did the NY Times just write a front page obituary for the Soho real estate market?

 

[UPDATE Dec 17: I just put up a new post, attempting to summarize (highlight might be a better word) from the treasure trove of comments to this thread. Keep those cards and letters coming! and see this cheat sheet:  real world impact of Soho artist-in-residence rules and Certificate of Occupancy enforcement, as the dialogue continues]

[UPDATE Dec 1: I did (finally) step back from the immedaite post-Nov 12 frenzy; the reslt is yesterday’s post, how are Soho artist-in-residence articles like the Richter Scale in California?. More to come, sooner or later.]

[UPDATE Nov 16:  I am going to want to step back from the post below, and probably do a more measured post on What Does it Mean? now that I have had had a few days to reflect, and to stop hyper-ventilating. After I check in with some more people on the front lines of the AIR issues in Soho. Maybe in a week?

Because the immediacy of blogging lends itself to occasional hysteria, I suspect lots of other people interested in Soho are developing more nuanced (less frenzied) views in response to the NY Times article on Friday. Manhattan Loft Guy hopes to be among them by contributing more to the dialogue than The Sky May Be Falling. In the meantime, feel free to continue commenting here. THX to all]

charades are hard to play in the light
[Be warned: this is going to be the longest Manhattan Loft Guy post ever!] I have long wondered about the Artist In Residency program and how it is applied or ignored, finding nearly universal agreement that it is much more ignored than applied. In fact, in the last two weeks I have talked to lawyers and agents about this, each of whom is a bit surprised this morning. Christine Haughney’s front page piece in today’s New York Times (Suddenly, SoHo Heeds Law Limiting Lofts to Artists) ends that fantasy about AIR being more ignored than applied. Sober reflection (and more learning) lies ahead, but I wonder if now The Market for lofts in Soho is about 10% of what people have thought it was.

If, as one agent is quoted by Haughney, the AIR program means that “SoHo … is living a big charade”, the game may now be over. And by “over” I mean that many lofts may be simply unsaleable, as the number of potential buyers may be really, really, really small. I will try to remain calm long enough to unbundle this conundrum. But first I might have to freak out about some numbers.

how does this compute?
As Haughney says (and I bold),

The [AIR] rule, rooted in city zoning laws dating back at least three decades, covers nearly all owner-occupied residential buildings in roughly five dozen blocks north of Canal Street. The laws permitted the use of these former industrial spaces as residences, so long as each apartment contained an artist certified by the city.

In theory, then, “nearly all” residential sales in Soho would be under teh the AIR program, with artist certifications. According to Haughney’s analysis of city records, there have been 192 artist certifications in Soho from 2003 into this year, 14 so far this year, and 14 in 2009. According to a StreetEasy search thsi this morning, the number of sales in Soho recorded since January 1, 2010 is … 235. Some of those 235 are specifically commercial space, and some are entire buildings, but I doubt the residential unit portion is less than 80%. if so, then about 174 sales occurred in Soho this year without AIR certifications (235 x .80 = 188 – 14 = 174).

In theory then, the 174 buyers without AIR certifications who bought lofts in buildings that are required to limit occupancy to certified artists did so "illegally". That is, only 8% of Soho sales in 2010 were AIR compliant.

I have some truly dire potential consequences in mind, but I first want to step back.

the rules, such as they are
The city’s Department of Cultural Affairs is responsible for the certification process; the Department of Buildings issues Certificates of Occupancy. This starts from a zoning law: it is illegal to live in an area zoned for manufacturing use; Soho is (still!) zoned for manufacturing. But the law makes an exception for artists, if they qualify for the exception.

Regarding artist certification, the DCA says (with my bold for certain interesting words):

• certification as a working artist is necessary in order for an individual to qualify for joint living-working space in the M1-MA and M1-MB zoning districts (SoHo NoHo)
• This permits fine artists working on a professional level who demonstrate a need for a live/work loft to reside in specific lofts zoned for manufacturing.

The application process and content is the very model of I-know-it-when-I-see-it decision-making. First, it provides a little more meat on the bone of “artist”, quoting the state Multiple Dwelling Law:

"a person who is regularly engaged in the fine arts, such as painting and sculpture, or in the performing or creative arts, including choreography and filmmaking, or in the composition of music, on a professional basis and is so certified by the city department of cultural affairs and/or state council on the arts."

Note that the criteria essentially require that the artist need (and use) the loft for the art, and not just as a terrific place to live:

 1.  The individual is engaged in the fine arts, not the commercial arts, including but not limited to painting, sculpture, choreography, filmmaking, and the composition of music, regularly and on an ongoing basis;

 2.  The individual demonstrates a serious, consistent commitment to his or her art form;

 3.  The individual is currently engaged in his or her art form;

 4.  The individual demonstrates a need for a large loft space in which to create his or her art.

The DCA considers the word “professional” in the state law as reflecting more focus than income (the classic starving artists can apply!):

the word "professional" refers to the nature of the commitment of the artist to his or her

art form as his or her primary vocation rather than the amount of financial remuneration earned from his or her creative endeavor

The certification is time limited. If a certified artist moves from one loft to another, the artist must re-apply and will be considered on his/her work since the last certification. I.e., it is not a life-time pass.

The application itself must be submitted under oath. It asks very specific questions about your work and the space you need i which to do it. I will copy the whole thing below, in red because it deserves emphasis, but let’s look at the process.

there’s a committee, of course
Haughney notes that the Artist Certification Committee presently has two people on it, whom she refers to as “judges”. I love the word “tinted” in this paragraph:

A review of some rejection letters … provides something of a tinted view of the neighborhood’s art scene, and of art criticism. The judges rejected a jewelry maker for producing work that was too commercial and a photographer whose pieces did not show enough “focus, quality and commitment.” Others were turned down for being a student, a “hobbyist” or an “interpretive artist.” One rejection letter stated that “while your work as an advocate and adviser to artists working in film is surely valuable to the film community, this role does not fit the legislative criteria

is the law The Law if it is not (much) enforced?
Yes, the law is that nearly everyone who lives in Soho has to be certified as an artist. Manifestly, that is not the case. Soho is now full of people who can afford multi-million dollar lofts who (a) do not regard art as their primary vocation and/or (b) do not require a significant portion of their loft in order to “do” their art. How did we get to this position?

We got here because, over the course of years, very, very few artists took the trouble to seek certification, about 30/year since 2003, with only about 85 certifications per year going all the way back to 1971, according to Haughney.

We got here because, over the course of years, coop and condo boards approved purchase applications from people who were not certified as artists (sometimes insisting on a waiver letter from the buyer acknowledging this awkwardness, sometimes not).

We got here because, over the course of years, banks had no problem lending into buildings zoned only for manufacturing without checking if the legal exception for “artists” applied (and title insurers insured title).

We got here because, over the course of years, real estate agents and real estate attorneys advised clients who asked that the likelihood that this would be a problem were slim.

We got here because, over the course of years, developers sold beautiful new condos that looked like residences (and whose by-laws limited use to residences) but were really “manufacturing” or — for exactly the right kind of certified “artist” — live/work space. (I looked this morning at the Condo Declaration of a Beautiful New Condo in Soho that Property Shark shows as M1-5B zoning; I did not see a single reference to AIR in the Dec or By-Laws.)

Slim just arrived in town; he didn’t look happy
Are you familiar with that expression: “there are two chances, slim and none, and slim just left town”? Well Slim just got back, arriving on the front page of the New York Times. And he may have brought his friend “Likely” with him.

What are the chances that someone at a closing of the sale of a Soho condo this morning looked at the front page of today’s New York Times during one of the dull moments of the closing, and a hurried and whispered conversation occurred? Such as between the buyers and their lawyer? Or that the title company representative or lender got an emergency phone call during the closing.

Indeed, I would be surprised if closings scheduled for today and Monday (at least) were not adjourned to let the professionals chew on What This Means.

what does it mean?
As I suggested, I suspect it means that some closings are adjourned for a while.

I suspect it means different things for buildings with permanent Certificates of Occupancy and TCO buildings. (Although I confess to not knowing if the Department of Buildings might have issued a permanent C of O if at some point all residents were certified, even if that later changed as the lofts were sold.) If I am a coop or condo board member, I would much rather have “only” a Cultural Affairs (future) problem about resales than also have a Department of Buildings problem with the C of O.

If I am a Soho loft owner thinking about selling, I put that notion away for a while.

If I am a Soho condo loft owner, I check my title insurance policy.

If I am a professional involved in a past sale in Soho (brokers, lawyers, lenders) I might check my liability insurance.

If I am a lender with exposure in Soho lofts, I might examine my portfolio and consider whether a mortgage can be called because out-of-compliance residency is an event of default.

If I am a potential lender in Soho lofts, I put all my loans on hold until someone credibly talks to me about risks.

If I have serious money invested in one or more Soho lofts, I think about political organizing. The Soho Alliance has already taken a position (more on that in a bit), and the law is The Law, so the swim is upstream. But the facts on the ground are that there seems to be a high percentage of “illegal” Soho residents (just like in the 1960s??) who vote, and whose real estate may be less liquid than they thought. A lot less liquid.

If I am Christine Haughney, I feel pretty good about stirring up a hornet’s nest.

old Soho is smirking
Preservationists can sound smug. Take this guy, for example, colorfully quoted by Haughney:

Sean Sweeney, director of the civic group the SoHo Alliance, said that brokers had approached him about trying to persuade the city to do away with the artist-in-residence regulation. Mr. Sweeney, who has lived in SoHo for 33 years, said he had declined to do so; he said one West Broadway co-op tried to evict one artist because he could not help pay for his building’s lobby renovation.

 

Echoing the tension that still exists between the old SoHo and new, Mr. Sweeney added that he would rather see a banker’s closing fouled up “than to see a pioneer evicted because that financier’s trophy wife wants a crystal chandelier in the lobby.”

I wonder how Mr. Sweeney would feel if unit owners were asked to pay for something he thinks more worthy than a lobby renovation, such as a new roof, or facade repairs. Or if the non-artist spouse of a now-deceased “artist” was under pressure to move because the coop or condo could not get a C of O until s/he moved out. Or if Bon Jovi needed to use his loft as rehearsal space in order to maintain his certification, blasting the neighbors with his ‘art’.

The question of what to “do” about artists in Soho is a big one, with many stakeholders and complications. On the one hand, every loft sold to a non-artist is one less space for art to be done. On the other hand, if there are no artists willing (able?) to use that space to make art unless they could buy in at 1980s prices, what happens? Is there a way to ‘protect’ working artists in Soho without labelling all the non-artists as … errr…  undocumented or illegals?

Clearly, The Market has been speaking for more than a few years, in creating the facts on the ground of non-artist residents. The Market did this by evaluating the risk of illiquidity (you can only sell to certified artists who will use the space to make art) as low. Acceptably low. I assume everyone is reevaluating that calculation now.

not a big deal?
I wonder if (after I stop hyper-ventilating) some players in The Market will continue to evaluate the risks as low. Haughney wrote about the (possible) change in the way the Cultural Affairs “judges” deal with artist certification applications. She wrote little about the Department of Buildings, which seems to me to swing a heavier hammer as far as coop and condo boards are concerned.

Maybe some players in The Market will do business as before, continuing to participate in the trade of lofts that ‘on paper’ can only be traded to certified artists who will use the space to make art. I dunno. Looks like a big deal to me, now that the bright light that only the front page of the New York Times can shine is shining.

The Application
1.  Do you now reside in a (check one) Loft? *          Apartment with Workspace?              Apartment with
separate Workspace?        Other (please specify)                                                                    *attach copy of lease.

2.  What is your present amount of LIVING space in sq. ft.?                      .  What is your present amount of
WORK space in sq. ft.?                           .

3.  Are you planning to move into a loft?*         If located, what is the address?                          
.  What is the total sq. ft. of the loft?             How much WORK space will you need in sq. ft. of the loft?                    
*attach copy of lease. Full address to appear on certificate                                                      

4.  Have you been certified before?         If YES, at what date and for what address?               
DATE:                        ADDRESS:                                                          

    ON A SEPARATE SHEET, PLEASE PROVIDE THE FOLLOWING INFORMATION:

5.  Describe your particular art form and explain why a large space is imperative for its creation.

6.  Include a professional fine arts resume pertinent to your work.  Include educational background, professional training, public exhibitions and/or performances, critical reviews, grants, awards or fellowships.  
Be sure to include dates.

7.  Submit documentation appropriate to your particular art form.  Your documentation should reflect a body of work over the last 5 years, up to and including recent work.  Student work, in and of itself, will not meet the criteria for certification.  Below is a general guideline for some fine arts fields, and the kinds of support materials that should accompany your application:
       –  Visual artists: 15-20 labeled slides and/or photographs of work, exhibition  
           announcements, catalogues, reviews, etc.

–  Music composition:  scores, tapes (including works-in-progress), reviews, performance announcements, etc.   

–  Choreography:  videos, written notations, reviews, performance announcements, etc.

_  Fiction/Poetry: published and unpublished works and drafts, reviews,   announcements of readings/staging, etc.

–  Film/Video/Performance Art: examples of work, reviews, and announcements  

All documentation should include, where appropriate, the date of creation, medium, size, and title of the work.  All support materials must be submitted in an envelope or folder not larger than 9" X 12".  Do not submit original work.  PLEASE INCLUDE A STAMPED, SELF-ADDRESSED ENVELOPE, IF YOU WISH MATERIALS TO BE RETURNED FOLLOWING THE CERTIFICATION COMMITTEE MEETING. *

8.  If you are already residing in a loft, include a scale drawing or photographs showing your living and working space.  If you are planning to move into a loft, provide a scale drawing showing your intended living and working space.

9.  Submit letters of recommendation on letterhead from two people, known in your field, regarding your professional involvement as an artist and your need for live/work space.

© Sandy Mattingly 2010