Columbia University Libraries Digital Collections: The Real Estate Record

Real estate record and builders' guide: [v. 89, no. 2292]: February 17, 1912

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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