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at a time when the [extraordinarily] wealthy could be safely contained to a short stretch of Fifth Avenue, are sadly out of date for our modern Gilded Age.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.
June 16, 2008 at 3:03 pm
Posted in: Economic Analysis of Law
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Responses (6)
KipEsquire - June 16, 2008 at 4:32 pm
Given that rent stabilization laws in NYC were implemented as “emergency“* (i.e, temporary) programs, for you to lament their “erosion” — after more than 60 years — is deliciously asinine.
Note also that rent-stabilization in New York is not means-tested. Rich New Yorkers can — and do — exploit it (and that’s definitely the right word) as much, indeed more, than their lower-income neighbors.
But don’t let facts stop you from defending your “class diversity” fantasies.
(*Much like our schizophrenic employer-based health benefit tax code was also fraudlulently peddled by Washington as “temporary” — which doesn’t stop people like you from classifying it, somehow, as a “private sector” failure.)
Sam B. - June 16, 2008 at 5:55 pm
Kip,
Although I don’t follow housing laws too much, I sincerely doubt that today the new rich of New York are exploiting rent-stabilization. It appears to me (as someone who came here within the last 10 years) that it doesn’t favor the rich or the poor so much as the people who moved here a long time ago; that is, whether you’re rich or poor, you’re probably not getting rent-stabilized unless you got here twenty years ago.
(Of course, if I’m wrong, please, please let me know. And also, of course, let me know how I get in on it.)
A.J. Sutter - June 16, 2008 at 10:02 pm
Kip,
I think you could make your comments in a more civilized tone. If there’s substance to your remarks, it should be able to stand on its own, without being packaged in ad personam rhetoric. If you want to use your own blog to indulge your style, that seems more appropriate.
GMUSL Alum - June 17, 2008 at 11:10 am
Gee Frank, maybe if they could actually raise the rents on those rent-stabilized apartments in response to vastly-increased demand, they wouldn’t be going through this process in the first place?
What’s the incentive to bring new rental housing online or maintain buildings if the owner isn’t going to profit from it? Sure, building codes present a stick, but with the vast majority of landlord-tenant laws favoring the tenant instead of the landlord, there has to be some sort of carrot for the landlord.
Paul Horwitz - June 17, 2008 at 4:51 pm
Characteristically interesting post, Frank. But doesn’t “ubermenschen” strike you as somewhat strong language in this context?
Frank - June 17, 2008 at 4:57 pm
Paul, I wanted to use “masters of the universe,” but was afraid people would miss the Wolfe reference! Ubermenschen’s more easily google-able. . . . but I admit it only makes sense in the context of other claims I’ve made about the increasing power of money to command biotechnological enhancements and life-extension.
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