Southbridge Towers: A House Divided

By Carl Glassman
POSTED DEC. 29, 2006

Nine buildings, 1,651 apartments, two opposing sides in a long and divisive conflict. That is Southbridge Towers today.

Residents of the Mitchell-Lama co-op, which covers  more than seven acres between Fulton and Frankfort Streets near the South Street Seaport, are inching their way towards the biggest decision in the complex’s 32-year history—and sparring at every turn.

Should the development remain in the state-subsidized housing program that has provided the comfort of low monthly maintenance? Or should it be removed from the program, giving residents—many of whom bought into the complex for a few thousand dollars—the right to sell their apartments for what the market will bear?

It is a conflict that has been simmering for many years, and it could be several more years—if ever—before it is resolved by a shareholder vote. But recently the rhetoric has become heated and often nasty with the release of a study that presents a largely rosy picture of what residents commonly call “privatization.” In “informational” meetings, fliers, newsletters, web sites, and a slew of letters fired off weekly to the Downtown Express, the two sides are fighting a war of words.

Opponents argue that “going private” risks the good deal that residents have long enjoyed. Many claim it even threatens the affordability of low-income residents’ homes. They envision maintenance skyrocketing as subsidies end and new, well-heeled residents buy in at top prices, demanding concierge service, fancy lobbies and gyms.

Proponents see a complex that will be better maintained when residents have a bigger financial stake in their property. And they denounce as “scare tactics” the claims of opposition leaders that maintenance costs will soar with privatization. In fact, they like to point out, maintenance already has risen 40 percent in the last four years.

The claims and counterclaims go on and on. “This issue has drawn such a wedge in the Southbridge community like we’ve never seen before,” said John Fratta, president of the complex’s co-op board and a strong opponent of private ownership of the complex. “Southbridge has always been a very united community.” According to Fratta, the 15-member board itself is about evenly divided on the issue. But at Southbridge Towers, divisions can be found almost everywhere.  “My husband is for it. I’m not for it,” said a woman, 87, who was walking through the plaza of the complex one afternoon last month.

The woman, who would not identify herself (“I’m not going to give you my name. He’ll kill me!”) characterized the proponents of privatization as “nuts,” claiming that big money won’t be there after all when they sell their apartments. Besides, she added, “I’m happy here. What do I need it for? I’m old.” The woman beckoned to a friend, Carol Cole, to speak to the reporter. “My husband and I lived here 32 years and as a result we’ve had a nice life because of it. And so has the whole community here,” she said. “Why should we take it away from the youth that are coming up? There’s not enough affordable housing.” Then came another friend.

“Everything is better when you’re private,” said the woman, a recent widow who also would not give her name. She said she had owned an apartment in a private co-op and sold it when one became available at Southbridge, after nine years on the waiting list. She said she understands the importance of being able to cash in on the increased equity of an apartment. “Whatever money I got I give to my children now, before I die,” she said.

Last month nearly 200 people filled the Southbridge Towers community room for a meeting run by Southbridge Rights, the group representing proponents of privatization. (The opposing group calls itself Concerned Cooperators Committee.)

The meeting was called to explain a recently released feasibility study, commissioned by the Southbridge board, which lays out the economic consequences of removing Southbridge Towers from the Mitchell-Lama program.

The 136-page report makes no recommendation but offers little downside if the complex leaves the subsidy program. And it predicts a windfall of $300,000 to $1 million for residents who decide to sell. Proponents see the report as an affirmation of a position they have held at least as far back as 1989, when the board at the time tabled a vote on

commissioning the study. As recently as April 2004 a referendum on conducting the study was narrowly defeated.

“I think people finally are getting tired of the [opposition’s] lies,” Jared Brown, a Southbridge Rights leader and board member, told the crowd. “I think this is the first time we’ve had a real study with independent resources tell us what are in our best interests.”

In particular, proponents claim that the study should ease the fears of residents, especially seniors, who believe maintenance will go up when the co-op has to make up the millions of dollars in real estate taxes that are forgiven under the Mitchell-Lama program.

According to the report, a 20 percent transfer or “flip” tax on the sale of apartments will offset that rise if at least 56 apartments are sold each year.

Last year, 60 apartments changed hands. (Under the current program, residents sell their shares back to the co-op and only get back their original equity plus interest.) In addition, they say, residents can “opt out” of owning their apartments, with rent increases tied to rent stabilization.

“We’ve got to get out there and tell people that [opposition leaders] are scaring everybody,” said Brown. “There’s not one thing in that report that’s not the truth.”

But opponents are not convinced.

Despite what the feasibility study says, argues Patricia Ryan, a 30-year resident, the costs to shareholders of leaving the program “are still part of the Great Unknown.”

“There will be more costs than indicated in the report,” she said. “And it’s no good just saying that an apartment is worth a certain amount at this moment, and if enough people sell maintenance won’t go up. I wouldn’t buy stock like that. It’s insane.”

The next step will be a vote on whether to commission a prospectus or “black book” costing more than $100,000, that is submitted to the State Attorney General and lays out apartment values and other financials of the complex. In advance of that, a showdown, of sorts, may come as early as next month.

The Southbridge board wants to hold a giant meeting where shareholders can question the author of the feasibility study, Stuart Saft. The problem is space. Even the 1,000-seat auditorium at nearby Pace University, where the board would like to hold the meeting, cannot accommodate even one person from each of the complex’s apartments.

But if the mass meeting does take place? As one resident put it: “That should be something. That I’d like to see.”