Paupers to Millionaires

The Manhattan landscape is being dynamically transformed by private developers. New residential towers are rising on the Upper East and West sides and downtown. The one exception is in the city's public housing projects, which look much as they did when they were built generations ago. Even the residents are pretty much the same — the New York City Housing Authority says the turnover rate in calendar year 2006 for its conventional public housing apartments was 3.62%, and one study showed that the average stay in public housing for a family is 17.7 years.

The New York Sun has long advocated selling off these buildings and the land they sit on to private owners. In an August 8, 2002, column in the Sun, J.P. Avlon had suggested opening up to private development some of the waterfront property along the East River between the Brooklyn Bridge and Houston Street that is now occupied by housing projects. And a December 13, 2002, editorial took a broader view, still.

"Across the country," we said, "far-sighted political leaders are destroying public housing projects. From the Pruitt-Igoe projects in 1972 in St. Louis, to the Robert Taylor Homes in Chicago in 1998, to the New Brunswick Homes destroyed in New Jersey in August 2001, to the Christopher Columbus Homes in Newark in 1996 ... , the failed vision of governmentrun housing projects is being demolished in a puff of concrete dust. Everywhere, that is, but here in New York City, where instead of getting the city out of the housing business, Mayor Bloomberg wants to build more units."

Our 2002 suggestions went nowhere, though Prime Minister Thatcher helped ignite the British economy by selling "council flats." So we are now willing to revise our proposals. Never mind selling the public housing projects in Manhattan, or even in some of the more choice areas of Queens and Brooklyn. Why not just give the apartments away to the tenants who live there — and instantly make hundreds of thousands of poor New Yorkers into wealthy ones?

Given the low turnover, the long average stay, and the lack of the political will to sell the buildings, these tenants for all practical purposes own the apartments already. But they can't turn the value of a below-market-rate New York City apartment into capital that they can invest in starting a business, leave to their children, or use to buy a comfortable home elsewhere.

As our 2002 editorial noted, many of these housing projects are in prime neighborhoods, where nearby apartments are selling for millions of dollars. They are on East 28th Street, Park Avenue, Fifth Avenue, near Central Park West. Those along the East River in Manhattan feature the same views enjoyed by those in apartments Tishman Speyer is now renting in Stuyvesant Town starting at $3,675 for a two bedroom and $4,625 for a three-bedroom and by those in condominiums Donald Trump is selling at his World Tower for $10 million each.

What would public housing tenants do if given title to their units? They'd sell in a twinkling. It'd be like winning the lottery. The new owners would be free to improve the interiors of the units. And, unlike the current residents, they'd pay property taxes rather than consuming taxpayer subsidies.

Objections to this idea can be expected from two directions. Some will argue that it is too generous to the poor: What did a public housing resident do to deserve a $1 million giveaway? The answer to that objection is that there already is a $1 million giveaway to public housing tenants. The average monthly rent in a public housing project is $336. Compare that to the market-rate Stuyvesant Town rents, and the value of the subsidy to a publichousing tenant is an annual $48,000. Multiply that times the average stay of 17.7 years, and you are already talking about an $850,000 subsidy for each tenant family.

And that is assuming that Manhattan free-market rents won't grow faster than public housing rents, a questionable assumption. Taxpayers would get back tens of millions of dollars, maybe even hundreds of millions of dollars, in new tax revenues that could help lighten the burden that the city's existing taxpayers already bear. When public housing tenants sold, they'd pay the city and state real estate transfer taxes, and perhaps even capital gains taxes. Their real estate brokers would pay income tax on their commissions. The new owners would pay property taxes, and the craftsmen who renovate the kitchens and bathrooms in their apartments would pay income taxes.

Another objection can be expected from left-wingers who view it as a plot to get the poor out of New York, or out of Manhattan, or to reduce the amount of "affordable" housing in the city. Not so. Public housing tenants who chose not to sell their newly owned apartments would have every right to stay. If politicians wanted to, they could even use some of the tax revenue windfall from the sales to build more supportive housing elsewhere in the city for the elderly, the disabled, or the mentally ill, or to pay for vouchers for the poor that could be used to pay for market-rate housing. Or for down-payment assistance to create more new homeowners. That would direct housing assistance to those who really need it most, rather than those who make it through the years-long waiting list for a spot in a choice Manhattan housing project. It doesn't help those on the waiting list to keep the tenant population in the housing projects stagnant. And it's paternalistic for "advocates" of the poor to try to force a tenant to stay in Manhattan when the tenant himself would prefer to take the proceeds of his sale and move from Manhattan to a middle class suburb in New Jersey or Pennsylvania, where the cost of living is cheaper.

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The idea of giving away these apartments isn't all that different from the land reform attempts led by the famous Peruvian economist Hernando de Soto. Mr. de Soto has focused on the developing world, but it may be that the plight of those in housing projects within America is similar to that of South American sharecroppers who lack formal title to their lands. The tenants of housing projects have assets — the right to a below-market rate apartment — but they lack capital that they can save, invest, or pass on to heirs. As the Web site of Mr. de Soto's Institute for Liberty and Democracy puts it, "the legal property system is in fact the hidden architecture that organizes the market in every Western nation — and the missing link for ensuring the rise of widespread legal entrepreneurship in every developing nation."

What most attracts us to this plan, though, is not strictly how it looks from the perspective of the well-to-do — a chance to lessen the tax burden — or how it looks to the poor — a chance to get rich. It is that it offers a chance to lessen the divide between rich and poor by transforming a whole class — about 200,000 residents of public housing in Brooklyn, Manhattan, and Queens — from recipients of a government subsidy into self-sufficient middle-class Americans. And that it offers a chance to reclaim hundreds of buildings of housing projects on hundreds of acres of prime real estate in the city, land now locked in stagnation, that could be integrated with the surrounding neighborhoods and become part of the cycle of dynamism and improvement and transformation and building that makes New York City today such an exciting and vibrant place.