Economakonomics: E Pluribus Mansion
posted by Frank Pasquale
As the ubermenschen of New York’s FIRE industries (finance, insurance, & real estate) continue to erode rent-stabilized space in Manhattan, many conflicts are occurring. One of the most dramatic is the Economakis family’s efforts to convert the 60 rooms of 47 E. 3rd St. (once the home of at least 20 tenants) into a single family home:
Under the law, landlords have the right to terminate the leases of rent-stabilized tenants if they plan to use the space for themselves. They must notify the tenants at least four months before their leases expire. . . . Andrew Scherer, the author of “Residential Landlord-Tenant Law in New York” (West Group, 2005), said: “The size of the space that somebody claims they intend to live in must pass what lawyers call the ‘giggle test’ – the notion that the claim is believable and will not cause a judge to start to giggle. The idea that someone would take 15 units with 60 rooms as a primary residence is absurd.”
Scherer made that observation in 2005, but by 2008 a state court in New York (perhaps influenced by MTV’s Cribs series) didn’t giggle and approved the Economakises’ plans. As the NYT reports, “Now that the Court of Appeals has sent the case back to housing court, lawyers estimate a resolution could still be two years away.” Some of the apartments in the building will simply be converted to empty air above the planned mansion’s palatial living room; others will form a “guest room”–leaving one to wonder if the “personal use” exception could countenance just about any building design.
The tenants have a website, and according to the Times claim that “the home the Economakis family envisions is exactly what threatens the character of the neighborhood they claim to love.” I personally don’t find this “cultural” argument convincing; New York neighborhoods change all the time. But the class dynamics are compelling, and starkly illuminate the “buying power externality” that is a hallmark of ever-increasing inequality. Commentator Neil DeMause’s view here is worth re-printing:
It shows how New York’s battered rent laws, written at a time when the [extraordinarily] wealthy could be safely contained to a short stretch of Fifth Avenue, are sadly out of date for our modern Gilded Age. . . . Or, if housing laws can’t be changed, maybe it’s a sign that 25 years of tax cuts for the rich have gone too far. After all, what’s getting sued by your tenants for wanting to turn their apartment into a nanny’s room if not God’s way of telling you you have too much money?
Of course, some modest combinations of apartments should be approvable. But Manhattan’s leaders should beware a cultural trend that would turn the city into a Metropolis-style arcadia for a superclass (with everyone else presumably in Jersey City and Queens). (For those unfamiliar with Lang, the film Metropolis is “set in the year 2026, in the extraordinary Gothic skyscrapers of a corporate city-state, the Metropolis of the title. Society has been divided into two rigid groups: one of planners or thinkers, who live high above the earth in luxury, and another of workers who live underground toiling to sustain the lives of the privileged.”). I think the state has a legitimate interest in promoting class diversity within neighborhoods, especially given Mickey Kaus’s observations on the decline of other “class-mixing” institutions in his book The End of Equality.