Rockaway Pays the Price for Rapid Development
For sale signs are popping up all over Far Rockaway, as foreclosures and tax delinquencies in the area soar.
For more than a generation hundreds of acres on the eastern Rockaway peninsula in outer Queens lay fallow. Ramshackle houses sat abandoned or condemned, some used by junkies as drug dens. The beaches had gone to the dogs, literally. In December 2001, a pack of wild dogs attacked and seriously injured an elderly couple on the boardwalk.
“This whole place was like an empty lot, know what I’m saying, like a ghost town,” said Victor Morales, a Rockaway resident since 1992. “Seemed like nobody was doing nothing with it for the longest time.”
Residents were angry, but not surprised. Many blamed the city for its long history of neglect, starting with a Robert Moses-era urban renewal strategy that razed a healthy community of summer homes and replaced them with thousands of units of public housing. Some believed City Hall preferred to keep the area undeveloped.
“City government up until recently has seen Rockaway as Siberia,” said Jon Gaska, District Manager for Rockaway’s Community Board 14. “You’re a bad neighbor, you’re a bad human being [and] you’re in a housing project in Brooklyn or somewhere else, we’ll send you to Rockaway. Out of sight, out of mind.”
Then something amazing happened, Rockaway became a real estate bonanza. As if overnight, capital poured in and changed the landscape. First city-contracted construction crews dug in on higher value oceanfront property owned by the city. Once these open plots disappeared, private developers built less expensive homes across the peninsula on vacant plots on the Jamaica Bay side. The city even arranged to attract a chain supermarket and gym, both firsts.
For the first time in their lives, long-time residents had reason to be optimistic. It was Rockaway’s gold rush.
“This was a sand dune ten years ago, and now it’s a community,” said Vince Castellano, a local landlord. “My entire net worth is here, 12 inches above sea level.”
But like the Gold Rush of the nineteenth century, rapid development in Rockaway has come at a price. Developers who bought oceanfront land from the city are selling their units successfully, but private speculators who built low quality houses on cheap land not on the Jamaica Bay side are not. Predatory lending and foreclosures are common.
Some people are more guarded than they were at the front of the real estate boom, what officials said. Some area residents worry about the long-term impact of private speculation. They fear they may be paying the price of developing too fast and too drastically at a time of great market instability.
“A lot of people are complaining that we’re being overbuilt,” said State Assemblywoman Audrey Pheffer. You can’t win. You walk in [to a public meeting] and they say… ‘We don’t have the roads for it, we don’t have the schools for it…’ I don’t know, what comes first, the chicken or the egg?”
Until recently, Rockaway was one of New York’s last real estate frontiers. As late as 2005, it had the highest percentage of vacant land of Queens’ 14 community districts, and the second highest among the city’s 59 districts. According to the Department of City Planning, nearly a quarter of land plots on the peninsula were vacant, compared to a borough-wide average of 5.5 percent and a city-wide rate of 7.5 percent. With 100,000 residents, Rockaway had the second lowest population density in the city.
The area was mostly poor and had been since the 1960s. In the 2000 census, the most impoverished parts of the peninsula had almost twice the percentage of residents below the federal poverty line as the city average of 22 percent. One-tenth of the population lived in public housing—the densest tract of public housing in Queens.
Local leaders felt strongly that Rockaway’s future depended on attracting middle class homeowners. They city owned most of the vacant land, so the community board pushed the City Planning Commission to use the real estate for mostly market rate, rather than subsidized, housing. The result was the Arverne-by-the-Sea and Arverne East complexes, consisting of 4000 mostly market rate two family homes. On city land on the bay side, the city contracted with developers to build 400 affordable housing units.
“[We believed that] the only way to survive is by really bringing in people with spendable dollars,” Pheffer said.
Sales have been brisk for nearly all the homes built on land formerly owned by the city. Arverne-by-the-Sea houses are now selling for as high as $1,000,000 and affordable homes on the bay are fully occupied, officials said.
The success of developers on city property inspired many smaller developers to buy up privately-owned plots, nearly all of which were vacant or abandoned. According to Gaska, many of these developers were amateurs who saw the high sales prices in Arverne-by-the-Sea and believed easy profits could be made. Historically low interest rates made it easier for non-professionals to borrow money. To keep their margins low, these speculators built modular and rowhomes, many of which were of poor quality.
“In Rockaway, we had a lot of vacant land [and] a lot of abandoned housing that was undervalued,” Gaska said. “Land was cheap, [abandoned] houses were cheaper, so you could get someone in on that cusp. The stars aligned for [land speculators].”
This stock of cheap housing is not selling at nearly the same rate as Arverne-by-the-Sea, Arverne East, or even the affordable units on city land. Local leaders attribute poor sales to shoddy construction and developers’ naïve faith in the long-term health of the housing market. It was a perfect storm of bad development.
Among residents, this stock of housing is notoriously low quality. Howard Schwach, the editor of the Rockaway Wave, remembers sending a reporter to a construction site where a strong gust of wind blew down a partially constructed house. The developer was United Homes, which is currently accused in a federal lawsuit of targeting minorities to sell overvalued, poorly-constructed homes with predatory loans.
Gaska faults these speculators with neglecting to consider Rockaway’s historically unpredictable housing market. For 40 years, investors were scared of Rockaway in spite of its real estate upside because of its long commuting distance, lack of amenities, and perceived lack of safety. Gaska believes that sales among high end homes gave speculators a false faith that these concerns were now obsolete.
“You can’t just keep building and expect people to buy,” Gaska said. “The market will get soft sooner or later. You want the market to be hot, you want people to think the project is successful, but you don’t want it to be built on a cloud.”
With poor sales, developers are scrambling. Some owners and lenders have lured potential buyers of cheap housing on the bay side with subprime mortgages, which are mortgages given to buyers with poor credit, and introductory teaser rates. The percentage of people in Rockaway with home purchase loans nearly doubled from 2002 to 2005, according to the Furman Center for Real Estate and Urban Policy. 38.5 percent of these loans were subprime, compared to only 9.7 percent in 2002. 41.9 percent of refinance loans were subprime. Rockaway has the third highest rate of subprime mortgages in Queens.
The community is starting to feel the impact of all the vacant new homes. From July 2006 to July 2007, Rockaway experienced 260 foreclosures, according to a report released by State Senator Jeff Klein. Many analysts believe more are on the way. According to the Furman Center, Rockaway had the second highest rate of tax delinquency in Queens.
One indication of the poor state of the housing market on the bay side are the “For Sale” signs posted in front of nearly every new building and on every telephone poll. Many of these signs are written by hand, suggesting that the owner is trying to sell directly without enlisting the services of a professional real estate broker.
Since the sales market is so slow, many of these speculators are now renting out units they originally intended to sell. But with a poor rental market, developers are increasingly taking on tenants with Section 8 vouchers. With a shortage of affordable housing across the city, Gaska says the Department of Homeless Services (DHS) and other city agencies are increasingly referring homeless clients to Rockaway.
“Every developer has a Plan B, or a Plan Z as the case may be,” Castellano said. “You may say, I may rent to Section 8 for a period of time until the market improves and I can upgrade my tenants. I suppose that is everybody’s ultimate back-up plan.”
As a result, the area has gotten poorer, in spite of the development boom. According to the Furman Center, the median household income across the peninsula dropped from $45,975 in 2002 to $35,000 in 2005. Gaska believes this is one of the most serious issues facing Rockaway because it could threaten the long-term revitalization of the peninsula.
“It’s killing mostly minority, middle-class, stable neighborhoods,” Gaska said. “The city’s killing us. I would like to hope that they would not stifle our renaissance because they have to stick the homeless some place.”
Many of the tenants referred by DHS have no ties to the community. With a slow local economy, Rockaway can offer almost no jobs for this population. According to Gaska, drug counseling, education, and employment services are insufficient.
“It’s not fair to the community, but it’s not fair to these families either,” Gaska said. “The city says, you want to get out of the shelter, you got to go to Rockaway… They have no family ties. They’re not getting the follow up services they need.”
Many newcomers are frustrated by the lack of basic amenities.
“You have to travel to get food,” said Tony Rivera, who moved to Rockaway three years ago. “It’s far from the regular stores — you need a car to get everywhere. It takes a half hour ride to get groceries. Another five years, it’ll be much, much better.”
Community leaders want to view these trends as a bump in the road rather than something more serious. They are troubled by stagnant sales among the stock of low-end speculative real estate, but believe that as long as sales at Arverne-by-the-Sea are high the revitalization of the peninsula still has a chance.
“In ten years, it’s only going to go up,” Pheffer said. “We might go through foreclosure[s]. We might go through housing not selling at the same pace. But I think that people have realized when they come here, and they look [to buy] here, and they decide to live here, that this is really a great place to be.”
Gaska agrees, and believes the market will revive sooner or later.
“It will sell,” he said. “Because you have to remember, God’s not making any more land. Ok? And if people want to own a house, they’re going to have to go somewhere, and it’s going to have to be Rockaway. And all our vacant lots will be gone. And then we’ll be like everywhere else.”