View Full Version : The 2-Family: A First Rung on the Ladder

January 24th, 2004, 01:58 AM
January 25, 2004

The 2-Family: A First Rung on the Ladder


BIT by bit $50 a week at first Jose Rodriguez Jr. built up his bank account, each trip to the teller's window a step on a pilgrimage from Honduras to owning a home in the United States.

Five months ago, "on Aug. 19" he remembers the date Mr. Rodriguez went to the closing, handing over a $12,500 down-payment check on an 80-year-old, two-story house on Eggert Place in Far Rockaway.

"It's a two-family," Mr. Rodriguez said. "I wanted a two-family home because that way I can have some rent coming in to pay the mortgage."

His steps echoed those on a similar path begun in the early 1900's when a 15-year-old boy traveling all on his own, Ferdinand Santucci, climbed out of steerage and stepped off a boat from Italy, Mr. Santucci's daughter, Elsie Figueiredo, recounted last week.

Mrs. Figueiredo, now 84, has lived all but the first four years of her life in the two-family house that her father, a steamroller operator, and mother, a seamstress, bought in the Ironbound district of Newark back in 1924, two decades after arriving in America. The house was built in 1863.

Both Mr. Rodriguez and Mrs. Figueiredo, in differing ways, cast light upon a somewhat underappreciated, though potent, force in the American housing market. For generations, the two-family house with its capacity to shelter kin, countryman or stranger while easing the mortgage-debt burden has offered a gateway into homeownership. Not just for newly arrived immigrants, but for all sorts of working-class strugglers.

In recent years, it has been both a budding segment of the housing construction industry and a fertile seed for rebirth in desolated neighborhoods. "This has been one of the best affordable housing models for at least a hundred years," said Jan Wells, a housing researcher at Rutgers University whose doctoral dissertation focused on the two-family phenomenon.

"The wave of immigrants that came at the turn of the 20th century, mostly from Europe, this is how they got on the homeownership ladder," Dr. Wells said. "And if you travel to Boston, you see doubles and triples everywhere in mill towns throughout the area. It was the home of the father, the son and the tenant who paid the mortgage through the rent the holy trinity."

For Mrs. Figueiredo, the detached two-family house on McWhorter Street in Newark has been something of a sacred trust though with an occasional hellish twist. Over the decades, aunts and uncles, sisters and brothers, as well as tenants both good and horrendous have come and gone from the rental apartment on the second floor.

Mrs. Figueiredo and her Portuguese-born husband, Carl, moved into that upstairs apartment in 1941, paying her parents $24 a month rent for years while bringing up their two children. And for years, Mrs. Figueiredo took care of her aging parents. "Because of that my brothers and sisters decided that I deserved the house," she said.

Now Mrs. Figueiredo lives alone in the old family home downstairs, with no intention of leaving soon. Last week, before shoveling snow from the sidewalk out front, she said: "I'm very sentimentally attached to the house. It's the only house I know. I can walk to any store I have to go to, to church."

"My daughter wants me to live with her in Parsippany," she said, "but I want my independence." Partly, that self-reliance derives from the $500 a month rent paid by the "very nice lady; she's a widow" who has lived upstairs for 14 years.

Upward Mobility
Steppingstone to Another House

What the two-family has meant for Mrs. Figueiredo's family for most of a century has been a gleam in the hopes of Mr. Rodriguez at least since his son, Jorge, was born in 1994.

The year before, after 11 years in this country, Mr. Rodriguez a maintenance worker in disabled people's homes had gone home to Honduras, married and returned to the eight-unit building on Parsons Boulevard in Jamaica, Queens, where the monthly rent was well along in its climb from $275 to $800. Time to make a change.

With Jorge soon to come, the couple moved in with Mr. Rodriguez's sister in Far Rockaway. And they began saving $50 a week from him; $25 more after Mrs. Rodriguez started housekeeping for others. Eight years later, it was time to buy. "Another baby is coming in August or September," Mr. Rodriguez said.

The brown, two-story wood-frame house, attached to another two-family on Eggert Place in the Bayswater section of Far Rockaway cost $250,000; the down payment was $12,500, and the mortgage interest rate was 5.25 percent leaving a monthly payment of $1,300. Mr. Rodriguez expects to rent the recently vacated upstairs apartment for between $1,000 and $1,300.

But Mr. Rodriguez has grander visions. "It could be a steppingstone to another house someday," he said.

Steppingstone or family legacy, the two-family comes in a variety of configurations: the stacked row houses with front stoops that have anchored inner-city neighborhoods since post-colonial times; the side-by-side wood-frame house with shared front porch and, perhaps, aluminum siding of the 50's and 60's, the suburbanesque duplexes of more recent development.

"Go out to Staten Island and the place is full of upscale two-families that are really nice," Dr. Wells said. "This is not working lower-income; definitely solid middle-class. Basically, it's a separate unit on the ground floor, behind the garage, and a unit on the two upper floors as beautiful as any single-family detached."

"The idea is that you put your elderly parent or your college student who you can't get rid of in the downstairs," she continued. "Or you rent."

There are varied social configurations of the two-family: the empty-nester couple moving into the smaller unit while the grown children with grandchildren take over the old family home. The two-unit house designed to convert to a single-family home when the kids start coming. The illegal conversion of the basement in, perhaps, the too-large ranch home of a surviving suburban parent, near a college.

According to census data, in 1980 two-families represented 5.6 percent, or 4.9 million, of the nation's total housing stock of 86.8 million units. By 2000, two-families had slipped to 3.9 percent of the total housing stock, or 4.5 million of the 115.9 million units.

And of those existing two-families, "only a third are owner-occupied; in other words, an owner lives in one part and a renter in the other," Dr. Wells said. "So you have about 1 percent of the housing stock that represents the owner-renter model a very small part of the housing scene."

But in recent years there has been more than an inkling of increasing interest in the two-family possibility. "New construction of these true two-families" as distinguished from the converted basement apartment "has historically been about 1 to 2 percent of new building permits," Dr. Wells said. "But since 1991 the increase in two-family building permits has climbed at a very steady rate, from 22,000 in 1991 to 37,000 in 2002."

And from 2001 to 2002, the two-family segment grew by 17 percent, the census numbers show, while the other configurations singles, threes, fours and fives-or-more grew by 8 percent. "Somebody's getting the message," Dr. Wells said.

They got the message in places like Jersey City a long time ago.

"If you look at the map," said Bob Cotter, Jersey City's planning director, "the two-family zoning district covers about two-thirds of the city."

Much attention is paid to "the fancy stuff, the waterfront apartment buildings on the Gold Coast, because they generate the most revenue," Mr. Cotter said. "But the real Jersey City exists inland, in the neighborhoods, where we do the two-families. It's the meat and potatoes of urban development."

"Largely, it's small infill contractors, the guys building three two-families on this lot; four, five on that one," Mr. Cotter explained.

Whiton Street Associates, for example, has built about 30 two-families scattered about Jersey City over the last two years. "Mainly, we're in the Greenville area near Bayonne," said Michael Russo, a partner in the company. "They're detached three-story homes, brick fronts, a backyard, central air-conditioning, hardwood floors throughout. They go for $380,000."

To be sure, there are fancier ones. In the Heights section, the northernmost part of Jersey City, new two-family homes are selling for $500,000, "which is phenomenal," said Mr. Cotter, the city planning director. "Five years ago, they would have been $325,000 to $350,000."

Using Vacant Lots
Knitting Holes in Cities' Fabrics

But in the last three years, Mr. Cotter said, vacant lots have been disappearing throughout the city, "especially in the inner city."

Fueled largely by immigrant-buyer interest, "the neighborhoods that were devastated in the 70's are coming back," he said. "It's putting customers back on the street, so places like Martin Luther King Drive are experiencing renewed retail interest, largely coming from the new two-family homes."

"It's terrific," he said, "because the market is knitting the holes in the city's fabric."

The phenomenon is evident in New York City as well, said Michael Schill, director of the Furman Center for Real Estate and Urban Policy at the New York University School of Law. Reviewing census data, Professor Schill said that from 1996 through 2003, "the number of building permits issued for two-family homes each year in the city has nearly doubled." In 1996, the city issued 1,167 permits for this type of housing, he said, while through November 2003 (the latest data available), 2,240 permits had been approved for units in two-families.

"And two-family homes constitute a significant proportion of all the housing being built in the city," Professor Schill said. Since 1996, over 25,000 units in two-family homes have been approved, 22.9 percent of all units authorized by the city during that period.

The New York City Housing Partnership a group of business leaders organized in 1983 to help redevelop vast swaths of the city devastated during the 1970's has certainly gotten the message. More than half, or 9,248, of the 18,039 housing units that the partnership has so far helped to build have been in two-family homes.

"You had whole areas of the city razed or abandoned, which, through development of two-family homes, became the center of a renaissance," said Kathryn Wylde, former president of the Housing Partnership and now president of its parent group, the Partnership for New York City.

"It brought the middle class back to the city, gave people a huge stake in their neighborhoods," Ms. Wylde said. "If you speak to police captains in those neighborhoods, they'll tell you that the drop in crime is really related to these homeowners who took back these communities. Prior to this, really, the only housing option for many households was a rental apartment. The two-family made owner-occupancy an affordable option."

A Shift for Lenders
Promoting Landlordship

But it took a seismic shift in bankers' thinking to make that option viable. Two decades ago, low down payment mortgages were not available for two-family homes, and lenders treated them as investor-owned property. They required down payments of 20 to 30 percent, and would not amply credit the rental income toward meeting loan-approval requirements.

The Housing Partnership cooperated with Fannie Mae, the federally chartered corporation that buys first mortgages, to induce banks to provide what was originally a 10 percent down payment requirement since reduced to about 5 percent and to accept 75 percent of the rent in assessing an applicant's ability to repay the mortgage. "That really opened the market to development of owner-occupied two- and three-family homes in the city," Ms. Wylde said.

As Dr. Wells at Rutgers put it, "For the price of homeownership you become a landlord."

Yet, if landlordship is, for some, an opening to the American dream, there can also be the nightmare. Or, at least, recurring migraines.

As much as Mrs. Figueiredo is attached to her home in Newark's Ironbound district, "having a two-family house, against paying rent somewhere else, is the lesser of two evils," she said.

It took a lot of work and money over many years to bring the old house (there was an outhouse out back in the 1920's) into the modern world. And after her father died in 1972, Mrs. Figueiredo and her husband chose not to rent the upstairs apartment.

"But then, around 1976, we decided we could use the money, and we rented," she said. "It was a disaster. They only stayed two years, but they ruined the place; tore it up. They put in a washing machine against my wishes; it overflowed two, three times and ruined my ceiling. They were very dirty, noisy." Recent renters, like the woman who has lived upstairs for 14 years, have been more neighborly.

Sarah Gerecke is fully aware of the panoply of problems that a fledgling landlord can face. She is interim director of Neighborhood Housing Services in New York City, a nonprofit group that offers education and financial support for homeowners. "People buy two-families thinking someone else is going to pay the mortgage," Ms. Gerecke said. "It's more complicated than that."

Neighborhood Housing Services runs a landlord education program specifically for people buying two- to four-family homes. "We let them know their rights, the tenant's rights," Ms. Gerecke said. "We offer resources for when there's a problem." Problems like the roof that will need replacing within 10 years, the boiler that will break within 15 years assuming they were in good shape when the house was purchased.

"We teach them to create a reserve, not just budget for the month-to-month costs, but for those larger items they have to save up for," Ms. Gerecke said.

Rosa Negron teaches the landlord course at Neighborhood Housing Services, including ways to avoid that tenant from hell. Contact two or three previous landlords, she advised, "because the immediate previous landlord may want to get rid of this tenant and will say positive things to do so."

The course provides information on low-interest repair loans, tax preparation, avoiding predatory lenders, legally ending a tenancy, programs for recovering rent when a tenant is temporarily unable to make payments. "They walk out secure they can handle any surprises," Ms. Negron said.

Not much can surprise John Foust, 62, a retired transit police officer who paid $31,675 for a two-family on Snyder Avenue in East Flatbush 32 years ago, then moved in downstairs and rented the top floor for $200.

It was just the first rung on a real estate ladder that Mr. Foust the father of six grown children is still fashioning. So far, he owns five buildings with 32 apartments. "Now I've got a headache," he said.

Back at the old two-family on Snyder Avenue, Mr. Foust's youngest son lives on the first floor. "He pays me something," Mr. Foust said. "Do you charge your son market rate? You owe them from Day 1 until you take your last breath." The upstairs apartment rents for $850.

"I'm like a musician who likes what he's doing, but not making a lot of money," Mr. Foust said. "I like to fix up an apartment and see a young person who might have been shut out of the market because he makes a bit too much money to qualify for housing assistance. I like seeing their eyes light up when I hand them the key."


Copyright 2004 The New York Times Company

Gregory Tenenbaum
May 22nd, 2006, 05:38 AM
Interesting article.

I almost forgot that 2 family homes was an historical normality.

It says a lot about the modern day need to aspire to a McMansion.