Fred Trump Slays the King of Cooperative Housing
By Gwenda Blair
Nearly two decades after Friedrich Trump came to America and a year before his first son, Fred, was born, another boy landed at New York Harbor. He was fifteen, a year younger than Friedrich had been upon his arrival. Like Friedrich, he had traveled alone and left behind his family, his homeland, and his obligation to enter into his country’s military service. And he, too, did not intend to return. His name was Abraham Eli Kazan, and the country he left was Russia. In the coming decades, he, like Fred Trump, would become a real estate developer in New York, building apartments in a city with a desperate need for housing. In the late 1950s the two men each sought to build on the same stretch of Coney Island, a long and bitter struggle that eventually entangled the highest levels of city government. But it was more than a battle between two well-connected businessmen. Trump and Kazan were leaders in two separate movements battling for effective control of the way the city would grow — and because New York City was a bellwether for the rest of the nation, the way that cities all over the country would grow. Ultimately, on this patch of Coney Island, not far from the famous amusement rides, Fred Trump helped carve America's urban future.
By 1918, Kazan was financial secretary of the Joint Board of the Amalgamated Clothing Workers, the men’s garments union. During and after World War I, when sugar and flour were scarce and expensive, he organized union buying clubs to obtain these staples at wholesale prices. Eventually the clubs evolved into a credit union, a welcome innovation in an era when consumer credit was not readily available elsewhere. Encouraged by this success, Kazan focused on another postwar shortage, the lack of affordable homes for poor working families. With a small group — a knee-pants maker, a coat tailor, a cloth cutter, a millinery worker, a shirt cutter, and several midlevel union officials — he met in a tiny space next to the freight elevator at union headquarters. Just as the buying clubs had cut the price of staples by eliminating the retail grocer, the group decided to cut the price of housing by eliminating commercial builders and landlords. Instead of paying private companies to construct and maintain their homes, they would become “tenant cooperators.” Pooling their money, they would form a union cooperative that would build and run the places where they lived. When tenant-cooperators moved out, the co-op would refund the money they had put in and recruit replacements, who would in turn add their share of funds to the common pool.
Kazan’s idealistic little band had no resources, no experience in housing, and a plan so novel and untried that they were sure the union would reject it if they asked for support. Instead they simply incorporated themselves as the ACW Corporation, choosing the union’s initials, as Kazan later wrote in an unpublished autobiography, “to give the impression we had a Big Brother behind us in this effort.” Obtaining affordable property — they finally located a parcel near the end of the subway line in the Bronx — took several years. Meanwhile many within the union scoffed at Kazan’s grandiose plans as financially unrealistic. “Even close friends at the union used to make fun of me,” he wrote, “saying that a co-op house would last from Monday to Thursday.”
Only in 1926 did the situation begin to change. Governor Al Smith, whose own impoverished childhood gave him a strong bond with the ill housed and the needy, proposed giving state tax abatements on new housing when owners agreed to limit profits and forgo raising rents. When Smith’s measure passed, the union endorsed Kazan’s group. The abatement was given, and the next fall the first Amalgamated Houses opened. On a cold, rainy November day, garment workers slogged through what seemed an endless expanse of mud to move into six five-story buildings clustered around a large courtyard. Soon Kazan added more buildings to the campus's Gothic-style complex and put up a second building, also called Amalgamated Houses, on Manhattan’s Lower East Side. When the Depression forced him to suspend building, he had constructed a total of 856 low-cost cooperative apartments.
The Depression also forced Fred Trump, who had so far done only privately financed construction, to stop building. But when the first federal housing assistance appeared in the mid-1930s, in the form of FHA mortgage insurance, he was able to move back into development almost immediately. Kazan spent the 1930s keeping what he had already built afloat. Ultimately both Amalgamated Houses survived, in large part because those who were still employed chipped in to help those who were not. On Sunday mornings an elementary school student named Harold Ostroff had a job delivering staples to families who were destitute. “I would put the bag down in front of the apartment door, ring the bell, and run,” Ostroff remembered afterward. “There was a committee that ferreted out who was desperate, but to protect people’s dignity everything was done anonymously.”
After the war Kazan returned to construction and, like Trump, used government programs for large apartment complexes. Because his projects, in the Bronx and on the Lower East Side, did not fit FHA categories, he did not receive mortgage insurance but instead continued to rely on state and city tax abatements. Although Kazan’s goal was to keep charges for tenants low rather than profits high, he pressed as hard as Trump to save money. A favorite target for economizing was the electric bill, which he held down by building his own generators and being ever vigilant about ways to curb kilowatt usage. Frugality also dictated the installation of only two elevators per building, regardless of the number of residents, and making them what was called “skip-stop,” meaning that one elevator stopped on even floors and the other on odd floors.
For his first postwar project, Hillman Houses, an eight-hundred-unit complex on the Lower East Side, Kazan asked for help from a new source: City Construction Commission head Robert Moses, a dominant figure in New York politics and well launched on a career of reshaping the city’s landscape through massive slum clearance and highway projects. A towering, Yale-educated Republican, Moses was not impressed by the short, slight union builder, who had a thick Russian accent, a minimal education, and socialist ideas. When the patrician commissioner learned that Kazan, who did not know how to drive, had asked his architect to take him to Moses’s headquarters, he scoffed at the immigrant developer for not having a private car and chauffeur. Hillman Houses, Moses declared, was “speculation,” “without merit,” and “preposterous,” and he refused to provide any support. But after Kazan finished the project at the low cost he had promised, Moses recognized him as a builder who could be relied on.
Having the backing of Moses — acknowledged by even his most bitter critic, Lewis Mumford, as having more influence on American cities than anyone else in the twentieth century — was a major coup for Kazan. Over the years that followed, Moses earmarked for Kazan a number of development sites that qualified for the federal urban slum clearance program known as Title I. Among them was a sixty-one-acre plot of land, much of it vacant, on Coney Island. Kazan was thrilled. He immediately envisioned the world’s largest cooperative, a huge complex that would contain twelve twenty-story buildings and more than five thousand apartments, and proposed naming it after a founder of the American cooperative movement, Dr. James Peter Warbasse. The official sponsor of Warbasse Houses would be the United Housing Foundation (UHF), a nonprofit corporation established by Kazan when the Amalgamated Clothing Workers Union moved out of the housing field. But just as UHF was about to apply for final approval and city real estate tax exemption, a rival claimant — the first in Kazan’s entire building career — stepped forward.
Fred Trump was still the biggest builder in Brooklyn, but the past three years had taken a toll. During the summer of 1954 one newspaper article after another had broadcast to the world a Senate committee’s claims that Trump had profiteered on postwar housing. The headlines were devastating. According to a classmate of Maryanne Trump, the accusations seemed to hang like a dark cloud over the family. Worse yet, the scandal also cast a long shadow over Trump’s business interests. Beach Haven tenants were suing for rent rollbacks, the FHA was threatening to take over Shore Haven, and the agency put Trump on its blacklist for future work. As a result, he could not obtain federal financing for his next major project, an apartment complex on the site of Luna Park, a celebrated Coney Island amusement center that had burned down ten years earlier.
Trump had kept busy. He produced a handful of smaller, privately financed apartment buildings in his home borough of Queens and gave them elegant English names like Saxony and Wexford. He put in the winning bid for a foreclosed 608 development that was one of the biggest apartment complexes on Staten Island. He built University Towers, his first Title I project and part of the newly developed Brooklyn Civic Center. But none of these projects was close to the scale he’d had in mind. To reestablish himself and his good name, he needed to do something else. Something big. Then he learned about the sixty-one-acre parcel in Coney Island.
On August 12, 1957, with no prior notice of his intentions and only two days before UHF was scheduled to present its Warbasse plans at a City Planning Commission hearing, Trump filed a formal objection. His verbal assault began at the hearing, which he attended with attorney Richard Charles. In a two-page statement read by Charles, he declared that the UHF proposal was an “outright giveaway” that would allow “a favorite few” — that is, 5,184 union families — to avoid paying their full share of taxes. Unlike his own projects, Trump claimed, Warbasse would take “money out of the pocket” of taxpayers and ask them “to subsidize more luxurious housing than they themselves enjoy.”
Kazan was dumbfounded. What should have been a routine event was a fiasco. The approvals process for the UHF’s most ambitious development skidded to a halt. In press releases and letters to officials, Trump and Kazan attacked each other’s positions and boosted their own. Charges and countercharges flew back and forth. Numerous adjustments to the proposals were announced, but the basic differences remained unchanged. Trump’s proposition included less tax abatement, higher rents, and no tenant investment, whereas that from Kazan stipulated higher tax abatements, lower rents, and tenant down payments of $500 a room.
The stalemate continued for more than two years. On one side were Brooklyn’s biggest builder and his allies, a host of borough politicians determined to protect one of Brooklyn’s own against an invader. Vigorously portraying himself as the embattled defender of free enterprise, Trump claimed repeatedly that low rents at Warbasse would pull tenants from Shore Haven and Beach Haven, even though these projects had long waiting lists and Warbasse’s $500-per-room deposit would discourage defection from Trump’s buildings. On the other side stood Kazan, nearly alone, doggedly repeating that because he was offering homes to families who could not afford Trump’s rents, he needn’t stoop to partisan politics and alliance building. “Housing should not be subject to politics,” he wrote. “It’s too basic.”
A noble stand, but unviable now that Kazan was alone. In earlier UHF projects he had the support of the unions and Moses. Given this powerful backing, politicians had gone along with the idea of projects on which no one made money. But the labor unions were not initial sponsors on Warbasse, and Kazan had opted not to go for the Title I financing that would have brought the project under Moses’s oversight. The ostensible reason was that the land cost was so low, it was unnecessary. The real reason, however, was that it would be impossible to involve Moses without antagonizing Mayor Robert Wagner, who was increasingly unhappy about the commissioner’s extraordinary power over city affairs.
When Kazan had first begun planning Warbasse, city comptroller Larry Gerosa and City Planning Commission head James Felt had called the UHF head into Felt’s office and read him the riot act. “They wanted it clear that the dogged and fiery Moses was not to have Warbasse as another of his huge list of metropolitan credits,” Kazan later recalled. “Not caring very much who got credit for what, so long as housing was getting built, and thinking that these men should fight out their own political battles, I went along.”
Kazan’s single-mindedness, heretofore an asset, would now prove his undoing. Although he realized that Moses did not want to leave Warbasse out of the Title I program, he never asked why. Nor did he take heed when Moses noted that there might be political problems if Kazan operated without his protection, including “a stiff fight from a builder named Trump.” And Kazan seemed oblivious of the fact that he was constructing a huge project in Brooklyn, a place he had never worked before and one where Trump had been consolidating his political ties for a quarter of a century. Still a regular at fundraising events, he stayed in constant touch with the borough’s political movers and shakers and had recently introduced himself to the new Democratic county leader with a $1,000 check. This local power base had not protected Trump against the Senate committee’s accusations, but after the probe was over, Brooklyn’s political heavies remained at his side. Among the most supportive was the longtime Brooklyn borough president. He had gotten to know Trump while lunching with the Knights of the Round Table at the Court Cafe, and the two had worked together on the centerpiece of Cashmore’s twenty-year administration, the new Brooklyn Civic Center.
But what may have been the strongest connection between Cashmore and Trump came from yet another quarter: Abraham Maurice (“Bunny”) Lindenbaum, a genial real estate lawyer who was one of the best fixers in the history of Brooklyn politics. In 1949, after more than a decade at the commercial insurance company used by most Brooklyn landlords and years of dutiful doorbell ringing for the Madison Club, Lindenbaum had struck out on his own with another lawyer, Sidney Young. Although their first office was in a single room so tiny that Young’s desk was in the closet, their first client was Fred Trump. With Lindenbaum’s talent for getting things done, the firm quickly grew to occupy an entire floor at 16 Court Street, the preeminent address for anyone involved in commercial real estate in Brooklyn.
There Lindenbaum & Young serviced a growing number of Brooklyn real estate potentates. Young had cut his legal teeth working with Abe Traub, the other major fixer of the era, and he specialized in going before tax commissioners to appeal real estate taxes, a little-known maneuver that saved significant sums for Trump. Bunny’s talent was putting people who could help each other in contact, occasionally by introducing them at his office. More often Lindenbaum, the consummate rainmaker, the man who could always explain why what he wanted was good for you, was touching base at Borough Hall and City Hall, holding lunchtime meetings at the 21 Club, an elegant, high-profile restaurant in midtown Manhattan, and juggling his numerous professional and civic posts. In January 1956 Mayor Wagner appointed him a member of the New York City Housing Authority. Four days later that same body approved the purchase from Trump of the Luna Park site for a housing project.
The idealistic Kazan detested fixers like Lindenbaum and Traub and insisted virtuously that good, low-cost housing for moderate-income families should make sense to every politician. But to the politicians who were doing the deciding, housing was a business, not a sacred trust. Kazan was just another operator building up a power base, and his pious words about not making trade-offs were simply a sign that he had gotten too big for his britches. Pro-Warbasse petitions signed by more than three thousand prospective residents, the pro-Warbasse crowd that overflowed a Board of Estimate hearing on the dispute, and even labor leaders’ phone calls to the Brooklyn borough president seemed to have no impact. When Kazan finally obtained an appointment with Cashmore, he refused to commit himself about the site and instead talked for an hour about his support for the new state of Israel and how good a friend he was to the Jews.
Cashmore sat on the Board of Estimate with the other borough presidents, the city comptroller, and the mayor. Twelve times Cashmore exercised his prerogative as president of the affected borough toblock consideration of the UHF tax abatement. Each time Wagner, a Kazan ally in the past, refused to confront Cashmore. Whether or not mayoral intervention would have helped was unclear; what was clear was that Wagner himself needed help on a far more pressing problem, the overwhelming presence and power of Robert Moses. Because Kazan’s backing came from Manhattan and the Bronx, areas where the mayor was already strong, backing him would not advance Wagner’s own anti-Moses agenda. Trump, on the other hand, had the support of political forces in Brooklyn, the borough in which the mayor was weakest. If Wagner was ever to loosen Moses’s hold on New York City, he needed to be able to trade a favor with Trump’s allies.
Put simply, to build up capital in the favor bank, he would have to obtain approval for Trump. This meant that he would have to produce another two ayes on the Board of Estimate, and the Manhattan and Bronx borough presidents would not provide them. The only possible source was the snowy-haired, Italian-born millionaire Larry Gerosa, who by virtue of his position as city comptroller had two votes. A combative figure who liked to boast that he never ran away from a fight, Gerosa was already on record as backing Kazan. On the other hand, he shared Wagner’s antipathy to Moses.
Possibly with the help of Bunny Lindenbaum, Wagner reflected on these complicated and pertinent facts. Then he sent a delegation to Los Caballeros Ranch, the resort in Arizona where Gerosa was vacationing, to explain to him why backing Trump was good. Apparently the delegation was persuasive, for Gerosa came home on the return flight. With Gerosa’s support for Kazan eliminated and no possibility of Cashmore withdrawing his opposition, the UHF head agreed to a compromise. The new plan, reportedly worked out with the help of Robert Moses and Gerosa’s successor as city comptroller, Abe Beame, divided the site, with the better and larger portion going to Trump for a mix of rental and co-op units.
Nine days after final Board of Estimate approvals on the Trump and UHF projects, Bunny Lindenbaum replaced Moses on the City Planning Commission. Pushed aside by Wagner, Moses went off to become president of the World’s Fair, scheduled for Queens in 1964. And the next fall, when Wagner launched his third mayoral campaign as an independent and reformist effort, one reason he felt confident enough to do so was that he seemed to have found favor in Brooklyn at last.
Trump had launched his attack with the complaint that tax abatements forced city taxpayers who did not live in Warbasse to foot the bill for it. A year later he reversed directions and went after the same tax abatements for the complex he would call Trump Village. For a while it seemed that outside taxpayers would be footing the bill for both projects. Then, not long after the final compromise between Trump and Kazan was hammered out, yet another program would render moot the debate over who should pay for middle-income housing. A whole new method of financing would come into being, pouring immense sums into construction and altering methods of public finance across the nation.
To be known as the New York State Housing Finance Agency (HFA), this new entity raised funds through the sale of bonds to the public and loaned the proceeds to private developers of certain types of middle-income housing. Because HFA bonds were exempt from federal taxation, they would attract investors looking for ways to limit their taxable income; because of the tax exemption, buyers would be willing to accept a relatively low interest rate. Thus the HFA could afford to charge builders low rates on what they borrowed, which in theory would translate into lower home prices.
But the new agency still had to face the debt limitations set by the state constitution. For years housing officials had bypassed these limits by holding referendums to approve special bond issues. Recently, though, such referendums had gone down to defeat at the polls. As usual, Governor Nelson Rockefeller refused to bow to seeming inevitability and instead quietly placed a bond lawyer named John Mitchell on retainer and told him to figure out a way around the debt ceiling. Later he would become nationally famous as Nixon’s campaign manager and attorney general, but within the tight-knit world of public finance he would earn renown for his ingenious solution to the dilemma posed by Rockefeller.
Traditionally the state backed its revenue bonds with its “full faith and credit,” meaning that in case of default, the state was legally required to make good on the bonds. Mitchell’s breakthrough was to create bonds backed instead by the state’s “moral obligation,” a seemingly subtle distinction that meant the state was not legally required to pay them off. As a practical matter, in order to protect its credit rating, the state would have to cover these bonds; nonetheless, because they technically were not a state obligation, they did not count against the constitutionally mandated debt ceiling and hence did not require voter approval. Government agencies could create as many such issues as they wanted; the only limitation would be whether or not Wall Street could move them.
Among the first to use these new financial instruments were Trump and Kazan. In early 1962 both developers asked to transfer their projects from city administration under the Redevelopment Companies Law to the state-run HFA. As he had done a decade earlier at FHA offices in Manhattan, Trump now spent months making the rounds of state agencies, his arms loaded with blueprints and his pockets full of cigars to hand out. In May he broke ground on the new development. It was to be the largest project in Brooklyn, with 3,800 apartments, and it was also the tallest, comprising seven twenty-three-story buildings. He had been so eager to get moving that he had purchased some parcels within the site directly from owners instead of waiting for the official condemnation process. Still impatient, he was now barreling ahead before final HFA approval and covering construction costs with down payments from co-op buyers, even though by law these funds were supposed to remain in escrow. But his confidence was well placed, for in December the agency sold a bond issue earmarked for the first section of Trump Village. By the next fall the HFA was in full swing and had committed itself to providing over $50 million for Trump Village and $36 million for Warbasse, now reduced to 2,484 units.
Trump Village, the one project to bear the developer’s name, was the only one of his projects that he did not actually build himself. But he was still the boss. He collected $3.8 million, or about four-fifths of the total builder’s fee of $4.8 million, and HRH received only one-fifth, or $1 million. In press accounts he did not mention HRH’s role but instead spoke proudly of being four months ahead of his construction schedule. He boasted about being the first developer to follow the city’s 1961 zoning ordinances, which required using only a small portion of the site for buildings and the rest for landscaping, play areas, and walkways. He pointed out that Trump Village, visible from twenty miles at sea, had displaced Coney Island’s 250-foot-high parachute jump as the first thing sea travelers could identify. And he mentioned frequently that the high-profile architectural firm of Morris Lapidus, Kornbluth, Harle & Liebman was the project’s designer.
By the fall of 1964 he had completed Trump Village and rebounded completely from the difficulties of the past decade. The FHA scandals and the loss of Luna Park were behind him. So were the problems of adjusting to new construction methods. He had turned back potentially threatening competition — Kazan never built in Brooklyn again — and reestablished himself as the major builder in the borough.
The reason Kazan never built Warbasse as originally envisioned was Brooklyn borough president John Cashmore; the reason Trump built Trump Village was New York City mayor Robert Wagner. A polite man as well as a practical one, Trump was more than ready to express his gratitude if and when such an occasion arose. So was his lawyer, Lindenbaum, whose seat on the City Planning Commission had been a mayoral appointment. Such a moment arrived at a luncheon held on September 27, 1961, for the real estate community. Intended to honor the mayor, it took place in a private dining room at Sakele’s, a restaurant in the Court Street area. After the meal, toastmaster Lindenbaum reminded the assembled guests why they needed to reelect Wagner for a third term that November. Then he asked for campaign contributions. One by one, forty-three builders and realtors rose and made pledges totaling $25,000. Trump committed himself to $2,500, the second-largest donation.
Trump and Kazan were remarkably similar. Moses once described Kazan as “about as flexible as high-speed steel,” and the same could easily have been said about Trump. Both builders were tough-minded businessmen who were impatient with rules and regulations, always wanted to go faster, and had no tolerance for doing things any way but their own. Neither ever settled for anything but the lowest prices and best deals. No matter how impossible a job might seem, they got it done. Despite the fact that one sought profits and the other didn’t, both were entrepreneurs. As such, they faced one ultimate test: whether their competitive advantage — that characteristic that let them succeed where others failed — was replicable.
Trump’s strength was his ability to figure out where the extra profits lay and how to get them — what regulations could be safely skirted, where the give was in financial arrangements, which politicians and officials to approach and what to say, how to minimize friction along the way. With this savvy he created a successful, profit-making organization. And it is in the nature of such organizations that if the head steps aside or dies and an adequate successor is not at hand, the business can be given a monetary value and sold and then someone else with the necessary entrepreneurial skills can take over.
By contrast, Kazan’s edge was his cooperative leadership. It was what made co-workers and cooperative managers accept low salaries and what made tenants go along with UHF management and with the requirement that if they moved, they had to sell their apartments back for no more than they had paid for them. It was what allowed this stubborn Russian immigrant to buck the very ethos of American capitalism, to scorn the notion of profits, and yet to build more housing units than anyone else in American history, including Fred Trump.
But the one thing Kazan’s cooperative leadership could not do was provide for an orderly succession. When the head of a cooperative institution leaves, the transfer of control is less clear, and finding someone of comparable skills to hold the enterprise together is a lot harder than finding someone who can make money. That is why, all over the country, cooperative movements have faltered, for it has been impossible to replace the small number of idealistic figures who got them started. And it is also why, ultimately, it is wise to encourage and, at times, to provide public subsidies to the Fred Trumps of the land — not because private development is morally good, but because it will keep going. There will never be a problem finding the next Fred Trump if this one dies or bankrupts himself — the market will keep pushing them along. They may or may not be as clever or shrewd or good or wise or inspiring as the Kazans, but they don’t need to be in order to get the job done.
As it happened, though, the market didn’t need to provide a successor to Fred Trump. He had a son, Donald, who wanted to be a developer and was more than capable. At the UHF, there was no one in the next generation able to take hold of the reins, no one with Kazan’s combination of cooperative vision and leadership skills. When construction at Co-op City proved more difficult and expensive than anticipated, Kazan was too old to impose his authority on the situation, and tenant-cooperators did not rally round. They did not accept the UHF request to raise rents and levy additional surcharges; they did not even heed regulations about noise and pets. They saw management not as an ally, but as an adversary, and ultimately they ejected UHF from its own project. After this crushing defeat, the UHF, an institution based on trust and mutual respect, never built again.
Gwenda Blair is the author of the bestselling Almost Golden: Jessica Savitch And The Selling of TV News. She has written for Politico, The New York Times, New York, Newsweek, the New York Daily News, Esquire, Smart Money, The Village Voice, Chicago Magazine, and other newspapers and magazines. She lives in Chicago and teaches at Columbia University’s Graduate School of Journalism.
This is the second of three posts on the Trump patriarchs, adapted from the author's bestseller, The Trumps: Three Builders and a President, courtesy of Simon & Schuster.