Guest: Rudin, Lewis
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THE OPEN MIND
Host: Richard D. Heffner
Guest: Lewis Rudin
Title: “The Never-Ending Problem: Finding Housing in New York City”
I’m Richard Heffner, your host on THE OPEN MIND. As a significant public service, Channel 11 has focused its community affairs programs this week on the subject of housing, one I suspect that touches us all in important, unavoidable ways. Indeed, not long ago a distinguished New York journalist with whose son my youngest son had gone to school, told me that these young college graduates ought well to be out on their own making their own way, except that when it comes to housing, simply a place to live, it makes no sense to think that young people beginning can make it on their own here in our town. Indeed that may well be true of older folks, people who never dreamed that by now they wouldn’t, couldn’t be well enough established not to have to worry about finding and keeping decent housing. Obviously then something’s got to give. And for this special OPEN MIND on housing, I’ve once again invited my resident housing maven, Lewis Rudin, President of Rudin Management Company.
Lew, thanks for joining me again. I know that you’re beset by everyone who says, “What am I going to do about housing?” But given the role that you’ve played in searching for a better New York and trying to create one, what in the world are we going to do?
RUDIN: Well, Dick, my brother and I have been wrestling with this problem for many years, and it’s really become a political problem.
HEFFNER: What do you mean “political”?
RUDIN: Well, it’s political in the sense that the fundamental housing stock for the City of New York, which was about two million apartments and has decreased now to about 1,200,000 rental housing apartments, will continue to diminish because of the use of the vote by those looking to get elected. Obviously there’s more tenants than landlords, so therefore they pander to the tenant vote and they continue to create rent-control laws, rent-stabilization laws. And right off the bat I’m going to say to you that that’s not the complete cause of the problem, but it has caused the investors, the people who would normally build buildings, the people who would normally lend money to builders or to those of us who want to create housing, to say, “Stay away from New York City”. It’s not the only reason for the problem, but it is the main cause of the fact that the supply of housing in this town is diminishing and not increasing. And it’s very sad, and it’s a cancer that I’m so concerned about that I think I mentioned to you recently I’ve been going around to talk to all the editorial boards because if we don’t do something about creating and saving rental housing in this city then we have the very real threat of losing the businesses that should stay here or come here. Because if they can’t find housing for their people then they’re not going to move their offices here. So that the subject of housing is, I think, one of the most serious to the survival of this city. I don’t know whether you want to put it on the same level as medical or Medicaid or the medical area, or you want to put it on the same level as safety in the streets. But after all, you need housing; people have to live someplace. So for that reason I was delighted to come here and I hope that we will be able to dialogue some of the problems and try to come up with some of the solutions so that we can – not just we, but our audience – can tell their political leaders, the governor, the mayor the legislators, the councilmen, that what they think they’re doing is doing the opposite. They’re protecting the wrong people. The young people that you and I want to see come to New York, get housing, are being kept on the outside. And we are subsidizing their parents and others and letting them enjoy the fruits of these very, very inexpensive housing units.
HEFFNER: Okay. Lew, look, we’re friends, more than friends. I’ll ask you over and over again to find an apartment for me or for a friend and you tell me how desperately unhappy you are that you can’t. We are friends. But I still have to say to you, all right, now we’ve heard you day that the problem is political. And these older people are being protected at the cost of the younger people who can’t come into the city for this reason. But this is a traditional landlord’s complaint, isn’t it?
RUDIN: That’s right. That’s right.
HEFFNER: What happens to the tenants who would not be able to meet the kind of rents that would be charged if rent control were to go off?
RUDIN: Well, you’ve got to be realistic. And I think I’m realistic. So I’m not saying to you that there should just be an elimination of all rent control. What I’m saying to you is that there ought to be, number one, a means test.
HEFFNER: You mean too many people are getting away…
RUDIN: That’s right. There ought to be a means test that says that if a person’s income is X dollars, that his rent level, he can afford so much of that for rent. When I went to high school, the economic, civic teacher said that you could afford 25 percent of your salary for rent.
HEFFNER: That’s because you went to Dewitt Clinton.
RUDIN: That’s right.
RUDIN: Now it’s changed. Let’s say it’s 15 percent. Now, one could say a lot of people are paying way beyond 15 or 20 or 25 percent for rent. And I’m sure that’s so. But I could show you in our buildings that the great majority are paying considerably less than 15 percent of their income for rent. Now, granted that our buildings are nicer buildings in Manhattan on the East Side and the West Side. But a means test would allow an increase within reason. You have means tests now in all of the Section Eight housing that the federal government subsidizes. You have a means test in the low-income housing. There is nothing that I would think that would be unfair about it. And it would be able to provide the owners of those buildings the opportunity to keep them up. One of the great problems you have is abandonment. We’ve been losing 20 to 30,000 apartment units a year. And the second is the conversion of those buildings to co-op. Now, why does an owner convert the building? Because he’s not getting the return on it, Dick, he’s just not getting the return. If he has to refinance a mortgage for that building today as I just did, and take the balance of that loan and refinance it, go from a five-and-a-half or a six percent mortgage rate, which has been in effect, and got to 13 or 14 percent, it completely wipes out the cash flow. There is no relief on the part of the Rent Stabilization Association that takes that into effect.
HEFFNER: But if you talk about means test, aren’t we functioning now within the context of something of a means test, but a means test for the landlord, with exceptions being made in the rent guidelines and limitations in terms of hardships?
RUDIN: Well, the trouble is that the argument is, well, you have the right to go to hardship and go to conciliation approval. It takes two, three, four years. And it’s a very, very difficult process. We went through it twice. And we’ll never do that again. We’re going to start to do something that my father and my brother and I vowed we’d never do: we’re going to start to convert our buildings to co-op, because we can’t cope. We cannot cope with the problem. And the tenants that are in occupancy now, Dick, are now doing something that we’re going to fight. They’re selling the keys to their apartments. They’re subletting their apartments illegally. They’re in business with my real estate. And I find it terrible when I can’t give an apartment to you or to my friends or their children but I find that the tenants are giving the apartments to who they want to because they’re selling the key. I think that’s outrageous. I can try to do something about it, but that’s what’s happening all over this town.
HEFFNER: All right. In practical terms we have a new administration in the state. Will that make any difference?
RUDIN: Well, we’ve been trying to get the message across. We – I’ve been trying to get the message across. The governor of course at this moment is really concentrating on his budget. And I can’t blame him, and you can’t blame him. He’s got a $1.8 billion budget deficit. He’s got to find the remedy to resolve it. He’s got to lay off people. He’s got to raise taxes. He’s got to do a combination of both. And he doesn’t want to raise certain kinds of taxes. He doesn’t want to discourage business from coming in. So he is focusing in on that area. Then you’ve got the mayor who’s going to have also a budget deficit. I think and we are now studying, I would call it a Marshall plan for housing.
HEFFNER: Government money?
RUDIN: No. It might be government. It might come out to be some kind of government guaranteed money. Remember back in 1946 and ’47 when we all came out of the army? How did the housing business get started? Who built the housing? Who built Levittown? Who build all of the East and West Side and the Queens?
HEFFNER: The GI Loans.
RUDIN: GI Loans. You had Section, a thing called Title 1 Housing. You got 608 housing. You had entrepreneurs, young people, my father and others – we didn’t build that kind of housing – but you had people that wanted to make money and they wanted to do it in the building business. They may have been young architects or they may have been engineers or what, carpenters or plumbers. They were anxious and they thought this was a way to make money. We’ve got to encourage young people to get back into the building business. Maybe it won’t be the Rooms and maybe it won’t be the Lefrechts and maybe it won’t be the Tischmanns, but it will be the next generation of those people who are anxious to make money through the building…The building business is exciting business. You create something from nothing in essence. And the architecture of things makes it exciting. My kids are in the business. They love it; it’s exciting to them. What we have to do is find the formula to get government, private industry and labor to get together as a triumvirate to create housing, because we need, I don’t know, 50, 60,000 units a year to catch up.
HEFFNER: What do you as a builder need to be guaranteed to entrepreneur…?
RUDIN: Well, I wouldn’t convert our buildings, Dick, to co-op if I felt that the process of increased in rent was taken out of a political process, it was tied to the cost of living index, it wasn’t done by a guidelines board appointed by the mayor and others and where they go down and have to be harangued by tenant groups. It think it ought to be taken out of that process and tied to a cost of living index that would show that if my costs went up, whether it’s cost of money or cost of oil or cost of labor, that it would be reflected in the rent, and not guided by a five-person group.
HEFFNER: Would you start right where you are now? Would you be willing to start at this level and say from here on in increases in the price…
RUDIN: Well, you say would I be able to start.
HEFFNER: Yeah, you as a…
RUDIN: Maybe I could. I don’t know, I can’t speak for…You know, one of the great injustices that’s in this town is everybody says, “The hell do we care about the Rudins? They’re rich. What do we care about Harry Helmsley? He’s rich”. But the Rudins and Harry Helmsley and Lefrechts don’t own and control the masses of apartments. Eighty-some-odd percent of the apartments in this town are controlled by one or two, one owner or two, one owner owns one building or two buildings at maximum. Those fellows, they can’t cope. The paperwork today, Dick, is unbelievable. So I can’t speak for that group. We have organizations. I would say an effort to start at some point now would certainly encourage the Rudins to stop converting their buildings, would encourage the savings banks, if we still have any, or the insurance companies or other lending institutions to start to provide the funds for housing, because after all, I can’t build a building without borrowing the money from somebody. You go and interview an insurance company lender or a bank lender and you’ll find they wont’ touch housing with a ten-foot pole because they’re afraid that if the politicians get into the act, goodbye Charlie.
HEFFNER: But at some point they might. What’s the point…
RUDIN: Well, I think that there is a clear-cut and unequivocal guarantee that costs will be reflected in the rent and passed on. Now, you know, there are, in life everybody wants to beat Con Edison and they want to beat the telephone company and they want to beat the landlord.
HEFFNER: Always the landlord.
RUDIN: Okay. So someplace along the line we’ve got to face the issue and bit the bullet. And let me tell you how important it is, because if we don’t do that we’re not going to be able to broaden the tax base of this city. If we can’t broaden the tax base of this city, Dick, we won’t be able to fix the roads and fix the subways and fix the sewer system and fix the water system and fix the bridges. So people can’t get in, they can’t get service; so what the hell good are the buildings that we build or we own if people can’t function, get in and get out safely? The only way we can get the billions and billions of dollars for the infrastructure is through real estate taxes. And the buildings that we won, Dick, are under assessed. And they’re not under assessed because I go down and plead; they’re under assessed because historically because of the rent levels they’re being kept down, just like private homes in this city. The private homes in this city are assessed for probably 20 percent or 30 percent of what a similar private home is assessed for in Nassau County or Westchester County. Now, is that fair? That’s what’s being done because politically that’s the way it’s done.
HEFFNER: We don’t have fools in office. They must be as aware of this as you are.
RUDIN: Of course they are. Of course they are.
HEFFNER: Then why in the past five years, ten years has there not been a change in this pattern?
RUDIN: Well, there was a bill called the Hallistan Decision that was ruled on in the Court of Appeals many years ago, which said there ahs to be an equalization of assessed valuations, that the commercial buildings were paying too much, and the residential buildings were paying too little.
HEFFNER: Nothing has happened?
RUDIN: Sure, the State legislation overruled that, passed a new bill last session, a year ago. So you have to ask that question to the elected officials; don’t ask me.
HEFFNER: There is one question thought that I do want to ask you, and I think it’s a fair one. In your estimation, as specifically as you can be, what would be the impact of the pattern that you’d like to see developed upon present renting populations in New York? What would happen? What would be the movement? You say there’d be a movement of, there would be new buildings built, there’d be a movement in. What happens to those here now?
RUDIN: Well, historically if you look back and study, as people get older they don’t need the larger apartments. They would normally have gone to a smaller apartment, a two or three-bedroom apartment. People would go to a one-bedroom or a studio. A lot of elderly people of course would go to Florida or retire but they’ve kept these apartments because they’re so cheap that they just felt that it’s silly to give up a six-room apartment on Central Park West for $600 a month or $800 a mo nth when they know it’s probably worth $1,500 or $2,000 or $2,500. But why give it up? They came back, they’d have to , in renting they’d have to ,if they were lucky enough to find a three-room apartment in a new building it would cost as much as the six-room, so why give it up? So there’s got to be some inducement for these people to move. You’ve got to create the housing that is going to be higher than they had expected to pay, but not as high. Do you remember in ’62 and ’63 there was a change in the zoning law? Bob Wagner was the mayor and there was a new zoning law put into effect. And for a three-year period those people that owned the land could build under the old zoning from ’61 to ’62 to ’65. And they could build a bigger building. So everybody built. So when the buildings were finished in ’62 and ’63 and ’64 there were so many apartments in this town you were getting six months free rent. You were getting a trip to Europe. You were getting a fur coat. Do you remember that?
HEFFNER: I remember that back in the ‘30s, not in the ‘60s.
RUDIN: Sixty-two to ’65 or ’66. Well, that was great for the tenants. It was great for the city. I’d like to see that happen. I’d like to see a proliferation in healthy times. I don’t want to see it because there’s a depression; I want to see it when the public has an opportunity to be a buyer again. Now, you have that to some extent now in office buildings, Dick. There has been an oversupply of offices, not to a great extent, not the way it was ten years ago. The tenant today is in the position to do a little negotiating. It isn’t, “Here it is; take it or leave it”. I want to see that with apartments. And the only way I will see it with apartments is on the basis of allowing us to build. We’ve got to have maybe zoning saw changes to allow the landowner to develop a kind of economic building there that will provide good housing, maybe a few more rooms than the architectural critics would like to see, but good rooms. I’d like to see government continue and not end tax-abatement programs, because if you don’t build anything you’re only getting X dollars; if you build something and even giving them an abatement you’re getting X plus plus plus plus. And in the future it’s going to be the expansion of your tax base. I’d like to see government use their pension fund money to provide the financing, and government to start using guarantees to provide the finances so that the institutions and the pension funds can go in and feel safe that they will have a good investment. And then I want to see the elected officials really have courage and say anybody that builds housing from this date on is absolutely guaranteed by the Ten Commandments that there’ll never be any political interference or any rent control. Now, they have to have guts to do it. And if they want to see housing done, that’s part of the program.
HEFFNER: You don’t want to be gauged by your tenants, right? Tenants don’t want to be gauged.
RUDIN: I want to have an arm’s-length negotiation. I want to have an arm’s–length negotiation. Okay? That’s what I want.
HEFFNER: What does “arm’s-length” mean?
RUDIN: Well, you have as much power, you can say yes or no to me as well as I can. There’s no gun at anybody’s head. That’s the way I want it to be. It should be a fair, honest negotiation.
HEFFNER: And without any…
RUDIN: And by the way, I think that, you know, I’m here on television talking to you and I’ve got plenty of tenants out there. Maybe some of them don’t think they’ve been treated that way with us. But I think the great majority of them have.
HEFFNER: And yet you want an intervention in the economic process. You don’t want one here between landlord and tenant, but you do want one between landlord and government.
RUDIN: Oh, absolutely. Yeah, because government has stopped the supply of housing in this city. That’s who stopped it. They have forced the major builders of this town to build up Fort Lee, New Jersey. Have you ever looked from the Hudson west and seen those buildings? You know who built those buildings? Mostly New York builders. Go down to Florida and see who’s built all that condominiums from Sarasota down to Miami. New York builders. Because they couldn’t build in New York. They couldn’t get financing in New York.
HEFFNER: Lew, you are an eminently practical person. What’s your estimate as to what the chances are to achieve in a balanced fashion something better, something more than what we have?
RUDIN: Well, I would say normally that I would give it a one-out-of-a-hundred shot. But I’m being more optimistic now because I have never received as many phone calls as I have received in the last 30 to 60 days from people desperate for apartments. And I am so emotional about it now because I can’t. I don‘t know how to tell someone just quietly, I’m sorry I don’t have one, and hang up. I’ve got to get into it and explain what we do.
HEFFNER: Why in the last 30, 60 days?
RUDIN: I don’t know. I don’t know. And I think it’s a good sign. It’s a sign that people want to be in New York City. And maybe it’s a resurgence of people coming back. And that’s gotten me thinking how sad it is that I can’t provide this housing for these people, that I have to tell them, “I’m sorry, you have to buy a co-op”, or, “If you want an apartment in one of our buildings you have to start with a studio or one-bedroom apartment because what we do is when we get a two or three bedroom we move someone up”. I think that’s the fair way to do it. We provide for our own tenants the opportunity to enlarge their requirements. And I’ve been saying this to my brother. I said, “This is a tragedy”.
HEFFNER: Is there any movement on anyone’s part – not the political area, but the construction, the building area – is anything going up other than the luxury, luxury apartments?
RUDIN: The partnership group headed by David Rockefeller has been trying now for about a year to get some lower middle-income housing started, about 150 units. And we’ve been trying to help them, the construction trades people, there’s a building congress group, and they’ve been trying to help. But there is so much, there are so many obstacles in the way. The UDC is involved in it. This is land that they own. And it’s very frustrating. And 150 units is nothing, Dick.
HEFFNER: I know. Let me ask – we have just a couple of minutes left – is there any place in this country where in your estimation there is a wiser approach to what we have been talking about?
RUDIN: Well, there’s been an effort throughout the country in many areas to put rent control on apartments because…
HEFFNER: Rather than take them off.
RUDIN: …rather than take them off because you have, you have an unfortunate attitude that once someone has established a rent level they never want to see it changed. A tenant’s mind, even he may be the richest person in the world, but when he’s a tenant he’s a tenant, and he will not understand that the operation of a building, the labor costs go up, the taxes go up, the cost of money goes up. And there ahs been an effort throughout the country for communities to start rent control. It has been beaten in a lot of places. I think it’s sad. I think what the answer to this is better communication, more honest communication between those of us who own real estate, particularly the apartments, and the tenants in our buildings.
HEFFNER: So what does that mean? It means the real estate owners say, “I want more rent”, and the tenant says, “I want to pay less”?
RUDIN: No. I know. But I think that they’ll have to be more involved in knowing why we need more. Once they buy that apartment and it’s a co-op, they know…
HEFFNER: I know.
RUDIN: …and they meet in a board of directors meeting once a month and they lay off the elevator man that they won’t let me lay off. And they cut the fuel down and they do all of the things that I’m trying to do but I can’t do because I’ve got a political process between me and the tenant. I want to eliminate that. And I have to eliminate it, I guess, by selling my buildings to the tenants. That’s wrong. This town has always been a great renting city. People would come into New York City. They would say, “Well, I don‘t know whether I like it or not. I want a two or three-room apartment. I want to rent”. They didn’t have to put down 50 or 60 or $100,000 to buy an apartment. That’s the way it should be, Dick. And you know, maybe through dialogue like this we could create some kind of a better atmosphere politically to allow us to go back to the free enterprise system.
HEFFNER: Lew, I’m glad you’re optimistic at the end. I hope what you suggest does come about. Thanks very much for joining me today.
RUDIN: Okay. Thank you.
HEFFNER: And thanks, too, to you in the audience. I hope that you, too, will join me again on THE OPEN MIND. Meanwhile, as an old friend used to say, “Good night, and good luck”.