NEW YORK -- People worked hard for a living in the eight-story apartment house where I grew up. One man delivered soda to our door each week. Another ran a dry cleaning store. There were appliance salesmen, bank clerks, teachers, dressmakers, pressmen, milk distributors. My father, a shirt salesman, fit right in. None of the wives worked. It was 1962.
Three hundred and fifty-six families had moved into three boxy, red-brick buildings on the site of an abandoned racetrack in the Sheepshead Bay section of Brooklyn. Most had young children. All were white. They came from places like East New York and other deteriorating neighborhoods in the northern part of the borough, in search of a slice of middle-class life.
My neighbors never thought of themselves as getting a government handout. They worked long hours, paid taxes, disdained politicians and looked down on people who collected welfare checks. They felt a cut above the folks who lived in "the projects" across Avenue X.
Yet my family, and all of my neighbors, were the beneficiaries of one of the sweetest subsidies in New York history. Only now, when that subsidy is in danger of being taken away, is it clear what an incredibly good deal they've had all these years.
The deal is called the Mitchell-Lama program, and it provides decent housing for 140,000 middle-income families throughout the city and state. Beginning in 1955, developers were given tax breaks and low-interest mortgages if they agreed to build apartments that middle-class people could afford. The builders were also promised that they could pay off their mortgages after 20 years and be freed from the program's restrictions.
Now those commitments are expiring. And officials here, facing a potentially huge wave of conversions to luxury apartments or condominiums, have a first-class political dilemma on their hands.
Why should anyone outside New York care? Because a similar scenario will soon be played out on the national stage. As commitments expire, up to 500,000 units built under Section 8 and other federal programs could revert to the private housing market over the next few years, leaving tenants with no place to go. It is a time bomb set to go off in the early 1990s, and Congress, beset budget pressures, has not figured out what to do.
In New York so far, 59 housing projects have become eligible to pay off their mortgages and leave the Mitchell-Lama program, but only five have done so. Except for a Rochester project that raised rents by 40 percent, there has been no rush to cash in or go condo. This may be because the time is not right to be trading in five percent mortgages, or because of legal confusion over whether the liberated apartments would still be subject to rent controls.
Gov. Mario M. Cuomo, citing a shortage of middle-income housing, proposed earlier this month to extend the program's restrictions for another 15 years. Although Cuomo suggested making extra profits available to Mitchell-Lama landlords, the real estate industry is up in arms.
Robert Rosenberg, who manages 20,000 Mitchell-Lama apartments as president of Grenadier Realty, says it would be "highly unethical" for state officials to unilaterally extend the buyout period. After years of controversy over rent control, he says, it would be such an "act of bad faith" that "nobody is going to want to do business with them again."
But Scott Stringer, spokesman for the Mitchell-Lama Residents Coalition, says landlords have "a sweetheart deal" because the program guarantees them at least a 6.5 percent profit. More importantly, he says, "This is housing we could never get back. If it's phased out, you would create a new homeless population in 20 years."
Stringer says it would be unfair to displace families who gambled on the less desirable locations where such projects tended to be built, such as Manhattan's now-yuppified Upper West Side, which has 28 Mitchell-Lama buildings. The original tenants were "pioneers," he says. "They came in and built diverse communities. They created neighborhoods that the speculators now want back."
At the Kings Bay II project in Sheepshead Bay, for example, what were once dirt roads became a staunchly middle-class enclave. A new shopping center was built. Waves of college-bound children flooded the area, prompting the city to build a new elementary school and to add a new wing to Sheepshead Bay High School.
When the original 356 families moved there in the early 1960s, they knew little or nothing about 20-year buyouts. What they knew is that in a new building backed by the city, a two-bedroom apartment with a terrace could be had for $140 a month, plus a one-time down payment.
"Nowhere in the whole city of New York can you get a deal like this," says Bob Goldstein, the tenant president. Goldstein recalls a recent tenants' meeting to discuss the possibility that the buildings would go private. "It was packed. They came down with fire in their eyes. They were against it and that's all there was to it."
The situation at Kings Bay II is complicated by the fact that, like many Mitchell-Lama projects, it was built as a cooperative -- tenants made a $3,000 down payment and owned "shares" in the building. If they moved, they were limited by law to recouping their original investment, plus interest. If the tenants, who run the buildings, voted now to leave the program, many could reap windfall profits. My parents' apartment, for example -- three bedrooms, 1-1/2 baths and a terrace -- carries a basic rent of $407 a month. Under Mitchell-Lama rules, they could sell it for about $14,000. But on the open market, Goldstein says, such an apartment could bring up to $140,000.
Not surprisingly, a significant minority of tenants -- those who are ready to retire to Florida, for example -- would love to cash in. But most oppose any buy-out, worried that their modest rents would soar. Those fears are not misplaced. The project's $5-million mortgage, with an unheard-of 3.7 percent interest rate, would have to be refinanced. The 80 percent property-tax abatement would vanish. Tenants would no longer have to deal with the city bureaucracy every time they wanted a door fixed, but neither would they be sheltered from market forces.
Rents at the project may not have changed much since 1962, but something else has. As the years wore on, there were more Buicks in the parking lot and fewer Plymouths. As tenants prospered, many achieved incomes far exceeding the project's limits, now $37,400 for a three-bedroom apartment. The city recently cracked down, imposing a 50-percent rent surcharge on the most affluent tenants, although even at those rates it's still a bargain.
Which brings me to a lesson known to every New Yorker: There is nothing more important than getting in early on a good deal. Many of the first tenants had some connection to Samuel LeFrak, the New York builder who developed the project. In my family's case, my late uncle, a Long Island dentist, knew LeFrak, so my father and his sister were given apartments. Nearly everybody knew somebody.
The preferences didn't end there. For years there were two waiting lists, one for outsiders and a "blood" list giving priority to tenants' relatives. That's how my grandmother got an efficiency unit in the Mitchell-Lama project across the street. That's how some of the kids I grew up with came back to the project after finding themselves priced out of the New York market.
And I suppose that's why the project remains all white and heavily Jewish, although the blood list has been abolished and there are no racial preferences in admission. It is simply too late for most newcomers. Some people on the waiting list first applied in 1969.
This sort of stability has its price. When I visit my parents now, I notice how the wooden swings in the once-noisy playground are warped from disuse. P.S. 286 has been turned into a school for the handicapped. The block sometimes resembles an outdoor nursing home, with retired men milling in the courtyard while their wives drag shopping carts to Waldbaum's as they have for the past 25 years. Still, it is a viable urban neighborhood, which is more than can be said for much of this area, in which an unexceptional two-bedroom apartment in Manhattan can rent for $3,000 a month.
As Rosenberg, a former city housing official, puts it, Mitchell-Lama "really worked in producing massive amounts of very sound housing. Most of it would not win architectural awards, but most is still in very good shape."
My neighbors are relatively lucky, since they will have a say in their future. But what about the tens of thousands of Mitchell-Lama renters whose fate is controlled by landlords? Should they, after years of public subsidies, be forced to pay market rents like everyone else?
You've heard the argument before: Rent control, and regulated rents in such programs as Mitchell-Lama, helped wipe out the middle-class housing stock in New York. Whole neighborhoods like the South Bronx were abandoned because landlords couldn't get an adequate return on their investment. Lift the controls, and the market will find a way to provide affordable housing.
I don't happen to buy it. If it weren't for programs like Mitchell-Lama, many families like mine would have moved to Long Island or New Jersey, and the city's housing crunch would be driving even more major corporations away. New middle-income housing has become virtually extinct in the 1980s, even in cities without rent control. Federal aid has dried up. No one wants to build for the middle class. It makes no sense to give away part of the decent stock that survives from an earlier era.
To be sure, New York is the classic "grandfathered" society for those on the inside. For the poor, there is public housing, where tens of thousands of people are waiting to get in. For the middle and upper classes, there are 1.2 million rent-controlled and rent-stabilized apartments that time has transformed into an entitlement program for the haves. Mayor Edward Koch has three rooms in Greenwich Village for a rent-controlled $350 a month. Some celebrities have 10-room apartments overlooking Central Park for less than $1,000 a month.
This is precisely the sort of thing that gives government regulation a bad name. The rules become so stringent, and the politicians so afraid of offending tenants, that the program winds up giving fat subsidies to the affluent and its original purpose is lost. But the prevalence of such abuses doesn't mean there should be no government intervention in housing at all. It's like Social Security; the fact that the benefits also flow to the rich should not discredit the program, although it does suggest the need for sensible (if politically dangerous) reforms.
The Mitchell-Lama dilemma is hardly insoluble, as long as it's not reduced to an all-or-nothing proposition. Tenants who have invested 20 years in their neighborhoods may have to swallow some rent hikes, but should be protected from eviction or financial ruin. Landlords who joined the program in good faith could be given enough incentives to ensure that many remain in the program. Such deals are worked out all the time. It's called political compromise.
Rest assured, my family and all my old neighbors will be the first to complain if their rents go up. They will grumble about the no-good politicians and wonder why the middle-class folks of Brooklyn are once again being picked on. But they also have to admit that their terraces give them an unobstructed view of a very rare sight: a government program that works.
Howard Kurtz is The Washington Post's New York bureau chief.