FEBRUARY 17, 1^12





MORE TENEMENT HOUSE BUYING LOOKED FOR

Several Years of Reduced Building Activity Has Placed Tenements On a
Normal Basis—Subway Building An Important Factor In Tenement Renting.





TiiE effects of the industrial depression
that followed the panic of liJOT
were istrong-ly reflected in all departments
of real estate activity. New construction
was decidedly curtailed, and for a time
trading- was almost at a standstill. The
recovery was slow, hut within two years
the general market had regained some¬
what of its former buoyancy, and in 1909
building operations wei-e resumed to siioh
an extent as to make that a banner year
in the history of tlie Building Depart¬
ment. Since the panic several remarkable
booms have occurred, notably on Fourth
avenue, in the district around the Penn¬
sylvania terminal and on several of the
prominent avenues of the West Side above
72nd street. In many cases values have
increased far above the levels reached
pxior to the depression. In fact, in nearly
every branch of real estate endeavor there
has been a sporadic if not well sustained
resumption of activity since 1907, and in
spite of the generally poor trade condi¬
tions which have persisted, the sum total
of real estate business transacted makes
a vei"y creditable showing:.

In one department alone, that of tene¬
ment houses, there has been no tendency
to resume active trading, and but little
disposition to proceed with new construc¬
tion. Ey tenement houses in this connec¬
tion are meant the five and six story
walk up structures found mainly on the
East Side which house the city's cosmo¬
politan foreign population. The Building
and Tenement House Departments recog¬
nize no such definition, but class all build¬
ings housing three or more families as
tenements.

For some years prior to 1907, the East
Side tenement was a favorite form of in¬
vestment for people of moderate means
and speculation in this form of property
was extremely prevalent among profes¬
sional operators. Not only did the older
houses change hands with great fre¬
quency, but an immense amount of new
construction was indulged in. As general
trade conditions were excellent, the labor¬
ing class well employed and tenement va¬
cancies few, rents became unusually high
and many tenement 'house owners bene¬
fited to the extent that they received an
income on their investments of 10, 15 and
in some cases even 20 per cent.

Pauic   Depressed  the   Market.

After the panic trading in tenements
ceased almost entirely, and the extent to
which new construction was curtailed
may be found in the records of the Tene¬
ment House Department. In 1906, which
stands out prominently as a boom year in
real estate, 4S7 structures of a purely
tenement house type were projected on
Manhattan Island. The panic occurred in
the fall of 1907, and the first six months
were not so greatly affected, yet the num¬
ber of houses planned during tbe year was
only 212. In 190S the number dropped to
119, I-n the following year, concededly
one of the greatest construction periods
in the city's history, the number of tene¬
ment houses planned was only 171.' In
1910 but 96 houses were projected, and
during 1911 the number increased slightly
to 112,

Buying also fell off to a remarkable ex¬
tent, and up to the present time has sig¬
nally failed to show any recovery. What
is generally known as the tenement house
district of Manhattan covers nearly all of
the East Side from a point just north of
the Brooklyn Bridge, and east of Lafay¬
ette street, as far up as Astor Place.
Ahove that Third avenue might be con¬
sidered the western boundary, and thr
area reaches north to the Harlem river.
Harlem proper, from 110th street to the
river, and as far over as Eighth avenue,
is- liberally supplied with tenements, while
certain avenues of the West Side, such as
Columbus and Amsterdam., have tenement
structures but little different in type from
those found on the East Side. In all
these districts at the present time there
are seldom more than a dozen houses re¬
ported sold by brokers in any one week,





and while the number of conveyances is
much greater, a large proportion of these
are the result of foreclosure or partition
sales and do hot represent trading at pri¬
vate contract. A fair illustration of the
decline in private sales, is furnished by
the report froni one prominent law firm
which makes a specialty of tenement
Iiouse contracts. In the month of June.
1907, 90 titles were closed in this ollice;
in the four succeeding years, the entire
number of titles closed did not exceed
this amount.

The reasons advanced for this curtail¬
ment are numerous and many of them
valid. The average investor in tenement
houses has always been the small mer¬
chant, the physician, the woman of mod¬
erate means and the lawyer. The high
rate of return from this class of proper¬
ties and the comparatively small amount
of cash necessary to acquire ownership
were the attractive features, and in most
cases it was the surplus earnings that
were invested. In the last few years the
incomes of many of these investors from
their own lines of business have been
greatly reduced, and as a result there has
been no surplus to invest.

The tenement house law, enacted in
1001, required many expensive changes in
existing structures and imposed onerous
burdens of expense on numerous owners.
Most of the requirements were just and
made for the welfare of the community,'
but in many cases the law was tmneees-
sarily harsh in its workings and demand¬
ed expenditures not entirely warranted.
Violations were placed by the department
in great numbers, and the trouble and
expense attendant upon compljing with
these was sufhcient to deter investors who
already owned ihouses from buying others,
even when the capital necessary was
available.

The curtailment of general business
after the panic, threw many workers out
of employment, and vacancies were un¬
usually numerous. Owners in most cases
found it necessary either to reduce rents
or keep their rooms idle, and the natural
result was greatly reduced income's.

Marg'lnnl  Operaflns.

When times were good and money easy,
the construction of buildings was carried
on with dangerously small margins, and
it was not at all imcommon to find tene¬
ments encumbered with four different
mortgages, the owners trusting to the high
rents and well filled ihouses to pay their
expenses and produce a profit on, in many
cases, an imaginary equity. When hard
times came and reduced rents and vacan¬
cies occurred, this dangerous form of mar¬
ginal operating immediately suffered, and
foreclosures followed rapidly. The wiping
out of the "shoe string" operator and the
doing away with third and fourth mort¬
gages has undoubtedly worked for the
general good of real estate, but the nu¬
merous foreclosures and calling in of
mortgages served to bring tenement
houses somewhat into disrepute, and the
natural buvers for this form of invest¬
ment became wary. In addition to the
reasons above given for the diminution m
ienement trading, increased taxes in the
last few years have imdoubtedly had som'e
effect, as the burden of taxation falls on
the small owner with greater severity
than on the one with large and expensive
holdings.                                    .        ^,      „

With these conditions m view, the lu-
ture of tenement houses is very naturally
a matter of speculation, and the question
as to the possibility of their again be¬
coming a popular form of investment is
frequently asked. In the last few months
there has been a slight increase m the
number of sales reported, particularly on
the lower East Side, which would seem
to indicate a return of confidence on the
part of investors in thi.s form of real es¬
tate The reasons for the decline in trad-
in- have been stated above, but it is un¬
reasonable to suppose that because certain
a"buses crept in and certain unlocked tor
conditions arose, this form of investmient





"wni'ceais'e,: Entirety "to prove attractive in
the future, and that buying and selling
of tenements wil] no longer be a factor in
the market. ■ In many ways the period of
inactivity !ias been beneficial, and many
well informed brolsers and operators pre¬
dict an early resumption of buying for
investment  if not for speculation.

According to the statements of East
Side agents, renting conditions to-day are
fairly good; in fact, they are probably
better than at any time since the panic.
In spite of the fact that general manu¬
facturing has not befeit resumed to the ex¬
tent that prevailed in boom years, condi¬
tions have been growing better of IMe and
the percentage of tenement dwellers un¬
able to pay rent from lack of work is
much smaller than it was. "U^'ages in
many cases are not as high as in former
years, and employment is not as steady,
and for this reason rents are materially
lower 'than they were. In this respect,
however, the con'dition is a more healthy
one, as many of the rents prevailing in
the years just prior to 1907 were higher
than were justified by the accommoda¬
tions afforded. It was not uncommon to
find lower East Side tenements renting as
high as -'?7 a room. Others less desirable
rented for $5 and $6. When one consid¬
ers that to-day an apartment in a five
story house on Washington Heights with
all modern conveniences, such as electric
lights, steam heat, shower baths and tele¬
phones, can be secured at the rate of $7
a room, it may be readily seen that such
rC'nt for a tenement was wholly unwar¬
ranted and did not make for the best in¬
terest of the community. The average
tenement rent to-day runs from $3,50 to
$5.50 a room, and therefore 'Comes more
nearly to a sound economic basis. When
rents are normal a slight depression in
business activities does not have as far
reachring an effect, as workmen are able
to accumulate some surplus with which to
tide them over a short period  of idleness.

Then, too, the curtailment in building
has permitted an equalization of supply
and demand, as the new buildings have
scarcely kept pace with the number of old
ones demolished to make way for business
structures, bridge terminals and other ex¬
tensive municipal improvements. In
many cases whole blocks of houses have
been removed and other city developments
such as the County Court House site,
which are planned for the near futurre,
will unhouse a large number of tenants.

Vast undertakings of a constructive na¬
ture have always affected the tenement
house districts because they attract to
the city numbers of unskilled laborers who
must be housed and who prefer lo live
in the vieanity of their employment. The
Lexington avenue subway, now under
construction, either runs through or bor¬
ders on the tenement house district of the
entire East Side, and is likely to prove an
important factor in solving the vacancy
problem. Othei- subways are in prospect
and no doubt a very large amount of un¬
derground construction will be carried
along during the next ten years.

The tenement house law of 1901. which
added so many burdens to the owners,
was considerably amended in 1900. and
many features productive of unnecessary
expense were either 'modified or entirely
eliminated. The law as it stands to-day
is excellent, and the disposition of the de¬
partment lis to treat owners with consid¬
eration where changes m existing build¬
ings are made necessary.

Standnril   Values   Obtain.

Building and trading on small matrgins
have been greatly discouraged in later
years by loaning institutions and others
■handling funds for mortgage purposes,
w-ith the result that fictitious equities have
largely disappeared and prices have
dropped to meet a real standard of value.
Plenty of tenements are for sale to-day
at prices far below, those of 1906, and
while rents are considerably lower, in-
■Gomes are, more staWfi-and . investments
mcA-e s©cyre;"on:account af the absence of