Friday, February 25, 2005

Affordability: Walter South

Walter South

The Problem:

The New York Times[1] reported on April 15, 2004 that apartments in Manhattan had risen to an average price of $998,905 in the first quarter of the year. The report by Douglas Elliman said that the median price for the period was $625,000.

In Manhattan in 1998 household median income for all households according to Housing in New York City 1999, Report Summary[2] was $40,000.

Normal rule of thumb in real estate is that a buyer can afford a house at 2.5 times their annual income. An income of $40,000 means a buyer can afford a unit which costs $100,000.

It would seem that this would indicate that there's an affordability gap between income and housing prices, particularly in Manhattan.

The New York Times[3] reported in August 2002 that according to the National Association of Realtors the median price nationally for a single-family home had risen to $163,000. A month later the New York Times reported that nationally the median household income had fallen in 2001 to $42, 228.[4]

Therefore, to purchase the median priced house of $163,000, the purchaser would need an income of $65,440. This is of course an income well above national median.

The poverty rate in this country in 2001 ran between 16.5% in central cities, and 14.2% outside of the metropolitan areas.[5] In general poverty rates run around 15%. If only 15% of the population lives in poverty and the vast majority of the population cannot afford median-priced housing, why do we define the national housing problem as a low income housing problem? The national housing problem is actually the need for the vast majority to find affordable housing.

Actually the problem is not quite so simple. If looked at carefully it becomes apparent that it is not just a problem of cost.

The New York Times[6] on April 12, 2004, reported that Angela Dean, a Labor Investigator for New York State Department of Labor, arose at 3:30 in the morning. She had to make a 5:15 bus for her job in the City. Her commute was at least three hours (in good traffic) from her home in Mount Pocono in Monroe County, Pennsylvania. The Times reported that 17,000 other workers were making the trip daily with her. She is among 44,000 people who have bought $150,000 single-family homes in the Poconos. Incidentally the Times estimated that while most builders in the home-building industry make between $7,500 and $15,000 profit on a $150,000 home, some Pocono builders were making as much as $62,000 on each sale.

In addition to her mortgage payments which would run about $14,400 a year (or $1,200 a month), Mrs. Dean and other Pocono home owners would have real estate taxes of about $3,000 a year, heating expenses of about $3,600 a year, and homeownership association fees of $500 a year. These expenses would total $21,500 a year, or almost $1,800 monthly. This is before the added expenses of their bus commute and car.

Assuming that anyone paying 35% of their annual income for housing is paying more than they can afford, this would indicate that the minimum income needed for these housing expenses would be $60,000 a year. The Times did not indicate what Mrs. Dean’s income was but she seemed to be at least near to the limit. Many of her neighbors had the same problem.

In the last decade foreclosure proceedings have been brought in Monroe County against 5,700 homes, or more than one in five of all mortgaged homes in the county.[7]

The Affordability Problem is also a problem of accessibility. Affordability without accessibility is not a solution.

Perhaps there's a third factor which is implicit in the problem of affordability, in addition to cost and accessibility.

The New York Times[8] reported on November 17, 2002 that Richard and Christine Antoneck had just bought a house in Fort Salonga (western Suffolk County) at a bargain price of $799,000. This was a bargain because the seller had been asking $819,000. Property taxes on house were $10,000 yearly (or $834 a month). Mortgage payments would be between $ 57,000 and $60,000 yearly. In addition, the article said the house needed work. To these amounts would have to be added utilities, heating and other suburban surcharges for amenities. There would have to be two cars, fertilizer, weed killer, snow blower, and yard service, plants from the garden center, hot tub, out door grill, and firewood for the fireplaces. Total expenses could easily be $80,000. This would require a minimum income of $235,000. Mrs. Antoneck is a school teacher in Floral Park. Obviously she could cover the $35,000 part but her husband would still need to earn at least $200,000.

It's easy to blame rising housing prices on the lack of affordability. But it is a harder to appreciate that suburban living also has higher hidden costs associated with lower density and excessive consumption. Lower density means higher taxes to pay for schools, fire, utilities, roads, and police departments. It also means higher up keep on the house itself, and higher transportation cost, and more furnishings and appliances. Housing prices are only a part of the real housing expenses in our increasingly suburban life. The hidden costs of urban sprawl must be factored into real housing costs, and these are cost borne by the general public not the owner.

In conclusion the affordability problem is a cost problem, an accessibility problem, and an excessive consumption problem.

The Housing Experts Ponderous:

Affordability problem isn’t a new problem for Housers. It has been addressed extensively. For example David Schwartz in A New Housing Policy for America[9] stated that even in 1987 (17 years ago) the percentage of families able to buy houses had fallen
every year of the past decade in every region.

He attributed the affordability problem to the lack of a federal housing policy, and to unprecedented curtailments in federal funding. Schwartz offers a number of suggestions to deal with a problem of affordability. He proposes various programs such as programs for special target groups i.e.: young families, seniors, low and moderate income families, and single parent households. He sets forth several ideas such as tax reforms, down payment assistance programs, interest subsidy programs, rehab financing, state bond programs, trust funds, taxation changes, reduced regulatory actions, employer housing assistance, reverse mortgages, and tax recapture programs.

What Schwartz wants is better grease. He wants to help by a providing more subsidies and hence less friction. He wants to keep the machinery in the existing factory working better. Schwartz wants to better facilitate what some believe is our national housing policy. Schwartz fails to understand that in reality our actual but unstated national housing policy is, a decent home for every decent American. Schwartz basically wants to expand the definition of the word decent.

An another example is David Varady, Wolfgang Preiser, and Francis Russell in New Directions in Urban Public Housing.[10] They call for better design, mixed income housing, greater opportunities in suburban housing, mainstreaming, and ending over regulations. Some of these ideas may be good but they do not address the basic issues. They want better oil for the present system rather than better grease.

Gwendolyn Wright in Building the Dream, A Social History of Housing in America[11] has a better perspective on the problem. She feels that the current housing programs and the problem of affordability will not be solved by new financing schemes, or by new prototypes.

These programs are of course necessary, but with the high cost of land, the high cost of financing, the waste of energy, the stigma of low income housing, the desire for profits, and piecemeal action in particular by government, these programs are not going to solve the housing problems in this country. Wright feels basically that where Americans live and how Americans live need to be redefined.

Fundamentally the real changes in housing's future will involve new ways to buy and sell, and new uses for the housing that already exists. Tomorrow's changes in urban housing will be in renovation and recycling. Wright looks for changes in the social and political structure. Wright sees the need for structural change.

The Parameters of a Solution:

How then could an affordable housing program work? A workable affordable program should include the following elements:

(1) It would have to be a mainstream program.

It would require a program directed towards the median income households. As Peter Marcuse[12] has suggested as long as the housing problem is viewed as something affecting the bottom 15%, or even the bottom 33% percent of our society, the majority of our society is not going to be interested in solving the problem. Only by mainstreaming housing and only by addressing the housing problems of a majority of Americans will the problem be dealt with decisively. Any program that fails to serve a broad spectrum of the public will face elimination on either ideological or economic grounds.

This would indicate that the target for any program needs to be the median. A by-product of the program could address the needs of other income levels but only to the extent of their proportions in general in society. Since the poverty rate in this country generally runs around 15% any mainstream housing program should only address the low income housing problem in about the same percentage

(2) A workable program would basically have to be non-governmental program.

If one is to accept the myth of the benevolent state and/or the myth of the meddling state then a workable program could function only outside of direct government control.[13] Most of the programs which are advocated by Housers call for government programs. But, when one looks at the history of these programs the essence of the beast is apparent. Most of these programs require either government contractual oversight or annual funding from various sources of the government. Each year these programs and their funding are chipped away. This has been the case with Public Housing, Mitchell-Lama, Section 221d3, and Section 8. Even England's Local Authority programs have been reduced by privatization schemes.[14]

(3) The program should be an ownership program not a rental program.

Cities are only as strong as their neighborhoods. Ownership creates a commitment, and it provides stability, and it makes for stronger community. People take pride and responsibility in their homes as owners. Owners often become more active in their community because they have more at stake. Nationally around 68.1% of homes are owner occupied.[15] In upper Manhattan only 11% of the units are owner occupied.[16] Home ownership needs to be increased in our urban areas.

(4) The program should emphasizes urban and multifamily living.

Individual family, single home ownership certainly has its place in our society, and certainly there are some people who would opt only for this form of ownership. But, the byproducts of fee simple ownership have adversely affected our society. Sprawl, excessive energy consumption, wasteful consumerism, auto dependency, and environmental expense, and are additional costs which society pays. Most of these costs are not borne by the individual fee simple owner.

Multifamily units are less expensive to build, operate, and maintain. Multifamily buildings can help increase density, can provide better amenities and can deliver social services more economically.

(5) The program should bring about a structural shift in economics and politics

A successful program cannot merely adjust or accept the status quo. Most of the Housers today suggest programs that enable the present system to work but with heavier grease. The majority of these programs call for front end subsidies, such as lower down payments, or interest subsidies, or other gifts from the state such as no resale limits. But basically what these experts suggest is that every player gets profit and or appreciation and then they can opt out. Most of these schemes are basically state socialism for the current players. Even Rent Control rewards the players more than the needy. Nothing really changes in the system.

A Partial Solution:

(A)The basic instrument of a workable program would be a Land Trust.

The purpose of the Trust would be to acquire land and to bank sites. Trusts would operate on a regional basis not on a city, county or state basis, and would operate as a 501c3 non-profit corporation. Land Trusts are currently being used in several cities in this country. For example Boston, Jersey City, San Francisco, Miami, and Maryland all have Land Trusts. The Land Trust would be funded in a similar fashion as the National Highway Trust Fund.

Many of the past and current housing programs have permitted site ownership to reside in the private sector. For example Mitchell-Lama, Section 236, and Section 8 have all squandered their resources by losing site control. Once the initial funding for many of these programs expires, the program permits the sponsors to opt out. The exception has been Public Housing. But Public Housing made two basic mistakes. One, they built housing for the tenant of last resort, and two, many of their sites were junk sites from the beginning.

The purposes of the Land Trust are to develop a land bank, to remove appreciated land values from housing costs, and in the future, if prudent, to capture land appreciation. By removing the value of land from the equation of affordability, the Land Trust could create a structural shift in housing.

If organized as a 501c3 non-profit corporation and operating in the private sector, site acquisitions could be tax free or tax-deductible. The Trust could acquire any site. The Trust could buy sites on the open market, or could receive sites from governmental sources, or even from estates or as gifts.

At the beginning the Trust would have to rely on gifts or grants for operational costs and for land acquisition, but as it matured it would seek a dedicated source of funding, probably from a minimum tax on real estate profits. For example, Pike County, Pennsylvania (ironically the County next to Monroe in the Pocono’s) has Act 137 which collects a tax every time a deed or mortgage is recorded.[17] These funds go for senior, or low, or moderate income housing. The argument could be made that all profits from housing from all sources should be taxed at low rates to provide for shelter needs and affordability for the majority of Americans. Funding for the Land Trust should be similar to the National Highway Trust Fund which collects a tax on every sale of gas but retains the funds for “highway” work.

The Trust Fund would have additional functions. It would, in addition to land banking, provide consulting and development services along with seed money for new projects; it would help obtain mortgages or other needed financing; it would provide construction management services during construction and management; and it would provide management until its projects have become stable. The Trust would receive fees from their lessees for their services. Within five to six years the Trust should be self sufficient as to their operational costs.

(B)The Land Trust would exercise site control by lease.

Schwartz in his book A New Housing Policy for America[18] does cite another possible solution to the affordability problem. He argues that mutual or co-op housing programs offer affordability solutions. These housing associations have shareholders who own stock in the nonprofit corporation which owns their building. Their management and admission policies are governed by a Board of Directors elected from among the Shareholders. The building itself can be mortgaged and capital improvements can be done by an act of the Board and without individual shareholder consent. Shareholders can, in addition, borrow against their shares to buy into the building.

Shareholders are given leases to their individual units. Schwartz points out that in Germany, in Sweden, and in Denmark such programs have worked for over 100 years. In the Scandinavian countries co-ops developed over 25% of all of their housing after World War II. In New York City co-ops have been a widespread form of ownership.

Therefore, after the Trust acquires a site it would lease the site to local co-ops at a nominal cost. In essence theTrust lease removes land cost from what the shareholder buys and what the co-op owns. The lease would establish restrictions on the use of the sites. The lease restrictions would provide that:

(1) 60 % of all units would be sold at two times the annual area median income. (This would mean, for example, that in New York City the median would be that for Manhattan and not for the neighborhood. Therefore, in Manhattan units would sell at $80,000 (or twice $40,000). This would put median income housing in all neighborhoods. Income verification would only occur upon purchase. Buyers would be welcome to stay no matter how much income they made in the future.

(2) 10% of the units would be sold for twice the annual incomes at 80% of median ($64,000 in the example) and that 10% of the units be sold at 50% of median $40,000).[19]

(3) 10% of the units would sell for 200% of median ($160,000) and 10% would sell at just below market ($300,000). (These ratios could be flexible by as much as 15% either way. They need not be fixed and are for purpose of illustration.)

(4) Resale’s would also be controlled by the Trust Lease. Resales would be limited to twice the area median for each income group at time of resale. The seller would get his purchase price returned, and the co-op would get the difference for their long term capital improvement fund.

Many co-ops and mutual housing groups have rejected such a severe resale policy.

But, in this proposal the purchase price does not include land costs. The unit has been subsidized upon purchase by the Trust. And, the purpose is to provide affordability on a continual basis. Ebenezer Howard understood the problem of retaining affordability. He published, in 1838, his book Tomorrow: A Peaceful Path to Real Reform.[20] In his book one of his conclusions was that appreciation should be retained and captured by the owners of the Garden City, the tenants. Howard argued that the people in their collective capacity should own the land, and that they should secure the increment in value for themselves. In short, appreciation was to be collective. The same argument in this case has to be applied to the improvements on the land.

This is not what happens in most co-ops today. In most co-ops when a shareholder buys his stock in the building, the stock depreciates and appreciates at the same time. This is because the building naturally deteriorates from usage and through obsolescence; hence the stock actually depreciates in actual value. But the market value of the stock generally appreciates because of the limits of supply and no lack of demand. When the shareholder sells his stock, its value has been diluted but the sales price has gained. The shareholder has in essence eaten depreciation and is walking away with appreciation. Suppose the rules were changed at the beginning. The buyer would be offered a new deal. He is able to buy a better house, with better construction, and more amenities, but because the buyer saves money when he buys, he gives up appreciation when he sells.

It could be argued that by restricting resale prices to the shareholder’s initial investment, that upgrading or property improvement would be discouraged. It could be argued, for example, that no owner would remodel his kitchen or bath because his cost would never be recovered. But this problem is easily solved.

Improvements can be added to the purchase price for any new buyer. But, all capital improvements would be depreciated on a straight line 15 year basis. For example it might cost $40,000 for a new kitchen. After 10 years the seller wants to sell his leased unit. At this point he can sell his unit with the 10 year old kitchen for $13,335 over his investment, based upon 15 year straight line depreciation. The buyer pays $13,000 more when he buys but his depreciation continues on the same basis.

It can be argued that buyers don't want to forego appreciation, no matter how reasonable. And this can be true for many buyers. A buyer, who has sufficient income, or family money, always can go to the private market. But for many buyers this may not be realistic choice. Newlyweds, low wage earners, senior citizen, starter home buyers, and even other people could believe that they can invest better in other opportunities may opt to buy into such a program and seek reasonably priced accommodations.

(C)The Trust would seek to influence land use patterns by acquiring or building multi-family and mixed use buildings.

The Trust would seek small multifamily buildings. These buildings would range in size from 80-160 units. The Trust would not want to overwhelm their neighborhoods and would seek to have scattered sites. The sites could either be urban or suburban. In either case public transportation would be a prime consideration. (For example train station sites in the suburbs).

Individual single family, fee simple, homeownership certainly has a place in our society, but there are at least two advantages to multifamily buildings. These buildings cost less per unit to build and operate, and they reduce the negative effects of sprawl, energy consumption, and consumerism. Thirdly, these buildings can offer better amenities at less cost to the buyer. These buildings can compete more successfully with the private sector. Offering better housing based on cost alone will not be enough. These units have to compete in terms of amenities also.

Catherine Bauer[21] was an advisor for the first public housing efforts in the early 30’s.In her work she realized that economical housing was not enough. She became involved with the American Federation of Hosiery Workers and she helped plan and develop the Mackley Houses in Philadelphia.

As result of her vision, the Mackey Houses had recreation and service facilities such as rooftop playgrounds, tennis courts, swimming pool's, libraries, laundries, and numerous meeting rooms. In today's market, in addition to such upgrades as above grade finishes, other amenities would have to be offered. Mackley Houses offer good advice for attracting buyers in Trust Housing.

Typical buildings with the Trust should also be mixed use buildings. For example in Manhattan, Trust buildings could include day-care or elder-care centers on the first floor, in addition to shopping on the avenue. Retail spaces could be available for beauty shops, drugstores, newspaper stands, grocery stores, and even restaurants. These arrangements could create multiple use buildings, and at the same time provide for additional income to the offset maintenance expenses.

(D) The Trust would create a structural shift in housing.

The Trust would acquire permanent sites for housing. Unlike most all other government programs, except Public Housing, the Trust would land bank. Once bought the sites would be removed from appreciation. And once acquired the Trust could offer professional development and management.

The Trust would build affordable housing for all incomes, but the program would be mainstreamed.

Basically the Trust would be non-governmental. It would seek a dedicated income source from housing and real estate profits but it would not necessarily be subject to annual appropriations once established.

The Trust would remove appreciation from resales thus maintaining affordability.

The Trust would refocus density. By offering better price, and better amenities it offers a better choice for buyers. For many it could be a reasonable alternative to suburban housing.

In Summary:

It's difficult to find anyone who doesn't favor affordable housing. Traditionally the hardest hit for affordability has been the poor, the elderly and first-time home buyer. But today the median income households and even upper income households are being priced out of market. Schools cannot find teachers, employers can find employees, and even ski areas such as Vail[22] can't find seasonal workers. Basically it's a subject that has universal appeal, but also it is also true that no one wants affordable housing in their community because of the stigma of Public Housing and government programs. Today, even Senior Housing under Section 202 is finding resistance in many communities; it is only being accepted reluctantly in many towns.

Over the past ten years the character of American families has been changing dramatically. For example, far less than one in five families today are traditional families.[23] Much of our housing stock was built for the older traditional families. Our housing stock and financing systems are not changing enough to meet this new type of demand. Our present housing is too expensive; it's too large, and too suburban.

Tinkering with existing programs and making minor adjustments to major policy failures is no longer going to work.

Case Study:

Talk is always cheap. Feasibility is reality. Is it possible to build, and to maintain, a mixed income, mixed use affordable multifamily building in today’s market?

To test this we will look at a case study in Manhattan. The site is on the East side of Broadway between 138th and 139th Streets. At present it can be described as a soft site. The site is purchased by the Trust and leased to a coop. It is an old theater building now leased for a McDonald’s and for a Starbuck’s.

A new building of eleven stories is proposed. On Broadway the McDonald’s and Starbuck’s will remain and a new Chase Bank Branch and Cleaners will be provided for. On the second floor there will be a new day-care center, an out-reach program and lounge for Senior’s (with free a free lunch program) and professional office space for a health clinic. These services would be on a lease basis but the lease cost could be balanced to income and need. Programs in these spaces would be paid for by the sub-tenant. Also on the 2nd floor would be a management office, and a two bedroom unit for the super.

On floors 3-10 would be twelve two bedroom units with two baths each. On the top floor would be four penthouse units, a common roof garden and community meeting rooms. As a mixed unit building 60% of the units would be sold at twice the median income for Manhattan, 20% would be sold at twice below the median, and 20% at twice above the median below the median income. A median income family in Manhattan earns $40.000 annually.[24] To simplify this case study all u two bedrooms are 800 square feet in size. The building costs $125 per square foot[25] to build. Hence at 800 square feet, times $125 per square foot the building will cost $100,000 per unit. The total development cost is $10,000,000 for the residential spaces. (Land costs are not included. It is assumed these will be offset by costs for building public spaces and amenities. Commercial space costs will be paid for by commercial leases.)

Total building cost of will be$10,000,000 and shareholder contributions from stock purchases will be $9,620,000 (see chart attached).[26] The initial deficit in funding would be $380,000. There is $5,815 available monthly from operating income (assuming that each shareholder is paying 30% of their income (or less) for their monthly mortgage payment and monthly maintenance) which could be used to cover an underlying mortgage. This amount would support (@6%/ 30y) a mortgage of $1,000,000 debt. But only $380,000 is needed. A mortgage in the amount of only $2,300 monthly is needed. Therefore the building could put into long term capital reserves $3,515 monthly or $42,180 annually.

Individual monthly housing expenses would include a prorated share of monthly building operation expenses (maintenance) and individual mortgage costs. No shareholder should exceed 30% of the gross of their monthly income for these expenses. Operating Expenses[27] is assumed to be $500 per month per unit. Each class of shareholder pays down 10% (also it could be 5%) of the purchase price and assumes a mortgage for the balance. The shareholders will pay 30% of their income for housing. Therefore after the mortgage monthly payment is paid the remainder of the shareholders 30% is applied to the maintenance of $500.

The Board of the co-op does shareholder selection. It establishes it own rules and regulations subject to the Trust lease, and it handles evictions for non-payment of maintenance and rules violations.


This case study illustrates that with land cost removed and with income mixing, it is possible to build and operate affordable housing. Once land cost are removed, the study also shows income distribution could begin at public housing levels or lower and go up to levels below present market. Feasibility could possibly be attained if the income limits were stretched in both directions.

Our case studies do not address housing for all people. The New York Times [28] of September 20, 2002 shows that an individual is considered poor with income of $9,039. The case study begins with income to $16,000. It could be assumed that many low income housing households will still need special-needs housing which will provide social services as well as housing.

In short not all housing needs would be satisfied by this model. But it could meet the needs of many.


[1] The New York Times, April 15, 2004

[2] Housing New York City, 1999: Report Summary p9.

[3] The New York Times, August 2002

[4] The New York Times, September 2002

[5] The New York Times, September 25, 2002

[6] The New York Times, April 12, 2004

[7] The New York Times, April 11, 2004

[8] The New York Times, November 17, 2002

[9] David Schwartz A New Housing Policy for America, Temple University Press 1988

[10] Varady & etc.New Directions in Urban Public Housing, Rutgers, 1998

[11] Gwendolyn Wright Building the Dream, MIT Press Cambridge, Massachusetts, 1983

[12] Varady & etc New Directions in Urban Public Housing, Rutgers 1998 “Mainstreaming Public Housing” by Peter Marcuse pp23-39

[13] Peter Marcuse Housing Policy and the Myth of the Benevolent State , Social Policy, January/February 1978

[14] The New Towns: Their Problems and Future. A House of Commons Report of Committee ,HC 603-1,17 July 2002 p.12.

[15] The New York Times, November 4, 2002

[16] A 197-a Plan for Manhattan Community Board 9 , Unpublished 2004

[17] The River Reporter, April 22-28 2004

[18] Schwartz , Ibid

[19] Housing New York City,1999:Report Summary p9

[20] Ebenezer Howard, Garden Cities of Tomorrow, MIT Press, Cambridge, Massachusetts, p.65,p.142

[21]Gwendolyn Wright Building the Dream, MIT Press Cambridge, Massachusetts, 1983 pp223-225.

[22] Vail Daily December 7,2002

[23] Schwartz , Ibid ,pp.297-82

[24] Housing New York City,1999:Report Summary p9

[25] C.Virginia Fields, A Time to Build ,Report of the Manhattan Borough President’s Task Force on Housing, 2000. This report indicates that New York City developers estimate that it costs between $118-$135 per square foot to build multifamily buildings in the City. Therefore at 800sf for a two bedroom unit, and costing $125 psf, a typical unit would cost $100,000.

Other articles indicate housing costs for market housing is much higher. A new rental at 57th Street and 11th Avenue is projected to cost $275,000 per unit. This would be $175,000 a unit above Field’s projections. But, how much of this cost is due to land and profits are hard to determine. The New York Times November 17, 2002.

[26] See Chart attached

[27] The Council of New York Co-operatives and Condominiums Comparative Study of 2000 Operating Costs on pages 14-15 show that total median operating costs for 182 Co-ops on the Upper West side was $2,723 per room annually. Of this amount $537 was for debt service. This would indicate that operating expenses were $2,723-$537/12 or $186.16 per room per month for the median unit. A two bedroom unit in New York City would be: two bedrooms, living room, one bath, and the kitchen for a total of four rooms (Bath and kitchen are ½ of a room each). This would mean that the average carrying charge would be $728.64 per unit.

The Housing New York City 1999 Report Summary says on page 31 that the gross median rent excluding utilities and fuel, was $684 monthly. What is not clear if this figure includes underlying mortgage payments made by the building owner. For the median monthly gross rent, which included utilities and fuel, the report cites $700. Most tenants do not pay for fuel and pay for their own utilities. The report also says on page 33 that the median contract rent of unregulated units was $750 per month for co-ops, and $860 for condos. But again how much is underlying mortgage and how much is actual operating expense?

Unpublished PHI (552 Riverside Drive) Budget Projections #620 Budget for 2002 project expenses at $446,805 for 67du’s or $555.74 per month per unit. Of this amount $96,000 is for a new mortgage of $1,250.000. Removing mortgage payment from the budget gives a total operating expense of $350,805 annually. And dividing by 67du’s gives a monthly operating expense per unit of $436.36. This figure is probably low when compared to the City in general. Based therefore on the above figures and the author’s experience a figure of $500 month per unit will be used. It is known that $437 works in a well run building. At $500 per unit it should work for these projections.

[28] The New York Times, September 25, 2002 p.19. National Median Household Income is $42,228 for a family of four. Families are considered poor at the following levels: For four at $18,104; for three at $14,128; for two at $11,569; for one at $9,039. Within these parameters 11.7% of the population is considered poor. At the same time the average income for the top 5% is $260,464,

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