In the sweaty days of midsummer, labor union representatives were shuttling from Brooklyn to Manhattan to Washington, D.C., trying to put together a last-minute deal to buy Starrett City, the largest subsidized housing complex in the country. As the days ticked down until an Aug. 7 deadline, they had to convince both the controversial businessman who had won the right to buy the building, and the politicians, regulators and housing advocates who had been blocking the sale, to let the unions take over.
It soon became clear to the labor chiefs that they were getting nowhere. Convincing the bidder, David Bistricer of Clipper Equities, to sell the contract was not so much the problem, they said. Getting the opponents of the sale to drop their opposition was.
“We scared people there because they thought we were paying too much for it, and some of the community organizations out there felt our plan didn’t work for them,” said Ed Ott, the executive director of the New York City Central Labor Council, a coalition of 400 AFL-CIO locals representing 1.3 million members. “In the end, we stood down.”
The Starrett intervention will not be the last time that unions try to enter in the real estate market, Mr. Ott said, and it certainly wasn’t the first. But the council’s attempt here, as with Stuyvesant Town-Peter Cooper Village 10 months earlier, did show the difficulties labor is facing as it tries to take an aggressive role in keeping New York affordable to its members and other members of the middle class.
Unions have been building affordable housing in New York since the 1920’s, when the aim was to get their members out of dilapidated tenements by creating dozens of solid, unadorned mid-rises to be owned by the very people who lived in them. The Amalgamated houses, Penn South, Electchester, Co-op City—all were founded, at least in part, by unions. As the city itself fell on hard times, and some of these complexes met financial troubles, the interest in creating new housing waned.
In the 1960’s, national unions set up a fund, now called the AFL-CIO Housing Investment Trust, in which pension funds, including those run by unions, invest. Today worth $3.66 billion, it has financed 80,000 union-built homes around the country over the past 40 years, including 11,000 in the past six years in the five boroughs, according to Carol Nixon, director of the trust’s New York office.
And yet financing affordable housing is perhaps not the problem that it used to be, according to Brad Lander, the director of the Pratt Center for Community Development and an affordable housing advocate. That fact has left unions searching for the right role to play.
“I’m enthusiastic about the idea of them playing a political role in strengthening affordable housing policy and regulation, and in creating good jobs in New York,” he said. “But I don’t think that it’s capital that is going to make a difference.”
Mr. Ott admits readily that he faces a steep learning curve. The labor council’s first attempt to buy real estate came last fall. That was when Mr. Ott, a former policy director for the Central Labor Council who had not yet been confirmed as permanent executive director, learned from his housing director, Kevin Gallagher, that Stuyvesant Town and Peter Cooper Village, with their 11,200 units, were up for sale.
“I had lived in Stuyvesant Town at one point for 12 years,” Mr. Ott said. “I knew it would be a huge fight that would reinvigorate the whole debate over affordable housing.”
In three weeks, Mr. Ott said, the labor council put together a $4.5 billion bid with other investors, including the AFL-CIO’s Housing Investment Trust, and aligned itself with Stuyvesant Town’s tenants association, which had been trying to find a way to preserve the mixed-income nature of the complex.
“They both were willing to be participants in the bid and also gave us great credibility in the marketplace,” said City Council Member Dan Garodnick, a resident of Peter Cooper Village. “Knowing they were behind the effort made this more than just a ragtag group of tenants trying to do the impossible.”
The union bid, had it beat out the $5.4 billion winning offer by Tishman Speyer and partners, would still have led to a large number of apartments rising to market rate over the long run, once the current tenants moved away and rents rose above the $2,000 threshold. Just one-fifth of the units would have been offered to tenants to purchase, while another fifth would have remained rent-stabilized permanently.
But Mr. Garodnik said that was much preferable to the present situation, under which there are no long-term guarantees of affordability at all and the new owner has been aggressively trying to deregulate apartments.
Since losing the Stuy Town bid, the labor council has met with numerous housing developers, some nonprofit, some for-profit, but is not willing to discuss any details. William Rapfogel, chief executive of the Metropolitan Council on Jewish Poverty, said he has discussed collaborating with the labor council; another source said that Nick Sprayregen, a businessman who is resisting Columbia University’s expansion in West Harlem, has also spoken with union officials about developing affordable housing on property he owns. Mr. Sprayregen would not comment.
“Labor brings economic and political clout. They bring resources, in terms of pension funds, in terms of manpower, in terms of the ability to bring people into the labor force, their job placement programs,” said Mr. Rapfogel, whose nonprofit organization develops low-income and affordable housing for the elderly and other special-needs populations. “Organized labor’s involvement in development marks a very important turning point.”
It is also clear that the labor council can offer something to for-profit developers—although Mr. Ott is clear that he would enter into a partnership only if it would lead to a significant number of affordable apartments and a pro-union management.
“I think if unions are involved, it’s reassuring to people in the neighborhood,” Mr. Ott said. Financial partners, he added, “also want us to use our political strength, which we feel is part of our capital and which we are proud of.”
Last June, as it became clear that Clipper’s principal, Mr. Bistricer, was unable to persuade government officials to approve the transfer of mortgages necessary for his purchase of Starrett City, the Central Labor Council was introduced to the Provident Group, a Louisiana-based nonprofit housing developer, because they both shared the same investment adviser, Citigroup. As Clipper’s revised offer foundered, the labor council proposed to acquire Clipper’s right of purchase, while agreeing to provide Mr. Bistricer any rights that might exist to undertake future development on the 140 acres. Meanwhile, the labor council would try to negotiate down the $1.3 billion purchase price, Mr. Ott said.
But the labor council ran into resistance from Acorn, an affordable housing advocacy group, which objected to parts of the labor council’s future plans for the 5,881-unit complex, he said. Under those proposals, a copy of which was obtained by The Observer, nine-tenths of the tenants would be transferred to a federal program that would cap the rent they paid to 30 percent of their income. But once those tenants left or died off, just 30 percent of the apartments would be preserved for low- or very low-income residents; another 20 percent would be sold to tenants making up to $85,080 for a family of four.
That threshold struck housing advocates and elected officials as too high, particularly in the far-out stretches of Brooklyn, where the median income was a lot lower.
“I don’t think the last-ditch effort by Bistricer and some business partners represented any kind of affordable housing plan per se,” Mr. Lander said. “What they were calling affordable middle income was higher than rent you could get there today.”
But Mr. Ott saw his bid as a last-minute attempt to keep the complex from losing any guarantees of affordable rents, which is what still could happen. Later in August, after Mr. Bistricer’s contract expired, the current owners, Starrett City Associates, filed a letter warning that they might exit the Mitchell-Lama program, which permits the state to set rents, after a year’s waiting period.
Right now, state, city and federal housing agencies are negotiating with Starrett City Associates to keep the complex in the program or otherwise affordable. Priscilla Almodovar, president of the state’s Housing Finance Agency, who is leading the meetings, characterized the discussions as “productive.”
“These are discussions we did not have an opportunity to have while the Clipper deal was in the mix,” she wrote in an e-mail. “It gives the owners and government a chance to crystallize what the facts would be in a stay-in or opt-out scenario.”
Meanwhile, Mr. Ott said the Central Labor Council would be interested in bidding on the property should it be put up for sale again. This time, though, the strategy will be a little different.
“We are going to have to do a better job of finding partners who represent the lowest-paid tenants,” he said.