The Lower Manhattan residential real estate market today is a very different reality than one might have imagined soon after the Sept. 11 attacks, when worries about personal security and environmental safety caused many residents and businesses to flee the area. Where the prospect of a terrible meltdown once loomed, the market has recorded an astonishing comeback.
A major incentive in keeping and bringing people to the area has been the Residential Grant Program of the Lower Manhattan Development Corporation (LMDC). Now that the application period for grants has ended, many in the real estate industry say they are confident that the gains made over the last two years will not be reversed, and regard the program as a springboard for what they hope will now be a self-perpetuating, strong market.
The residential grant program, which began last June and which stopped accepting applications in May, aimed to halt occupancy rates which plunged to around 60 percent after the attacks, LMDC spokeswoman Joanna Rose said. The program received more than 40,000 applications, and some $188 million in program funds have been awarded so far. The program has led areas like Battery Park to record its highest occupancy rate ever, around 97 percent. A spokesman for Downtown Alliance, a group dedicated to the economic and social development of the area, said the 3 percent vacancy figure applies to downtown in general.
Under the program, monthly assistance payments were offered to people who were willing to make a two-year commitment to live in the downtown Manhattan area. Residents who live in Zone 1, the area closest to the World Trade Center site, receive $500 a month, while those living further away from the site receive $250 a month. Landlords under the program can charge no more than 95 percent of the rent prior to Sept. 11.
Many in the industry, including officials at The Real Estate Board of New York, said they don t believe gains will be reversed, and that the program lasted the right amount of time. “At REBNY, we ll probably argue for longer incentives to bring more results,” said President Stephen Spinola. “But I think the two-year period was appropriate, and if we find increased vacancy rates in six months, then we ll rethink that,” he said, adding that the program “has been a huge success.”
Douglas Wagner, president of Manhattan brokerage firm Benjamin James Associates Inc., predicts that vacancy rates will continue to be low since buildings are full, Pace University is back downtown and hiring is occurring again on Wall Street and people want to live close to work.
Others say that, for the moment, business volume has not taken a hit three months after the end of grant applications. “I did more business when the grant was available, but business is still strong,” said Herbert Cheng, a real estate broker in the financial district.
Cheng also noted that the area is still popular and people get more square footage for their money than in other parts of Manhattan, because the converted office buildings in the area have larger spaces.
Far from ending too soon, Andrew Heiberger, President and CEO of Citi Habitats, thinks the program was actually quite generous, saying he didn t think residents needed to be paid $500 per month as an incentive to rent a one-bedroom apartment. He said a $300 incentive for a one-bedroom apartment would probably have done the job.
In addition to boosting occupancy rates, the program has also delivered new residential properties to the downtown marketplace as buildings went from commercial to residential use. “Residential conversions are going on in Lower Manhattan involving both previously commercial units and brand new units. There s been 26,000 new units in Lower Manhattan since Sept. 11 and incentives like the residential grant program have helped a lot,” said Downtown Alliance spokesman Bryan Evans, who said the program has had a “tremendous effect.” Cheng said that when offices relocated from the area after Sept. 11, it made more sense for the owners to convert them to residential uses rather than allow them to be vacant, and that the grant program was helpful in getting these new units quickly reoccupied.
Entirely new residents have also appeared in the area. Recalling that people moved into the area from places like Astoria and Hoboken, Wagner said that by lowering the cost of rentals, the grant allowed people who could not live in the area before Sept. 11 to afford it.
“For $1,250 or $1,350 a month, you can rent a one bedroom apartment and that s the only place apart from rent stabilized tenement buildings where you could do that,” he said. The areas around the World trade Center site, part of Zone 1, have benefited the most from the influx of new residents. Rose said that over 50 percent of the current residents in this area identify themselves as new residents.
For all its acclaimed success, though, the program has been far from a hitch-free operation.
Lately, attention has been focused on those who sought to abuse the program. Rose said that some people who either did not live in the area or moved out of the area in violation of their two-year commitment had received monies under the program.
An amnesty program set up by the LMDC, which had a deadline of September 30, was meant to give such people a one-time opportunity to return grant money and avoid prosecution.
Spinola thinks the LMDC s amnesty program was “the absolutely right decision,” since there may have been people who had legitimate reasons to leave Lower Manhattan. “I have not heard that it was a significant problem,” he said. “After all, we give amnesty programs for parking tickets, and for people to bring in their guns. This is an issue of money and it was an emotional time.”
However, despite the amnesty issue, there is a broad consensus that the LMDC has achieved its goal of restarting the real estate market in the area and rescuing it from looming disaster. Now a strong momentum has kicked in, many say. “LMDC was the springboard for what is now a self-perpetuating strong market,” Wagner said.