooperative because of the astronomical cost. On the one hand, the city has agreed to sellbuildings in low-income neighborhoods for $250 perapartment, or $2,500 for a to-unit building. On theother hand, the cost of an offering plan for such build-


15/24

ings might easily be $10,000, according to Falk an dother lawyers who have prepared them without charge.

Creation of standard disclosure forms and wider useof para-legal aides would undoubtedly bring down thecost but there is disagreement on how much.

Robert Armstrong, who compiled the prospectus for931-933 Columbus Avenue, estimated that as many as22 of the 35 documents in the offering plan could beboiler-plated.

A sizable number of homesteading groups haveadopted a different corporate form of ownership thathas so far steered them around the attorney general'soffice but has left them, by their own admission, in anuncertain legal position.

City housing officials and the state a ttorney general'soffice, which have been trying to iron out the problemsfor several months, reported in late October that theywere close to an agreement on a simplified disclosureprocess under which the city would provide much of thephysical and financial information .

"W e have indicated our minimum requirements an dassisted the city in providing for some kind of truncatedprocedure for co-oping city-owned propert ies," saidHarold Lubell, State assistant attorney general in chargeof the Bureau of Real Estate Financing. "W e don'twant to impose the same obligations we would withconversion of a middle or upper income or luxurybuilding," he said, adding, however, that "W e have aduty to implement the laws of New York State that aredesigned to protect the poor as well as the rich."

For city-owned buildings that have been managed bythe tenants (under the year-old Tenant Interim Leaseprogram) and are ready to be sold, the state will notrequire the usual outside, independent engineering an d

accounting reports, bu t will accept informat ion alreadyavailable to the city, Lubell said. In most cases, the datawill be considerably less detailed than what is normallyexpected of an offering plan . He said the state willrequire consent from more than 35 per cent of thetenants-the minimum set by state law governingcooperative conversions.

The city's Department of Housing Preservation andDevelopment is now in the process of devising forms forreporting the disclosure informat ion. They will be testedin a pilot project of 25 buildings. "W e envision HP Ddoing the actual work" on preparing the offering plans,said Rita Dattola, a lawyer with the housing agency.

One reported hangup is whether the cooperatives willbe formed as standard, for-profit business corporations- a s favored by the attorney general-or as non-profitcorporations, the more traditional structure for lowincome groups.

In addition, city housing sources said the state wasdemanding that HPD "guarantee" the functions of themajor systems in the buildings it sells. Lubell denies thatis the case.

How this new set of procedures will benefit low-

15

income tenants who want to buy their buildings fromprivate owners is unclear. Lubell said his office wouldcooperate with tenant-sponsored offering plans.

A n entirely different viewpoint is advanced by otherswho oppose this amount of government regulation andassert that the circumstances that the Martin Act wasdesigned to cover simply do not exist for low incomecooperative conversions.

"The Martin Act is a securities statute," said

Lawrence McGaughey, a lawyer who has representednumerous community housing organizations and tenantgroups. According to McGaughey, the law is intendedto oversee a process in which a private owner is selling tounknowing buyers, huge profits are being made, substantial sums are being borrowed and shares of stock arebeing issued.

None of this is the case with low income cooperatives,McGaughey maintains. In most instances, tenants haveeither been living in the building for a long time or, inthe case of sweat equity homesteading, have performedthe rehabilitation themselves, so they are well acquainted with its physical condition. Under city policy, thebuyers are only paying $250 per unit, so there is noheavy borrowing or huge profit-taking. Ownership canbe vested in a non-prof it corporation with the tenants as"members" and the sale of individual apartmentsgoverned by the rules of the marketplace, he says.

"The key words are 'protection racket, ' ' ' McGaughey said, referring to the rigorous disclosurerequirements of the law, an d "bank tribute," referringto the sizable debt service on bank loans for traditionalco-ops, but which is non-existent for most low-incomeco-ops.

There are, in fact, many buildings in New York City

that are owned by non-Martin Act corporations. Theyare known formally as Article XI non-profit HousingDevelopment Fund CorP9rations an d informally asconsumer cooperatives. Membership is restricted to thetenants. In most cases, no equity paper (shares) has beenissued. Banks and government agencies have mademortgage loans to these consumer co-ops without firstrequiring attorney general approval of them. As apractical matter, there is no economic incentive toadhere to the Martin Act because the key benefit ofincome tax deductions is of no use to poor people.

McGaughey and the Urban Homesteading AssistanceBoard, which provides technical assistance to grassroots housing groups, believe that consumer cooperatives should be recognized as an available option,although they acknowledge that clarification of severallegal issues, including the defini tion of ownership andestablishment of rent-setting ability, is needed.

"This does not mean the attorney general has nointerest," McGaughey said, noting that the state hasapproval authority over Article XI corporations .Instead, he called for very simple disclosure statementsthat would involve neither the cost of a prospectus nor


CITY LIMITS I Novem ber 1979


16/24

GLIEDMAN - A FIRST IMPRESSIONby Brian Sullivan

Nathan Leventhal's recent departure from the position of commissioner of HPD to become a deputymayor creates what is commonly known as a "hard act

to follow."Leventhal, an energetic housing lawyer who came toHP D from the private sector after earlier experience asrent commissioner within HDA, was cast in the "brightyoung man" mold of the Lindsay era. His administration of HP D was high profile, take charge, managementby objective.

Anthony Gliedman, author of a recent study criticalof the city's "revolving door" auction policy andformer commissioner of the Department of Ports andTerminals, seems determined to put his own brand onHPD, not only stylistically but also substantively. LikeLeventhal, he greets guests in his shirt sleeves, but he

speaks less emphatically and listens more intently.Internally, he seems to perceive a need to stabilize HP Dafter Leventhal's much needed shake-up, to steer thebureaucracy rather than wrench it into a new course. Itmay be too early in his tenure to offer a judgment (he'shad the office just over a month and no major policyissues have been confronted yet), but there are someindications of the direction in which he intends to takethe city's major housing agency.

The self-help approach to housing, specifically withinthe In Rem programs, will probably enjoy a high priority under Gliedman. He has seen firsthand what tenant

cooperatives can accomplish and is acutely conscious ofthe limitations of HPD in the direct management of itsvast In Rem stock. At the same time, he emphasizes theneed for more moderate rehabs to stretch the city'slimited amount of Community Development money.Clearly this poses a problem for tenants in city-ownedbuildings which need major amounts of rehab work toassure their long-term usefulness as housing.

Similarly, he is committed, as is the entire Kochadministration, to creating a mechanism for highvolume "take-out" or sale of In Rems to non-profittenant organizations. But he seems to have a greaterunderstanding of the problem of displacement.

HP D is attempting to sell buildings to tenants at suchprices or with defects so costly to repair as to make itimpossible for low income people to afford to own thebuildings in which they now live . The issue of maintaining HPD's policy of selling In Rem housing to lowincome tenant groups at $250 per apartment may be thefirst serious test of Gliedman's commitment to cooperative home ownership for low income people in their ownneighborhoods.

Rather than defend the blatantly political reasoning


behind HPD's attempt to renege on its uniform salespolicy in Clinton, Gliedman speaks with some empathyof the problem this may pose for the affected tenants.

He is actively looking for ways to avoid imposing thefull "market price" on tenants while assuring someincreased income to the city. Whether he can pull thissort of balancing act of f remains to be seen. In themeantime, every organized tenant group in the city iswatching and waiting with more than passing interest.

The idea of creating a uniform sales price for all InRem housing in low and moderate income areas (asdefined by HUD) was greeted by housing activists andHP D bureaucrats alike as a long overdue solution to theproblem of individually negotiating every transfer ofownership to a tenant cooperative from HPD. Theexisting mechanism,ironically named the "Direct SalesProgram," was universally recognized as a failure.After reviewing a great deal of research by HPD staffon the selling prices achieved at auctions, the Board ofEstimate approvea the uniform sales price of $250 perunit for In Rem housing in all census tracts eligible forCD funds in 1978. Thus, the way was open for a relatively simple and rapid program of sales to tenantgroups as Article XI non-profit housing corporations.

Earlier this year, however, HPD decided that it mightlook bad if low income tenants were able to buy valuable property in real estate "market areas" at such lowprices. The Clinton neighborhood on the mid-West Side

has become the testing ground for one of the most controversial policy questions facing New York City. Willthe Koch administration have the commitment toeconomic integration in our neighborhoods to stick tothe $250 sales price for low income tenants or will it takethe money and run, leaving low income tenants to bedisplaced by the highest bidder at auction?

There are many problems facing Gliedman as he takesover the reigns at H P D - a n embarrassing inability tospend 312 loan money, a growing empire of unwantedIn Rem property, a self-destructing demolition program, etc.

But, none of these combines such crucial elements of

social, political, and fiscal policy as does the In Remsales question.

The answer Gliedman comes up with will have animpact far beyond Clinton. I t may well in the long rundetermine the ability of low income people to be securein their own homes in neighborhoods throughout thecity. 0

Brian Sullivan is a senior planner at the Pratt InstituteCenter fo r Community and Environmental Develop-ment.


17/24

BRONX RESIDENTS SAY NINTH FED. REDLINESThe Ninth Federal Savings and Loan Association in

the Bronx had some unexpected company on October20. About 50 residents of Castle Hill, Soundview andBronx River sections picketed a branch at 1580 Westchester Avenue to complain that their neighborhoodsare being red lined and to demand that the bank sign anaffirmative action agreement to offer more local loansat affordable terms. A smaller contingent went inside thebank to press their request to attend Ninth Federal'sannual shareholders meeting in January.

The demonstration was organized by Bank on the

Bronx, a grass-roots anti-redlining coalition that wasestablished by the New York Public Interest ResearchGroup (NYPIRG).

According to data compiled by BOB, Ninth Federalhad $62 million in deposits from the Bronx in 1978, andfrom 1976 to 1978 the bank originated only one mortgage in Castle Hill and only five mortgages, totaling$141,500 in the entire Bronx. At the same time, according to the data, the bank originated 25 loans totaling$11.7 million outside the Bronx.

"This is the worst record of all the banks in theBronx, and God knows all of them have poor records,"said Joyce Beverly, chairperson of Bank on the Bronx.The group charges that Ninth Federal is in violation offederal law (the Community Reinvestment Act), whichrequires banks to meet the credit needs of their localcommunities.

The affirmative action agreement proposed by BOBwould require Ninth Federal to provide at least $325,000to meet local demand for mortgage and home improvement loans; establish a minimum 20 per cent downpayment with up to 30 years to re-pay the loan; offer loansfor multiple-family dwellings; enforce the "good

17

repair" mortgage clause; advertise the availability ofcredit in local newspapers; advise reputable licensed realestate brokers of Ninth Federal's programs and provideBOB with statistical loan information on a quarterlybasis.

James Bottari, president of the bank, has refused tosign the proposed agreement, according to BOB.

Meanwhile, a new study released by NYPIRG charges"almost total" geographic discrimination in mortgagelending by savings banks, savings and loan associationsand commercial banks in Central Harlem. Using 1977

records , the study said the four banking institutionswith branches in Central Harlem had combined depositsof $197 million but held only $8.8 million in localmortgages an d home improvement loans and had originated only seven loans in the area for a total of$87,000. The branches were those of the Bowery andEmpire Savings Banks, Carver Federal Savings andLoan Association and the New York Bank for Savings.No mortgage loans and only seven short-term homeimprovement loans totaling $27,840 were made by thearea's four commercial banks in 1977, according to thestudy.

A recent federal investigation of mortgage practices bythe Washington Federal Savings an d Loan Associationshows that despite savings deposits totalling $172 million from local residents, the bank did not make a singleresidential loan in Washington Heights-Inwood innorthern Manhattan from January 1978 to March,1979.

The investigation by the Federal Home Loan BankBoard attributed the total lack of mortgage activity toan "unduly restrictive" 50 per cent downpaymentpolicy. 0



18/24

TEACHERS BAnLE COMMUNITIESFOR CONTROL OF CETA IV FUNDS

by Susan Baldwin

A newly formed national, community-based coalition ismounting a fight to save some $7 billion in CET A(Comprehensive Employment and Training Act) fundsfor youth employment and training from being assignedto local public school systems and the educational establishment around the country for after-school programsthat exclude community partic ipation.

The group, a coalition of 22 organizations known asthe National Alliance of Community-Based Organizations, was formed in October to protect CET A funding,primarily under CETA Title IV, for neighborhoodbased programs that encourage truant students to reenter the school system or receive alternative educationthat will lead to jo b training and employment.

According to Betty Terrell, executive director of theAssociation of Neighborhood Housing Developers andone of the organizers of the coalition, the AmericanFederation of Teachers has been lobbying to secure thismoney funded under CETA's Youth Employment andDemonstration Projects Act for its own and other educational organizations' use (e.g. National EducationAssociation, Parent-Teachers Association, an dNational School Boards) on the local level.

"W e heard that Albert Shanker [president of the AFTand its New York Chapter, the UFT] was trying to getthis money for his union and take it away from ourcommunity programs," said Terrell. "What they'resaying is if you give the teachers a little more money,they'll be able to take care of the problems they have inthe school system. They don't reach the kids in theschools now, so what makes them think they will reachthe drop-out students through this youth trainingprogram." She also charged that the AFT had agreed tosupport President Carter in his re-election efforts as atrade-off for White House support of this re-assignmentof youth training and employment funds.

Reached at the UFT's New York office, Susan Glass,a spokeswoman for Shanker, said, "O f course Mr.Shanker favors this [CETA IV funds] going to the local

school systems. There have been many budget cuts, andthis money could close the gap . . . There may be someCBOs that are doing a good job, but there are many thatare fly-by-night operations." She said CET A fundingcould be used in New York City to close the expected$45 million budget gap and keep some 3,000 teachersfrom being laid of f in February.

According to Jerry Morris, an AFT official inWashington, the Department of Labor had found theCBOs to be "unaccountable" in the past, that "there isno information about them" . . . "no level of quality, no


measures" . . . and that "these programs are shortchanging the youth. They may get a jo b for six months,but there is no education and training." He also suggested that CBOs felt threatened at losing the fundingbecause it was being used to support "their politicalfiefdoms . . their political base . . . their political patronage. "

Six months ago, President Carter commissioned VicePresident Walter Mondale to ' form a task force onyouth employment that was mandated to look into theproblems of escalating youth unemployment andapparent nonexistent education and training in theschools. This organization, the Education Task Forceon Youth Policy, is to file a final report of its findings

with the White House early in January, in time for thePresident's submission January 15 of proposed legislation and the corresponding budget for domestic projectsfor the upcoming year.

This task force will also be responsible for filing datathat will influence a proposed major rewriting of youthemployment and training legislation in 1981.

"The groups in New York and elsewhere around thecountry are justified in their concern about thisprogram," said Othello Poulard, an associate at theWashington-based Center for Community Change, anational technical assistance organization that providesaid to non-profit community groups. "From what wehear, Vice President Mondale's task force is going torecommend that the teaching establishment get thelion's share of this money. We also understand that thetask force will recommend that increased prerogativesan d sign-off rights should be given to the public schoolsystems in the new contrac t. "

In a position paper prepared at a recent Baltimoreconference, the task force went on record supportingsign-off privileges for local "education agencies" and"staff and other standards equivalent to those of thepublic schools" in programs involving training runoutside the school system.

Following the conference, the organizing committeethat led to the formation of the national CBO allianceissued a statement to the task force supporting thepresident's national policy of "new partnerships," butemphasizing that it was "adamant that citizens' groupsbe included as full an d equal partners in the policyformulation process" and that "citizens' groups whichinclude families and you th . . . must have an active rolein the setting up of national and local priorities withrespect to the substance, methodology, resource allocation of programs."


19/24

At that time community representatives attending theconference also agreed to collaborate with and supportlocal school boards an d districts in efforts to improvequality education in the schools, but opposed givinglocal school boards signing-off power on any of theCET A funding dealing with educational training . Inaddition, they asked that the 1977 CET A regulationsrecognizing the CBOs as "critical partners" in formingpolicy and providing programs for youth be upheld .

According to Terrell, New York City's CBO contingent is in the preliminary stages of meeting and planningfuture negotiating strategy and does not intend to "giveup to Washington without a fight." It also expects tohave a meeting with White House officials and othermembers of the national alliance in November to pushfor community control of the CET A IV contract.

"A s far as I know, we have a good program andWashington thinks so too,"said William Sussman, ofthe Union Settlement House in East Harlem, which hasa $100,000 CETA IV contract to train 22 young men inbuilding maintenance and repairs skills.

"W e had the program last year and filed our report,"he added. "They made it clear to us then that we wouldbe refunded this year, but so far we haven't been."

Union Settlement's after-school program, whichrequires high school-aged participants to attend vocational school during the day and work four hours at theminimum wage scale ($2.90 an hour), five days a week,expected to be refunded by September 11. City andWashington officials recently promised funding for thegroup by mid-December at the earliest.

"Manhattan Vocational School was a disaster dealingwith these youth," Sussman explained, adding, "I guessit was for this reason-their performance-that the

government liked what we were proposing and pickedus. Now we don't know whether we will be refunded,but the city's Department of Employment says we will.Who knows? But, I think it's a terrible mistake to takethe community out of this youth training program,because it should control it. I t understands what'shappening. The Board of Education is up in Mars."

Poulard is optimistic about the alliance's chances ofconvincing the White House of the importance ofincluding the CBOs in the new funding.

"W e talked to the Department of Labor and sensitized them on the CET A VI contract, and now this yearone-third of all the participants in Title VI are from the

CBOs. I t paid of f here . . . We hope it will work withCET A IV," he concluded.Meanwhile, the city's Board of Estimate October 26

renewed ANHD's non-profit CE T A VI contract in theamount of $3,434,585, effective November 1, 1979, toOctober 31, 1981. Calculated on an I8-month basis, italso includes a six-month optional extension period. I twill provide 180 jobs to eligible city residents for workin the areas of housing preservation, fire prevention,community development, education, an d culturalactivities. 0

19

312 LOANS continued

rather than weaknesses."This 312 program has been used with great success

throughout the country, and we hope to do the samething here, but we can't wait for the city to perform,"said Steve Lampert, one of the implementers of thisSouth Bronx plan.

Representatives from Logue's office are planningvisits to cities such as Boston where the 312 loan hasbeen used successfully, in an effort to devise a streamlined program for this area of the Bronx. They hope tobe funded directly by Washington to rehabilitate fullblocks in this section of the Bronx without goingthrough HPD's scrutiny first.

"They may be trying to get everything together downthere at HPD," Lampert concluded, "but we don'thave time to wait. We have identified all the owneroccupied buildings in the two-block area of our planwhere we want to help the homeowners, and we can'tafford t

City Limits Magazine, November 1979 Issue

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