Columbia University Libraries Digital Collections: The Real Estate Record

Real estate record and builders' guide: v. 82, no. 2122: November 14, 1908

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November 14, 1908 RECORD AND GUIDE 917 ESTABUSHED-^ iWRPH SV-A^ 1868. em Dev&teD td RevL Estaje . BuiLDirfe AFif^iTEenJHE .KoiJseUou) DEeoft^TOil. Bosir/EssAffaThemes OF GE|ta^l Ir/TtRpsi, PRICE PER YEAR IN ADVANCE EIGHT DOLLARS Communications should be addressed to C. W. SWEET Published EVery Saturday By THE KECORD AND GUIDE CO. President, CLINTON W, SWEET Treasurer, F. W. DODGB Vice-Pres. & Geol. Mgr,, H. W. DESMOND Secretary, P. T. MILLER Noa. 11 to 15 Bast 34tl> Street, Now Yorls City (Telephone, Madison Square, 4430 to 4433,) "Entered at the Post Office at Neio York, N. 1'., os s cond-class matter." Copyrighted. IOOS, by The Record & GuiOe Co. Vo!, LXXXII. NOVEMBER 14, 1008. No, 212ii EVERY taxpayer in New York City should ponder seri¬ ously the open letter which Mr. Edgar J. Levey has a'ddressed to the committee of the Legislature, now engaged in investigating the finances of the city. The Taxpayers' Alliance would do well to have it printed and circulated as a 'pamphlet. In this letter, which was published in a recent number of the New York Times, Mr, Levey analyzes with all the authority of a trained financier the danger which threat¬ ens the property owners of the city. Comparing the Budget figures of 189S with those for 190S, he shows that in ten years an increase in population amounting to 35 per cent, has been attended by an increase in expenditure amountins to 10(1 per cent. Expenses, that is, have increased three times as fast as population. If the same rate of increase continues for another ten years, New York City will be spendiug ?370,000,000 every year, which will constitute a per capita charge of $54 against a comparative charge of $26 in 1908. A doubling of the amount of money spent per capita would not mean a doubling of the tax rate, for the increase in assessed valuation is likely to be larger than the increase in population, but it would assuredly mean an increase in the tax rate of more than a half—perhaps as muth as three-quarters. Moreover, it is very probable that a large proportion of this enormous increase in expenditure would have to be paid by the property owners themselves. Owners of real estate can shift their tax burden on their tenants only in case those tenants have no escape, but are obliged to-pay what the landlord demands. But in the case of New York, it will be possible for hundreds of thousands of people to meet any increase of rents by an exodus to New Jersey. Consequently, an increase by an abnormal percent¬ age in the tax bills would diminish the value of New York real estate by just so much. In certain parts of the city its value would assuredly decline; and with the decline in value would come, of course, a diminished increase in assessed valuation, and consequently a relatively heavier tax burden on the remaining property, A gradually accu¬ mulating increase in taxes becomes, consequently, equiv¬ alent practically to confiscation, aud the property owners of New York in insisting upon a reduction in the municipal.ex¬ penses will be fighting, not merely for the saving of a little of their money, but in a measure for the preservation of the substance of their property. A continued increase in the municipal expenditures amounting to three times the increase in population will mean in the long run the prac¬ tical appropriation of private property for what are called public purposes. THB analysis made by Mr. Levey of the way in whicli this increase of 100 per cent, in New York's municipal expenditures is distributed brings out many significant facts. In the first place, the money needed for the debt service in¬ creased from about $14,000,000 to over $40,000,000, an expansion of 189 per cent. There can. consequently, be no doubt that any thorough-going .reform in the city's finances must begin with this item. N-6 city can go on mortgaging the property at such a rate without coming to grief. Many expenses for which bonds are issued, such as repaving, should be charged to taxation and the increase so made in the Budget raust be saved by other economies. If the in¬ creased cost of the debt service be subtracted- from the total increase, there remains an expansion of only 78 per cent, in the general expenses of the city, which is too much, but by no means as much too much. Next to the debt service Ihe most important increase in tbe Budget is to be found in the Department of Education, which is actually receiving and spending 122 per cent, more money than it did ten years ago. "Well may Mr. Levey say that such an enormous augmentation of expenditure, amounting to four times the increase in population, fairly shrieks for some adequate ex¬ planation. The several Borough Presidents are receiving about double" what tbey did ten years ago; and it may assur¬ edly be claimed that no corresponding improvement in ser¬ vice has accompanied this particular increase in expenditure. Another case of a huge increase is that of puhlic libraries. Since 189 8 the appropriations for this purpose have in¬ creased 425 per cent,, and the amount now devoted thereto by the municipality would pay four per cent, interest on over $23,000,000 of city stock. Are the libraries worth it? And what are we to thinlc of Mr. Carnegie's extraordinary gene¬ rosity in getting the city to spend the equivalent of $18,000,- 000 in return for a gift of $5,000,000? We cannot follow Mr. Levey's detailed analysis of New York's municipal ex¬ penditure any farther, and indeed, it is not necessary to do so. The point is that these increases have been continual and have tended even to be greater towards the end than in the beginning of the period. It is obvious that a condition of this kind calls for a .remedy as drastic as the disease; and unless such a remedy is found, New York property owners will be in the position of having their property appropriated to a very considerable extent in order to pay for municipal extravagance. AS A RULE, real estate is a department of general busi¬ ness operations which is last to feel the effect of an industrial and . commercial revival. It is not until after business men have been making money for some time that ihey begin to consider the investment of a certain proportion of their proflts in new factories, warehouses and more ex¬ pensive dwellings. In the present instance, however, it looks as if real estate and building in New York and in some of the other large cities would participate almost immedi¬ ately in any general revival of business. In the first place, it must be remembered that the period of dullness and in¬ activity, at least so far as Manhattan is concerned, has now lasted for ahout two years. During 1907 general business remained voluminous until the panic, but the real estate business in Manhattan and the Bronx had already anticipated the effect of the coming storm. The extreme diSiculty of borrowing money except at very high rates and the great cost of building had already diminished by a large percentage the amouut of capital invested in new construction, and had con¬ sequently already reduced the effective demand for real estate. For two years, consequently, Manhattan and the Bronx have been adding to their stock of residence accom¬ modations only at a comparatively moderate rate; and with a revival of business there will be room for a considerable increase in the construction of the various cheaper classes of housing. This is particularly so in the case of tene¬ raents. During 190S a considerable number of recent immi¬ grants returned to Europe and by their departure left a larger proportion of vacancies iu Manhattan tenement houses than had existed for many years. The erection of such buildings iu Manhattan and the Bronx was unpopular in 1907 and fell almost to nothing in 1908. But there is now every indication that these iramigrants will return in equally con¬ siderable numbers, and will rapidly fill up the vacancies in the tenement house regions. A fair demand consequently may be expected for unimproved property in all those parts of Manhattan and the Bronx which are available for the immediate erection of apartment and tenement houses. There is also another reason for believing that a revival of general business will have its immediate effect upon real estate in New York. The deraand for real estate in this vicinity is almost as much influenced by speculation as is the demand for stocks. It is the function of speculators to an¬ ticipate any rise in prices that is likely to result from an increase in population or business, and to begin their pur¬ chases before the legitimate business demand actually sets in. It may be expected, consequently, that during the com¬ ing year an active speculative movement will take place in those parts of Manhattan which will eventually be most bene¬ flted by a business revival. Speculators in this class of property have been comparatively quiescent for a couple of years, and it is improbable this will remain so much longer.