Volume 22, Number 12 | The Newspaper of Lower Manhattan | August 7 - 13, 2009

B.P.C. residents push for ground rent changes

By Julie Shapiro

Battery Park City residents are launching a new campaign to keep their homes affordable, and they have a powerful ally on their side.

That ally is Assembly Speaker Sheldon Silver, who recently met with residents of 11 condo buildings in southern B.P.C. where annual fees are slated to skyrocket in the next several years.

At Liberty House on Rector Pl., for example, residents paying an average of $31 a month in ground rent will have to pay $276 a month starting in June 2011.

“I am very concerned about the impact of these increases on the entire Battery Park City community,” Silver said in a statement. “I believe that these increased payments, particularly in these tough economic times, threaten the financial stability of the buildings and could force residents out of their homes.”

Even before the scheduled increases, B.P.C. residents already pay among the highest taxes in the city. The arrangement dates back to the founding of Battery Park City, which is public land that was leased to developers through competitive bidding. When residents buy condos, they take over a small portion of the developer’s ground lease, essentially renting their space from the Battery Park City Authority.

The authority turns much of that ground rent money over to the city, where it is intended to go toward affordable housing. That is because the earliest plans for Battery Park City called for the neighborhood to have mostly low and middle-income housing. Instead, the planners decided to use the prime waterfront property for mostly market-rate housing, and charge a ground rent that would be used to build affordable housing elsewhere in the city.

Residents now pay anywhere from $30 to over $500 a month in ground rent, in addition to paying the equivalent of city property taxes and a fee to support the neighborhood’s parks. Under schedules negotiated with the developers several decades ago, the ground rent payments are set to increase dramatically in the next several years.

A source familiar with the discussions between Silver and the condo owners, speaking on condition of anonymity, said the solution is to draft a long-term agreement that eliminates sudden spikes in ground rent.

“We can’t see why ground rents have to double or in some cases more than double,” the source said. “That’s just added tax dollars flowing to the city.”

Jim Cavanaugh, president of the B.P.C.A., said he was open to meeting with Silver and the residents but could not comment on their ideas because he hadn’t seen details.

The authority has already adjusted ground rents at three buildings in Battery Park City: the Regatta, the Liberty View and the Cove Club. But those buildings were slated to pay much more ground rent than the buildings now meeting with Silver, and Cavanaugh has said that the decision to mitigate the increases at the Regatta, Liberty View and Cove Club should not be viewed as a promise to help other buildings as well. (The Cove Club was dissatisfied with the authority’s offer and is among the 11 buildings now working with Silver.)

One of the condo owners hoping the authority will change its mind is Eric Wallace, who bought a unit in the Liberty House in 2002 with assistance from federal 9/11 recovery grants. He and his wife want to raise their young sons in the neighborhood, but they would have trouble paying the planned 10-fold increase in their ground rent.

“That’s just not a sustainable way to grow a community,” Wallace said.

On top of ground rent and taxes, Wallace and other condo owners also pay building maintenance fees and extras like flood insurance. While virtually all fees are increasing, Wallace, who works in healthcare, said the economy means that his family’s income is staying flat, and he knows other families that have had to leave the neighborhood.

Last week, Wallace started an online message board
(groups.yahoo.com/group/bpcgroundrents) for concerned B.P.C. residents to share information. More than 20 people have joined so far, including one retiree who wrote that the ground rent increases would be “devastating.”

Wallace said the model of Battery Park City generating revenue for the rest of the city was based more on a vision of Battery Park City as a crash pad for wealthy stockbrokers, not on the family-oriented community that the neighborhood has become.

Terry Lautin, a broker with Prudential Douglas Elliman who has been living and working in B.P.C. since 1998, agreed that the neighborhood’s residents are being disproportionately taxed.

“I don’t know that the escalation of [ground rents] is really going to be helpful for anybody,” Lautin said. “It’s still a young neighborhood. Just because it’s enjoyed healthy growth, I don’t know that you’d want to penalize that.”

Lautin also pointed out that the neighborhood has been through a lot since 9/11, from toxic dust to the seemingly endless rebuilding.

Tom Tam, a broker with Battery Park Realty, said the maximum monthly ground rent that would make sense is 25 cents per square foot, or $250 a month for a 1,000-square-foot apartment. Some condo owners will be paying more than twice that figure after the increase.

Tam said he has had buyers back out of deals after finding out about the upcoming ground rent increases.

Charles Urstadt, vice chairperson of the B.P.C.A. board, said the question of offering rent relief is not a simple one. He objects to any changes to ground rent agreements that reduce the amount of money that goes to the city for affordable housing.

Urstadt said that when the authority sells bonds, the deals are based on the authority’s finances, including the amount of ground rent the authority expects to collect. Changing the ground rents could violate those agreements, Urstadt said.

In addition, Urstadt pointed out that the city should have a say in any changes, since the city is the party that gets much of the ground rent money. A spokesperson for the mayor’s office said in an e-mail that the city would have to review the details of any proposal before commenting.

One argument against changing the ground rents is that the condo owners knew what they were getting into when they bought their units, and they received a below-market price for the units because of the future ground rent increases.

In the 1990s, Battery Park City apartments sold for 25 to 30 percent less than comparable units in other neighborhoods, said Tam, the broker.

“If you bought it over 10 years ago, then you have good deal,” Tam said.

Both Tam and Lautin, the Prudential broker, said reducing ground rents would increase sales prices, which would benefit current residents.

Wallace, the Liberty House resident, said he is not looking to make money off of a reduction in ground rent — he just wants to be able to afford to stay in his home. While Wallace said he has always known about the rent increase, he was not expecting it to come in the middle of an economic downturn. At a time when corporate America is receiving all sorts of subsidies and tax breaks, Wallace said it makes sense to offer some assistance to homeowners like himself and his neighbors.

“This is a cost of living issue,” Wallace said. “We’re just trying to make sure we have enough to get by.”

Julie@DowntownExpress.com

 

 


 

 


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