The Evolution of Economic Development in the Outer Boroughs

One day in the mid-1980s while I was walking down 42nd Street near 5th Avenue I saw that someone had painted “New York City is a Marxist, Leninist Hell” on a piece of plywood outside a construction site.

I laughed out loud. I had recently arrived here, one of the thousands of young professionals elbowing their way into New York City every year like waves of soldiers storming the Normandy beaches.

What I found in my adopted city was a healthy dose of free market love on the corporate level, but a peculiar bias against free markets among all social classes on the local level.

For example, a highly compensated executive I knew lived with his professional wife in a rent stabilized penthouse apartment on the Upper West Side around 72nd Street that featured two bedrooms, two baths, and a wraparound deck with breathtaking views of Manhattan; all for a whopping $800! With the money he saved on rent, he invested in a country house in Connecticut where he retreated on weekends and holidays.

After growing up in a state where land and private property are revered, and only people with low incomes qualify for subsidized housing, I found the City’s rent control laws mystifying and extremely unfair, particularly to newcomers and young people. 

With a salary of less than $30,000, my housing options were limited so I headed to the outer boroughs. For around $850, which included rent and electric heat, I landed a tiny apartment in the attic of a brownstone in Park Slope, Brooklyn.

Park Slope in the early 1980s, boys and girls, wasn’t the Park Slope you know today. The good news was the neighborhood had gotten so bad that hundreds of families had left, which meant there was a lot of housing available for those fresh off the jet.

The bad news was you couldn’t get cabs to go the neighborhood; there were few retail stores; the main grocery featured suspicious produce and surly employees; drugs were so prevalent that my priest held candle light vigils outside the local crack houses; and you had to run home from the subway station at night to avoid being mugged by a purse snatching crack head.

It turns out, however, that Manhattan’s loss was Brooklyn’s gain. We found that if you called them—the narcotics detectives—they would come and eventually every inch of Park Slope was safe to live in. The crack dealers were replaced by professionals who started a baby boomlet and filled the parks and sidewalks with kids and Maclarens.

Rent controlled housing in Park Slope was rare because the few large apartment buildings that existed had been converted to co-ops, and most brownstones had fewer than six apartments. As a  way to lock in housing costs, many of us, with support from the Community Reinvestment Act, bought co-ops, single family brownstones, or multi-family buildings with tenants that would help us pay the mortgage. While we were reviving our neighborhood and others were doing the same around the City, residents of rent stabilized buildings remained frozen in time.

In the 1990s, some fairness was injected into the rent laws when it was determined that landlords in rent stabilized buildings didn’t have to play daddy to wealthy tenants, and that apartments inhabited by families making $175,000 or more annually for two consecutive years or with rents above $2,000 could be decontrolled. I said to myself, “Finally, welcome to the real world.”

Also in the 1990s, the Democratic Leadership Council and President Bill Clinton influenced the Democratic Party to recognize the value of the private sector as a solution to the massive changes occurring in the economy. The recession of the early 1990s, which eliminated hundreds of thousands of jobs in the tri-state area, meant white collar workers couldn’t rely on corporations for jobs; globalization meant blue collar workers couldn’t rely on manufacturing for jobs; and efforts to balance the budget meant lower and middle-income workers couldn’t rely on government for jobs.  

The only remaining job option for many was entrepreneurship. The Clinton Administration encouraged it by establishing Community Development Financial Institutions (CDFIs) with the goal of supporting small businesses in low- and moderate-income communities. The City encouraged rebuilding neighborhoods by supporting commercial corridors that had been ravaged by riots and neglect and creating Business Improvement Districts. The City was becoming more business friendly. 

These developments injected new life into outer borough neighborhoods that desperately needed services. I was inspired to open a PR and marketing firm and had the opportunity to work for several organizations that encouraged economic development in Brooklyn, Queens, the Bronx, and Harlem.

I was a consultant for BEDC, which provided entrepreneur training and micro loans to individuals opening home day care centers, nail and beauty salons, retail stores, restaurants, and service businesses. I also worked for Community Capital Bank, which made commercial loans to the owners of a retail flower shop and Laundromat, both in Bedford Stuyvesant, small manufacturers in Sunset Park, a gas station owner in Maspeth who bought and cleaned up a multifamily building, a clothing designer in midtown Manhattan, and other businesses.

Many of these small businesses were started by new immigrants who brought to New York City an entrepreneurial drive that had been nurtured in their old countries. They created jobs for themselves and others, provided much-needed services for newcomers settling in revitalized neighborhoods, and rebuilt commercial corridors formerly plagued by vacancies and crime.

Now these entrepreneurs, who have already been hard hit by the Great Recession, are under assault by the Working Families Party, which is urging the City Council to support a law requiring all small businesses, regardless of size or revenue, to provide mandatory paid sick days to employees.

If passed, this law will hurt even the small businesses that currently offer paid days off because owners and managers will be required to endure suspicious unscheduled absences, yet prohibited from reprimanding employees; provide paid days to part-time employees who never received them before; see tax dollars that should be used to help small businesses get through this recession diverted to creating a new department charged with executing this legislation; be burdened with maintaining paperwork on all employees for five years; and subjected to employee challenges for up to three years.

The measure requires that businesses with fewer than 10 employees provide five paid days off, and businesses with more than 10 employees provide nine paid days off. The size of a business will be calculated by adding together the number of employees who worked the previous year, full-time and part-time workers, temporary employees, and consultants.

Retailers are reporting that sales are down 50 to 75 percent and many are shuttering their stores all around the city. It appears that the WFP and its union supporters are so secure with their incomes and benefits, so naive about how capitalism works, or so disconnected from the effects of this recession, that they have no idea how small businesses are struggling.

We’ve seen massive layoffs in law, retail, real estate, construction, finance, nonprofits, small businesses, advertising, and media. Only the City’s unions have been spared the carnage. Yet the WFP is trying to impose new regulations on small businesses that will further reduce the tax revenue needed to pay the salaries of the City unions that the WFP professes to be supporting. It doesn’t make sense.

The proponents of this bill seem to have the naïve notion that all businesses are wealthy Fortune 500 companies with unlimited resources. This isn’t true. In many cases, this law will pit poor part-time workers against poor business owners, many of them immigrants, who are barely paying rent or eking out a living. How will the City pay for this new regulation at a time when we’re facing a $4 billion budget deficit? Why would anyone advocate a law that could lead to higher unemployment when the City’s official unemployment rate is over 10 percent, and many believe the true unemployment rate is closer to 17 to 20 percent?

On the housing side, the WFP lobbied hard in Albany last spring to re-control apartments that had been de-controlled within the last 12 years. The measure didn’t pass but a Court of Appeals ruling in October stated that the owners of Stuyvesant Town and Peter Cooper Village improperly raised rents and deregulated apartments while receiving tax breaks. The full impact of this ruling on the real estate industry hasn’t been determined.

At a recent luncheon, David R. Greenbaum, president of Vornado Office, had harsh words for the state Appeals Court ruling and said he feared we were living in the “Republic of New York.”

“We have an agency of the government which promulgated rules on how to deal with J-51 variances and decontrol that was reaffirmed by three administrations (Pataki, Spitzer, and Patterson), but the court said you’re not allowed to rely on the government’s interpretation of the rules,” Greenbaum said.

A New York Times article interviewed several Stuyvesant Town and Peter Cooper Village tenants who are professionals and I suspect could easily afford to pay free market rents.

I feel as though I’ve been hurled back in time 25 years. Highly paid professionals are still clinging to their rent stabilized apartments, perhaps to finance their second homes or luxury vacations, and landlords and small businesses are once again under assault.

I thought we had made more progress, but with the WFP influencing the local Democratic Party and elected officials and the recent Appeals Court ruling I’m afraid we haven’t.  I wonder if it’s just a matter of time before I see “New York City is a Marxist, Leninist Hell” written on a piece of plywood outside a New York City construction site.

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