What if, as many are predicting, the crisis in New York's financial industry leads to a hemorrhage of jobs in Lower Manhattan -- 50,000, some say. What will people do on Wall Street?
Well, here's part of the answer: They will live there. Thousands of them are already doing that. Perhaps the best-kept secret about Manhattan these past few years has been the ongoing conversion of the southern tip of the island into a residential neighborhood. In 1970, according to city numbers, there were 833 people living in Manhattan south of Chambers Street -- in other words, below Ground Zero. That was fewer than in the 18th century. On the eve of the terrorist attacks in September 2001, there were about 20,000. A modest decline occurred right after the attacks, but it was erased within a few years. Now, the best estimates are that about 60,000 people live in the Financial District, some in the modern luxury high-rises of Battery Park City, along the Hudson River, but a growing number in old skyscrapers along the narrow, canyon-like streets that surround the New York Stock Exchange, the big banks and the brokerage houses.
If you'd like a dramatic morsel of evidence, try this one: On the south side of Wall Street, every building except the stock exchange is now a residence. Millions of square feet of space in old office buildings have been converted to condos or apartments. In 2008 alone, some 27 new residential properties were scheduled to open south of Ground Zero. In the words of William Love, a longtime resident and community activist, "This is the hottest place in New York. Residential buildings are going up like mushrooms. If there's land, people will build on it. If there's an old building available, they will convert it."
Love made those comments to me a couple of months ago. You may feel that they have been overtaken by events -- that the residential boom was itself a bubble, and is bound to collapse now that the investment bubble has collapsed. Some of the people who bought expensive condos in the past few years may continue to live in them, but others will lose their jobs and have to move away. Newcomers aren't going to be lining up to live in the vicinity of Wall and Broad.
That's a plausible argument, but I don't think things will play out that way. In fact, I think something more like the opposite will happen. The current financial crisis may slow down the residential expansion of Lower Manhattan for a little while, but in the end, it will encourage it. The truth is that the Financial District has been growing less finance-dependent every decade. As recently as the 1980s, half the area's jobs were in the so-called FIRE industries: finance, insurance and real estate. Now that number is less than one-third. Bankers and brokers have been replaced by people who work in design, advertising, software and in various corners of the nonprofit sector.
Finance remains a huge player, of course, and troubled financial companies and those who service them will no doubt lay off thousands of employees in the coming months. But the more these companies shrink, and the more space becomes vacant in old office buildings, the more tempting it will be for landlords to make a move to apartments or condos. And there is a huge supply of these buildings. Even after the past five residential-boom years, only about 10 percent of the eligible office space in the Financial District has actually gone residential. The potential for a further transformation of the area, which some developers have taken to calling "FiDi," is vast.
The important questions are those that surround the issue of demand: How many people will want to live on or near Wall Street, and how many will be able to afford it? Or, if you've been down there recently and had to navigate your way past jackhammer noise and trash on the sidewalk, and squinted up so you could see little slivers of sunlight peeking out into the dense, darkened streets, you may want to ask an even more fundamental question: Why would anybody want to live there in the first place?
Personally, I wouldn't. But I can understand why lots of New Yorkers do make that choice, and will continue to. To start with, it allows many of them to walk to work. Walking to work is a nice amenity just about anywhere in the country, but in Manhattan, it's worth paying a premium for: no daily traffic jams, no commuting by subway in rush hour. It's estimated that about 35 percent of the Financial District employees currently walk to work every day. I realize that by this time next year, quite a few of them won't have jobs to walk to. But I don't think that argues against the long-term appeal of getting around on foot in the most congested city in America. People will still want that.
There are some less tangible factors. Many people who live at the lower end of Manhattan say that they're drawn to the proximity of water -- to the frequent reminders that they live on an island, something that people on Central Park West or the Upper East Side tend to lose sight of. Now, the Lower Manhattan waterfront isn't exactly scenic in most places, and I'm not sure I'd pay a premium to be near it. But quite a few people will.
Finally, there's what may be the most intangible factor of all: the sheer quirkiness, or perhaps the word is edginess, that surrounds living in an area that nobody even thought of as a decent place to live until a few years ago. There are others besides Wall Street. If you know Manhattan fairly well, try this thought experiment: Pretend that it's 1960, and that someone asked you to name three areas that seemed unsuited to a residential future. I'm sure there'd be a variety of answers, but I'm also fairly sure that somewhere on the list would be the abandoned industrial lofts in Soho, the tenement buildings of the Lower East Side, and the canyons of the Financial District. Today, those are some of the hottest residential districts of the city.
For many died-in-the-wool urbanites, there's something exciting, something a little sexy, about colonizing a part of the city where hardly anybody expected a community to spring up. This doesn't apply just to New York. It's happened in Chicago, Boston, San Francisco and other places as well. A first generation of gays, singles and other urban pioneers stakes out a territory that had been lacking any residential appeal altogether. In a few years, they create a community that is more desirable than they ever dreamed possible. Often, it becomes so desirable that the pioneers can't afford to live there anymore.
Which brings us to the issue of rents, incomes and costs in general. The residential boom in New York's Financial District was built on an influx of rich people. Rich, at least, by the standards of most of America. The average household income in the district is $163,000 a year. Among the newer arrivals, it is considerably higher. Small apartments in the classiest of the converted office buildings have sold in the million-dollar range. Unlikely as it may seem, this is actually a lower price than in other fashionable Manhattan neighborhoods. For those with fat wallets, buying a place on Wall Street has been a relative bargain these past few years.
On the positive side, the arrival of the wealthy has not resulted in any significant displacement of the poor. There were almost no poor people to displace, or long-term residents of any kind. On the negative side, there is hardly anything in FiDi that could remotely be described as affordable housing. There's a sterile block of buildings on Fulton Street, Southbridge Plaza, that does provide a home for some middle-class families who've lucked into a good deal and wouldn't want to move out. Otherwise, "affordable" is a word that has no meaning here in its conventional sense.
Given the absence of a middle class, can the Financial District ever become a real neighborhood of families and children, not just an enclave of rich singles and couples living in swanky condos and apartments? Contrary to what you probably expect, the answer may be yes. The median household size is actually higher in FiDi than the Manhattan average. Walk down Wall Street on any Saturday morning and you'll see a fair number of young couples pushing strollers, taking their children to the grocery store or to the park. For the most part, they aren't people who moved here with children. They're couples that came and then became parents later. You have to stop and remind yourself that many of these are couples with combined half-million dollar incomes, but they are families nevertheless. Some of them are paying tuition at expensive private schools, but others are flooding into (and improving) the once-underutilized local public school. PS 234 has some of the highest test scores of any public elementary school in the city, and it has a waiting list, even for those who live nearby.
Well, such are the trials of the affluent. It may seem inappropriate right now to defend the behavior of the Wall Street bankers and brokers who made a pile on the recent investment bubble, often unethically, and I will not attempt to defend them. I will merely make the observation that rich people, like the rest of us, have to live somewhere. If they can take a pocket of urban America that had no previous residents and stood a good chance of becoming a commercial ghost town, and turn it into a functioning community, maybe they are doing something good for their country after all.
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