Middle class losing out in big cities

Story highlights

  • New York City real estate prices are reaching absurdly high levels, especially near Central Park
  • Harry Siegel: Big cities are becoming luxury products for the rich, while middle class is squeezed

Harry Siegel is a columnist and editorial writer for the New York Daily News. The opinions expressed in this commentary are solely those of the author.

(CNN)As a candidate, Bill de Blasio vowed to "turn the page" on the boom of the preceding 20 years that he says created a "tale of two cities," one for the rich and one for the rest of us. Now that he's mayor of New York City, he's learning that's easier said than done.

While the problem afflicts big cities on both coasts, New York City is exhibit A. The real issue under billionaire Mayor Michael Bloomberg wasn't that the rich got richer -- in fact, de Blasio's expensive plans hinge on that continuing -- but the erosion of the middle class, squeezed out of an hourglass system in which developers, going where the money is, pour their dollars only into the very top of the market with the city taking a cut from that to build a relative handful of subsidized units for a few lucky winners, with literally thousands of people applying for every such home.
Harry Siegel
Instead of "transforming many poor people into middle-class people" by diversifying the population of neighborhoods, as the great urban thinker Jane Jacobs described what a healthy metropolitan economy should do, rising property values have helped make the city indeed become the "luxury product" Bloomberg once envisioned.
    One big reason for that is the flood of foreign money (some of it being laundered) landing here since the 2008 market meltdown, money that's turned our homes into a global commodity out of reach for many New Yorkers.
    Cash in need of shelter has priced out New Yorkers in need of shelter. Last year, the average home price in Manhattan hit an all-time high of $1.87 million. This is a city where many households spend more than a third of their income on rent.
    The symbol of this unaffordable city is the massive new towers, rising from tiny bases, at 59th Street at the south side of Central Park. Few will ever see the spectacular views these huge, absurdly thin towers sprouting like a phallic field to cast shadows over the park, homes that Jonathan Miller of the real estate appraisal firm Miller Samuel has called "the world's most expensive bank safety deposit boxes," rather than places where, you know, people actually live.
    That in turn, drains money from the middle. First, as the guy who wants a place on Park Avenue settles for Second Avenue, the woman he outbids there ends up in Brooklyn Heights, and the family she outbids settles for Bushwick, pushing prices up all the way out to the edges of the city. But even as demand spreads, developers are pouring money into the very top of the market, since that's where the best return is.
    The result is that the city increasingly feels like a playground for the well off and the fairly well-paid Wall Street, tech and media workers in their employ. Take the High Line, the much praised boutique park in Chelsea that the Bloomberg administration liked to boast created billions in new construction.
    In fact, what it did was draw money that would have been spent elsewhere in New York, channeling it to connected developers right there building seven- and often eight-figure apartments. The park also symbolizes the new ethos of rarified, nominally public spaces, Stroll up to the highly curated space for a $25 lunch, and you'll rarely see a single soul from the neighboring Chelsea projects.
    While rent stabilization -- which limits how much landlords can up the rent -- and other programs ease the burden for about half of the city's renters, that leaves the other half in a constant crisis, with almost no new apartments being built for them outside of the high-end luxury market, and supply chronically falling short of demand.
    The net result of all this is that too many of us can't afford the prosperous city with a preposterous cost of living. Even as Wall Street has thrived, more middle-class residents have left than arrived each year over the past decade. Young people come for a few years, and then leave when they're ready to start families or when they realize they're paying a huge premium to be here and not getting much in return.
    Someone making $60,000 in Manhattan has the same standard of living as someone making $26,000 in Atlanta, according to 2009 report by the Center for an Urban Future that also found that Queens -- Queens! -- is the fifth most-expensive place in America.
    Yet, the fastest-growing job sector over the past decade has been low-wage service positions, such as hotel workers, waiters and baristas. Unlike the manufacturing jobs that long since fled to cheaper places, these jobs rarely offer the pathway into the middle class Jacobs envisioned.
    In a place like New York City, land has become so valuable there are hardly any gas stations left in Manhattan. Commercial rents are so high that grocery stores are foundering and office workers routinely spend $15 on lunch at places where employees working furiously make less than that an hour.
    A big part of de Blasio's response to all this is an affordable housing plan he vows will save or create a record 200,000 housing units over 10 years, in part by requiring all builders in rezoned sections of the city to pay for subsidized apartments.
    But those subsidized units, which his administration is now quietly signaling will yield tens of thousands less apartments than he'd promised on the campaign trail, will do almost nothing for what remains of the middle class, and may even drain development dollars from neighborhoods outside of his plan.
    Perhaps to avoid community opposition, the neighborhoods identified so far are mostly fairly poor and fairly dense, so that focusing new development there will likely perpetuate the economic and racial segregation this mayor won office promising to reverse.
    While De Blasio offers a more progressive twist on Bloombergism -- the same basic deal, in which the city depends on developer aiming at the rich to subsidize housing for the poor, just with the rich paying a bit more -- this is the opposite of the "self-diversification" Jacobs envisioned helping to "unslum" cities.
    It'll take much more than that to make America's big cities places of opportunity for people of all classes, not hollowed-out temples of capital and tourism surrounded by teeming poverty.