By Daniel Rose, chairman, Rose Associates
America’s current supply of distressed real estate cries out for imaginative thinking about possible alternative uses and alternative financial arrangements that may achieve desirable goals other than those originally intended.
New York’s Manhattan Plaza, the 1,688 unit housing development on Manhattan’s West 42nd Street is a prototypical example.
As described in The New York Times of August 2, 1976, the complex was planned by the developer, HRH Construction Company, as middle income housing financed by New York’s Mitchell Lama program.
Rising costs and a softening rental market made it impossible to achieve the necessary rents.
Roger Starr, the city’s Housing and Development Administrator, applied for federal funds to turn the project into subsidized housing for poor, but fierce neighborhood opposition prevented him from doing so. In desperation, the developer turned to the project’s renting agents (Dwelling Manangers, the management arm of Rose Associates), whose president proposed limiting the housing to members of the performing arts, with financing provided by HUD’s Section 8 program.
A subsequent study by the Settlement Housing Fund confirmed the concept’s viability. Clara Fox, the Fund’s executive director, said, “We went into it thinking the whole idea wouldn’t work. But we have studied it and we are convinced the numbers add up.”
Initial opposition from Theodore Bikel, head of Actors Equity, and Gerald Schoenfeld, head of the Schubert Organization, eventually turned into support, and today the concept and its implementation are universally acclaimed.
Across the nation, foreclosed or abandoned industrial buildings can often be transformed into residential units, foreclosed expensive residential units with mortgage write-downs can be sold or rented into smaller units and, where possible, garages in homes can be converted to residential use. A variety of innovative financial arrangements — such as foreclosure with the owner remaining in occupancy at a low rent — are helping to stabilize otherwise threatened neighborhoods.
Consolidation of vacant housing and selective demolition have helped some troubled neighborhoods.
Such imaginative programs can help tide us over until rising real estate values again do their magic.
