In 2000, I became the tenant president of Independence Plaza, a 3,500-person rental development in Lower Manhattan. Completed in 1974, its three 39-story towers and 48 low-rise buildings overlook the Hudson River. The complex was financed by the federal, state, and city governments under the Mitchell-Lama program, arguably the nation’s most successful affordable housing program. Its residents — those who remain after it was privatized under Bloomberg — are African-American, Caucasian, Hispanic, Asian-American — people of every race, class and ethnicity.

Many lived at Independence Plaza from the time it was first occupied. Most are poor or moderate-income families who moved in because of the cheap rents. The neighborhood didn’t even have a supermarket or public school in those days. A few tenants whose incomes have risen beyond the limits that initially qualified them for an apartment paid surcharges of as much as 50%, still low when compared to the local real estate market.

My wife and I moved to Independence Plaza in the eighties, shortly before the neighborhood became widely known as TriBeCa (the Triangle Below Canal Street). It would soon be one of the hottest real estate markets in the country. Sadly, we’ve watched our neighbors, who raised their families here and whose kids attended the local public schools, replaced mostly by young, white professionals. Often the newcomers double up to share the $5,500 a month rent. It’s easy to tell them apart from the old-timers.

Integrated housing and public schools are rare and precious things in New York whose housing and public school systems are among the most segregated in the nation. Destroying them is beyond stupid. Michael Bloomberg isn’t stupid. Nor are the other politicians who pursue the same policies of privatization and deregulation. They created and then dismantled the Mitchell-Lama program, some for personal gain, others for ideological reasons.

What happened to us and many other moderate-income tenants in New York, and why it happened, explains much about how New York City works. The same dynamics almost certainly apply to other cities. But as they say in the Verizon ads for Fios, this is New York, this is big.

The Evictions Begin

About ten years ago, a blizzard of bogus eviction notices rained down on the tenants, a familiar tactic in New York’s landlord-tenant wars: throw something against the wall and see what sticks. Tenants don’t have the resources to fight well-financed, politically-wired landlords. Then elevators began to go out of service for months at a time, torn and filthy hallway carpeting was rarely cleaned, let alone replaced.

The union doormen and security personnel who had worked at Independence Plaza for years were fired, replaced by (fewer) non-union, hourly workers. Thugs sold drugs on the staircases between floors and staged pit bull fights in the courtyards. The new head of security was scarier than the thugs. He had been dismissed from the NYPD for repeated instances of brutality. An air of intimidation hung over the complex. Tenants petitioned Rudy Giuliani’s housing commissioner to remove the management. Instead, she renewed the $750,000 annual management contract held by the landlord’s nephew.

Independence Plaza became known as “The Projects.” The surrounding neighborhood was now filled with high-end restaurants and multimillion dollar lofts. My wife and I began to think about moving. It had become uncomfortable, even embarrassing to live at Independence Plaza. Then we discovered that the owner wanted folks to move out.

We hadn’t known about a 1960 amendment to the Mitchell-Lama law, which gave owners the right to exit the program after twenty years in it. The owners — so-called limited profit entities — were not required to repay the tens of millions of dollars they had received in property tax abatements and other benefits they had received over the years. They could simply refinance their mortgages and exit. The twenty years had run for all Mitchell-Lamas throughout the city.

Suddenly, some 150,000 units of affordable housing was at risk. The owners had depreciated their cost basis down to zero. With their tax advantages exhausted, Mitchell-Lama developments were a fat target for landlords who could exit the program and double or triple the rents.

We were shocked. The right to exit the program hadn’t been included in our leases, not even in the fine print. You couldn’t sell a used car that way. Soon we began to read news accounts of Mitchell-Lama owners who were doing just that: leaving the program and doubling and tripling rents virtually overnight. When we warned tenants of the danger and urged them to join the tenant organization, the owner’s nephew published a letter in the local paper denying any such plans. He claimed I was just scaring tenants to raise money.

A New Mayor Arrives

In the middle of all this, September 11 happened. Rudy Giuliani tried to postpone the upcoming mayoral election. Like Bloomberg today, he claimed to be — perhaps thought of himself as — the indispensable man. But the politics weren’t aligned correctly and he couldn’t budge the Democrats in the state legislature. The Republicans, some of whom he had tried to indict as a federal prosecutor, (among them Alfonse D’Amato, the dominant figure in the Republican Party) didn’t much care for him either.

Now we had a new mayor, a seemingly moderate Democrat who had changed political parties for pragmatic reasons. We petitioned the housing agency to do something about the buyouts and the neglect and deterioration of Independence Plaza. Despite a New York City Comptroller’s audit that excoriated the housing agency for lax financial and physical oversight, the same housing officials remained in place. They ignored our complaints. The new mayor had quietly ratified his predecessor’s policies. “Quietly” is the operative word: no New York mayor is ever on record as opposed to tenant rights.

One day, I came home to find a message on my answering machine: “This is Laurence Gluck. I’m under contract to buy Independence Plaza. We should talk. Please call me to set up a meeting.” Many tenants hadn’t believed that “the powers that be” would stand aside and allow us to be evicted. “Haven’t all the politicians assured us that they were with us?” That it had already happened in other Mitchell-Lama developments didn’t matter; it wouldn’t happen here.

Sometimes I felt as though I was trying to deprogram the victims of a cult; the tenants liked their local politicians, couldn’t see through their meaningless assurances, and even resented the people who questioned their sincerity — me mostly. The meeting with Gluck was the “I told you so” moment. I took no pleasure in it — well, maybe a little.

Meeting Laurence Gluck

I e-mailed the tenant board and arranged for several of us to meet in Laurence Gluck’s offices in Lower Manhattan on September 12, 2002. He was waiting for us. Two other men were with him, a real estate broker who had arranged the deal and an assistant who never said anything. He just glared at me throughout the meeting. I never did get his name.

Gluck shook our hands and ushered us into seats around a conference table. “Please call me Larry,” he said expansively. A short, thin, balding man with a neat little mustache, he wasn’t at all combative. Bland and benign. He didn’t seem like someone who had thrived in the crocodile-infested New York real estate swamp. Only a furtive darting of his eyes suggested otherwise. Watching him, I had the impression that this was a man who had been looking for his opportunities at a very early age. He had found a good one in us.

He began picking away at a large bowl of fruit, wiping his chin with a paper napkin. “Well, as I said on the phone, I have a contract to buy Independence Plaza. I’ve filed all the necessary papers, and I expect to take title very soon. I wanted to tell you about my plans. I’m taking the development out of the Mitchell-Lama program and eventually going to market rents. I anticipate getting the government approvals without much difficulty.” All low-key and very sunny.

He looked around the room. No reaction. “Of course, I realize how stressful this is to the tenants. I grew up in the Bronx. My family didn’t have any money. I don’t have to go to market rents immediately. Government vouchers will protect most tenants. This will be a smooth transition. We can do it by attrition. I’m going to invest a lot of money in capital improvements.”

Still no reaction.

Gluck looked across the table, “Some fruit? A coke?”

“No thanks.”

“Do you have any questions?”

“We’re just here to listen,” I said.

One of our board members asked, “Can we see the papers?”

“No, those are confidential.”

“How much did you pay?” I asked.

“That’s confidential, too. But I’m sure you can get whatever is on file at HPD.”

The broker, a tall, thin, elderly man, who was wearing the only suit in the room, undertaker black, broke into the awkward silence.

“No need to worry,” he said. You’re really going to like the change of owners and all the improvements Mr. Gluck is planning to make.”

Nobody said anything. This would be a $100,000,000 deal and a big commission was riding on it. He was right about the improvements, though. I was sure Gluck would make them, but how many of us would be around to see them? Nor would we be allowed to see Gluck’s plan for Independence Plaza. But in a rough sort of way, we knew what the numbers were.

Laurence Gluck’s Plan

Independence Plaza had a mortgage of about $57 million. Gluck told reporters that he paid “upwards of $100 million.” Based on 2001 financials, the last documents we had seen, the residential rent roll was $12,488,280. Commercial income accounted for about $3 million, including the parking garage. According to our lawyer, a traditional real estate valuation was ten to twelve times the rent roll. At the time of sale, the property might have been worth between $150 million and $185 million.

If he exited the Mitchell-Lama program and went to market rents, his revenues, not counting the garage and retail stores, would increase by about $30 to $40 million. Independence Plaza’s value would rise to as much as $400 million in a very short time. Neither he nor Harold Cohn, the original owner-builder, had invested their own money or taken any real risks — the supposed rationales for taking profits in a so-called market economy. The taxpayers paid for everything. They are still paying. Only they don’t know it.

Federal Housing Vouchers–the Key to the Deal

Federal, state, and city governments had provided all the initial financing in the form of a $68 million, 1% mortgage, rich tax incentives, and cheap land. Now Gluck would finance the privatization with federally funded housing vouchers. The city would give the vouchers to tenants whose household incomes were less than $60,000 for a family of four, perhaps half the tenants. Without the vouchers, the tenants would certainly lose their homes. From Gluck’s perspective though, the voucher tenants were simply a medium through which federal monies would flow through to him.

A household that qualified for a voucher would receive a lease for TriBeCa market rent based on a Gluck-Bloomberg appraisal, but would only pay the previous Mitchell-Lama rent or 30% of the family’s adjusted gross income, whichever was higher. The vouchers would make up the difference – for as long as Congress made the annual appropriation to fund them.

Bloomberg housing officials said they were confident that the congressional funding would always be there, but neither they nor Gluck would give tenants a legal commitment to back up the assurances. Tenants would live in fear — they still do — that one day the federal government would not renew the funding. In fact, George Bush wanted to do just that, but under political resistance from some members of his own party, he rescinded the plan. In any case, when a voucher recipient dies or moves, the apartment is deregulated and New York loses another unit of integrated, affordable housing.

Absent a change in the law or a contract that protected them, tenants who didn’t qualify for vouchers and couldn’t pay the steep rental increases — everyone else — would be evicted when their leases expired. Gluck assured the frightened tenants he would be “fair,” but he wouldn’t say what he meant by fair or put anything in writing.

Neither he nor anyone in the Bloomberg administration would entertain any alternatives such as rent stabilization or a tenant purchase and conversion to a tenant-owned, limited equity cooperative, the option we sought to advance. Under it, tenants would own their apartments but would not be able to profit on a resale. The affordable housing would be preserved for future generations. Our every effort was blocked by the real estate lobby, the Bloomberg administration and by every state politician and regulator we encountered, save one. But I am getting ahead of the story.

“Don’t worry — Nobody’s getting kicked out.”

Tenant advocates rallying outside City Hall in 2003.

With his government-guaranteed cash flow Gluck would obtain the financing to prepay the mortgage, exit the program, and make desperately needed capital improvements to enable him to charge market rents. He would then refinance the mortgage for what we later learned was approximately $420 million. Accounting rules would allow him to deduct his profits — the $420 million less the cost of acquisition and improvements. The take was easily more than $100 million, a handsome deal even by the standards of New York’s real estate moguls so accustomed to hundred million dollar paydays until the recent collapse.

From the city’s perspective, the vouchers were no-cost items. They were financed by federal dollars, and allowing Gluck to privatize the complex without any sort of rent protections would increase property taxes from about $1.2 million to about $15 to $17 million. Gluck would also receive market rents from the vacant apartments, many of which were held off the market until the exit from the program was completed. The mayor was captured on videotape commenting that “these Mitchell-Lama tenants who are fighting the landlords are just trying to get rich.”

A few days after the encounter with Laurence Gluck, I wrote to the tenants, described what had happened and called for a general tenant meeting. As I hurried along the sidewalk, rushing to the meeting, my head down, thinking about what I was going to say to the hundreds of tenants who would be there, two people were walking very slowly just ahead of me. The man was wearing a brown suit, white shirt, and a bow tie. He was holding his wife’s arm. A strikingly dignified black couple, they looked to be in their eighties. I passed alongside the man. He said, “Hello, Mr. Fabricant.” It took me by surprise. I didn’t know them and hadn’t seen them in the neighborhood. I would have remembered.

I slowed down, said hello and started forward again. The man gently touched my elbow. I slowed down. He said he and his wife had lived at Independence Plaza for many years, and that they were worried about what was going to happen to them.

“We don’t have a lot of money,” he said.

“I don’t know where we’d go,” she said. She leaned forward, looking at me, expecting an answer.

“Don’t worry; nobody’s getting kicked out,” I replied with more confidence than I felt. What else could I say?

“I know you’ve got to get over to the meeting,” he said. “We’ll see you over there.”

They both wished me luck and told me how much confidence they had in me. It was devastating.

Several years earlier I had retired as the president of a graduate school at George Washington University. When I was elected president of the tenant association by default because nobody wanted the job – neither did I — I wisecracked to my wife, “Now you can call me the president of small things.”

Until that encounter with that elderly couple, I really hadn’t thought about how many people were counting on me. They made me realize that whatever else it was, this was no small thing. After our fight with Gluck, I did some research on the Mitchell-Lama program. What I discovered gave me an even better insight into Michael Bloomberg’s worldview and the stranglehold that he and the big real estate operators and their financiers have had on our city for so long.

To be continued.

- Neil Fabricant