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July 11, 2009 @ 4:58 pm

Politics and Real Estate

/ CC BY-SA 2.0

Someone Should Develop A Walking Tour Around The City and Tell the Stories Behind the Buildings—A Good Way to Explain New York Politics to the Uninitiated.

Political scientists, urban theorists, and other academics will take exception to the idea that mere anecdotes offer sufficient insight to be useful. I was curious so I read some of this literature. Some theories are brilliantly conceived and elaborated, some merely impenetrable. But for those untrained in the language of hyper and bounded pluralism, elitism and neo-elitism, of instrumental Marxists contending with structural Marxists, of thought worlds populated by reputationalists, regime theorists, pareto-optimizers, and so on, reading these texts can be daunting.

I have no overarching theory of urban politics. No manifestos or isms to advance. I know I tread on dangerous ground in saying that some academics strain too hard at their methodological leashes. The theories often outran the evidence, or so it seemed to me. That isn’t surprising.  Interviews, case histories, multivariate analysis, economic and demographic studies, and so forth, can ease the bumpy road to tenure, but finding out why things happen is hard. Transactions are hidden. Motives are ambiguous. Unless the marked bills are discovered in the freezer, government decisions are always couched in public interest terms.

What politician will tell a researcher that s/he was just out to make a bundle? To get to the next political level? Or even to leave an ego-satisfying legacy? What developer, unless under penalty of perjury, will describe how s/he funneled money to a politician in exchange for a favorable decision?  What regulator will admit to looking for a job with a developer when making a decision?  Investigative reporters unearth scandals from time to time, but telling them is fraught with legal obstacles, and pulling the patterns together to establish the system’s true nature isn’t easy for someone who has to turn in 1500 words a day. I found one academic work particularly curious.

Governing New York City: Politics in the Metropolis is regarded as a classic work in the school of thought known as pluralism. Professors Sayre and Kaufman drilled deeply down into New York’s political and governmental machinery. Their exhaustive research led them to conclude: “No single ruling elite dominates the political and governmental system of New York City.”   They hailed the system’s “…democratic virtues: its qualities of openness, its commitments to bargaining and accommodation among participants, its receptivity to new participants, its opportunities for the exercise of leadership by an unmatched variety and number of the city’s residents new and old.”

That was the political world they thought they had found in 1959 when Robert Wagner Jr. was mayor. Sayre and Kaufman had a benign view of money’s role:

Logic would seem to dictate the conclusion that generous donors, given the nature of our economic system, must enjoy great material returns on their investments. There is little empirical evidence to support or refute this proposition, particularly as it applies to those who contribute to local party units. It is by no means clear that most contributors have well-formed political objectives in giving to the parties.

Was that really the world in 1959? Has the world changed that much? The answer to both questions is no.

Real estate is the primary source of the City’s revenues and the basis of its social order. Politics is about who gets what and how. Real estate and politics are New York’s two hometown businesses. With the exception of Bloomberg whose plans for New York City dovetail nicely with those of the big landlords and developers, and who buys political parties, politicians, and consultants wholesale, big real estate pays the politicians far more than anyone else pays them. That’s how they finance their campaigns and often how they make much more money than their public salaries. With rare exceptions, meaningful access to policymaking and politics is granted only to those who earn their livings at it or those who can pay them. Its been that way for a very long time. If you’ve lived in New York for as long as I have, you know it’s only gotten worse.

Donald Trump, forced to testify under oath, once conceded that he got around the $5,000 corporate contribution and $50,000 individual limits then in place by spreading his contributions, more than $150,000 for the 1985 municipal elections alone, among eighteen subsidiary companies.

Trump generally got what he paid for.  One only has to walk down 42nd St. to the Grand Hyatt Hotel and look up at the restaurant that juts over the street. Stanley Friedman, deputy mayor in the Beame administration and later a Koch ally, had arranged for the Trumpster to receive the city’s first tax abatement for a commercial property, the renovation of the Commodore Hotel. The abatement was worth $160 million over 42 years. Trump’s financing for this, his first major real estate deal, was contingent on it. But the city had no legal authority to grant it. So the Urban Development Corporation took title for $1 and leased it back to Trump for 99 years for a modest rental. Trump paid the city $200,000 a year in lieu of taxes. Robert Tisch, another mega developer, characterized the payment as the “equivalent to the tax bill for a motel on Eighth Avenue.”

Friedman also arranged for the special permit so that Trump could build the restaurant. Friedman then left his government post to join the law firm of the notorious lawyer-fixer, Roy Cohn. Trump was a major client of the firm. I tell the story not to single out Trump or Friedman, who later went to jail on an unrelated matter, and not because it’s unique. It’s just how the city works and has always worked.

The fees paid to the lawyers and lobbyists who move the real estate deals through the housing bureaucracy are of course derived from real estate profits, much of it attributable to tax abatements and subsidies.  Bankers provide the up front cash. It’s what the boyz like to think of as a win-win situation. Everybody makes money. The other stakeholders, such as the people who live in the buildings, the communities, and the taxpayers don’t make out nearly as well.  The people who live in the affordable housing are just the instrumentalities by which the money flows through to the intended recipients—the insiders. Think of the word “landlord” and one has the sense of the feudal relationship between the real estate barons and their tenants. But let’s return to the world of Sayre and Kaufmann.

The Robert Wagner Jr. Story

In 1961, New York Mayor Robert Wagner Jr. was running for reelection as the enemy of the Democratic bosses, the same county leaders who had supported him in the past. The leaders, especially Manhattan’s Tammany Hall headed by Carmine DeSapio, had developed too unsavory a reputation for the mayor to be associated with and hope to win a third term. Eleanor Roosevelt and Governor Herbert Lehman were leading a reform movement and were on the warpath. It was pre-television politics and field operations were what counted. The bosses had always supplied the troops. Where would Wagner get the money to replace them?

Enter the real estate operators and their lobbyists. Wagner hosted a luncheon at a local restaurant. City Planning Commissioner Abraham (“Bunny”) Lindenbaum invited 43 real estate developers. Lindenbaum distributed blank checks to each of the luncheon “guests.” The checks were made out to Wagner’s campaign committee. Only the amounts and signature lines were blank. One by one, he asked each of the guests to say how much they were filling them in for. Donald Trump’s father, Fred, was at the luncheon. He had an application pending to build a Mitchell-Lama development in Coney Island. Not only was Lindenbaum the City Planning Commissioner, he was also Trump’s lawyer. Wagner could block or advance the project along with the lucrative tax abatements that came with it. Similar conflicts of interest hovered over the luncheon. The real estate crowd gave generously.  They always do and always have—now more than ever.

Wagner was not regarded as a corrupt politician. Nor was Ed Koch, who also took very large amounts of real estate money. Unlike Wagner, however, he didn’t abandon the county leaders of his day until they were indicted or committed suicide. But the times were different and so was Koch whose base was the Village Independent Democrats. (He had approached DeSapio for an endorsement early in his career, but was turned down.) He needed the outer borough ethnics to tone shape his public persona and make himself more palatable to folks living outside of the narrow confines of Manhattan below 96th St.

Much more real estate money is flowing into politics these days compared to Wagner’s era. It’s due in part to the vast profits and the increased value of favorable government action. Even more important is the shift from labor- to capital-intensive politics, from county leaders and their brand of retail politics to the current era of media consultants and television campaigns– wholesale politics. Candidates need much more money to hold onto their seats.

Increasingly distant from their constituents, incumbents are closer than ever to the real estate lobby. Michael Bloomberg doesn’t need any of them. If he gets his way, we’ll have another system entirely, a model that can be replicated in states and cities around the country.  This is an important election.

  1. Governing New York City: Politics in the Metropolis, W.W. Norton. 1959, paperback edition 1965.Wallace S. Sayre, Columbia University professor of public administration and Herbert Kaufman Yale University professor of political science.
  2. See the Trump testimony given to the 1988 New York State Commission on Government Integrity, chaired by Fordham Law School Dean, John D. Feerick. Ethan also testified to his role as a bundler.
  3. The Empire and Ego of Donald Trump, Marylin Bender, New York Times, Aug 7, 1983
  4. Lefkowitz Calls Wagner Fete the Ultimate in Immorality, New York Times, October 1, 1961
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