The Streets Were Paved with Gold - Ken Auletta [147]
The campaign promises, Heimann sneered, were totally “unrealistic.” He audibly gulped when informed these were the 1974 campaign promises of his boss, the Governor. Those promises helped Hugh Carey capture the votes of many of the state’s 500,000 Mitchell-Lama tenants. Not surprisingly, tenants want to avoid rent increases. Not surprisingly, public officials prefer denouncing rather than acting like landlords and raising rents. The result: rents don’t keep pace with costs, thereby threatening foreclosure. Rather than confront this no-win political problem, public officials assumed an ostrich pose—ignoring it, appointing study committees and mediators, appropriating a few million here or there, all with bipartisan support, of course.
The state’s middle-income housing program presupposes that Mitchell-Lama projects are at least self-sustaining, though in places like Co-op City they clearly are not. The city, with broad political support, long ago abandoned the legislative intent of the MitchellLama law, financing their projects not from rents but from the issuance of city debt. To hold down rents, and hoping long-term interest rates would decline, the city began rolling over this debt rather than floating new bonds. Interest rates rose. The deficit spread. “As a consequence,” UDC Chairman Richard Ravitch wrote Governor Carey, in a confidential January, 1977, report, “the successive Housing and Development Administrators were free, as a practical matter, to impose rent increases in amounts they decided should be imposed regardless of the fact that mortgage debt service defaults had to inevitably result from the low increases.… The result in the overall has been that without legislative authorization, the City’s program has been transformed into a partial direct subsidy program, although the continuing and increasing shift of costs of the program from the City Mitchell-Lama tenants to City taxpayers has not been publicly acknowledged as deliberate City social policy and is only dimly perceived by the public.”
The city altered the program in another significant way. Though state law requires income affidavits to certify that tenants are eligible to move into a middle-income project, or are paying a fair rent once they do, the City Council, with the support of past mayors, prohibited the use of income affidavits as a violation of privacy. The Council, also with mayoral support, regularly rushed through legislation strictly limiting rent increases. After surveying this dismal history, the Housing Committee of the New York City Bar Association concluded, “It is an understatement that the program early on became highly politicized.”
The financial consequences were profound. By 1976, according to an audit by State Comptroller Levitt, 98 of the city’s 140 projects were delinquent in their mortgage payments. According to Mayor Koch’s fiscal 1979 budget message, “By June 30, 1975 the City had outstanding $1.1 billion in BAN’s [bond anticipation notes] issued for Mitchell-Lama purposes and another $118 million of BAN’s issued for municipal loans to owners of multiple dwellings. And yet another $200 million in debt issuance remained to complete the financing of projects already in construction.” In late 1977, after the state Court of Appeals declared the city moratorium on the repayment of notes unconstitutional, the city undertook to sell these mortgages, at a considerable loss.
It is good public policy to seek to retain the middle class. But it is also good politics to promise to hold down rents. In New York, the politics preceded the policy. During his 1977 campaign, Mayor Beame made a rare appearance at a Board of Estimate hearing, and before a large, cheering audience of tenants, voted to exempt senior citizens from rent increases (for five years) and to offer tax exemptions to Mitchell-Lama housing companies to suppress rent increases. The measures passed unanimously. On another occasion, before 1,100 cheering tenants from Manhattan’s Lincoln Towers,