Harlem as hot as ever as townhouse sales continue to flourish.

During the last three years, the well-publicized resurgence of Harlem has been documented ad nauseam. The large scale developments and sales of some of Harlem's largest housing projects have splattered publications nationwide. However, the Harlem townhouse market has quietly spearheaded the resurgence of the neighborhood. Prices have continued to climb despite rising interest rates.

The Harlem townhouse market can be split into two distinct categories, those that have a legitimate, legal certificate of occupancy (C of O), and those that still hold SRO (single room occupancy) status. The differentiating factor and value of the two are often confused. A traditional townhouse with a legal certificate of occupancy (between 1-4 families) issued by the city is legally allowed to rent out the units for free market rents. If a homeowner would like to change the C of O of their home from a single-family to a two-family or more, they would have to apply for a new certificate. Doing so adds value to the home, and the revenue of additional tenants increases but conversely, often results in tax increases. The process of converting these homes to condo units entails application and subsequent approval of the attorney general of a condo plan.

This process is known to take approximately six to nine months and costs in the range of $50,000.

Conversion of SRO townhouses require a completely different process. The Single Room Occupancy (SRO) program was authorized by Section 441 of the McKinney-Vento Homeless Assistance Act. Under the 1987 program, HUD enters into Annual Contributions Contract with public housing agencies (PHAs) in connection with the moderate rehabilitation of residential properties that, when rehabilitation is completed, will contain multiple single room dwelling units. These PHAs make Section 8 rental assistance payments to participating owners on behalf of homeless individuals who rent the rehabilitated dwellings. The rental assistance payments cover the difference between a portion of the tenant's income (normally 30%) and the unit's rent, which must be within the fair market rent (FMR) established by HUD. Each unit is for occupancy by a single eligible individual. Today an occupied SRO townhouse usually doesn't draw much attention for sale. Most purchases of occupied SROs are by previous and/or current SRO owners whom know the history and tenancy process of maintaining and/or converting a SRO to a legal 1-4 family home. If a SRO townhouse is vacant and on the market, then it draws significant attention. The protocol for converting the vacant rooming house from the SRO status to 1-4 family is a tedious, timely, and costly process. The purchase price of SRO town homes over the last five years has ranged from 20-40% less than 1-4 family homes. First you apply for a "Certificate of Non-harassment" on the home, which proves that no tenant was harassed when vacating the property over the previous three years. After a determination is made, or the house has been vacant for more then three years, the Certificate of Non-Harassment is granted. It should also be noted that no construction can be done to the house while the certificate is being applied for. The "Certificate of Occupancy" can be applied for through the New York City Department of Buildings after the non-harassment certificate is attained. This is when the homeowner determines how many units they desire in their home. The application and subsequent approval of the C of O ranges from 3-6 months, and because of this lengthy time line and the cost to hold the property during that time, many people shy away from SROs. Additionally, if the owner wishes to condo the building, several more months are added to the timeline.

As investors and homebuyers become more familiar with the differentiation between townhouses, we can examine how prices per s/f have continued to ascend over the last several years.

Ten years ago, prices rarely topped $150,000 for homes in good condition with legal C of Os. As time progressed, and the Giuliani administration began to take notice of Harlem's potential, the prices followed suit. By 2003, the average price per s/f of Harlem townhouses had fluctuated to $155 per s/f. In 2004, that number rose to $220 then $255 last year--a 60% increase in three years. Moreover, there have been sales exceeding $2 million on Harlem's famous Strivers Row, equating to more then $500 per s/f. What differentiates Strivers Row from all other blocks on the entire island of Manhattan is that each and every house has legal private parking. In some cases several parking spaces are inclusive with the homes. Owners have at least two entrances to their respective parking on Adam Clayton Powell and Frederick Douglass Blvds.

These facts, along with the historically significant facades and well-maintained, tree-lined blocks have seen prices skyrocket. Recently a home sold on Strivers Row for $2.6 million, well over $500 per foot. A few doors down, a home fetched $2.2 million, or just over $460 per square foot. Several others are active on the market at prices topping $2 million. The north side of 137th Street, just south of Strivers, has reaped the same benefits of sharing the private parking with their homes, where prices top $350-400 per square foot. The recent condo craze has had experts pricing out floor-through townhouse units for as much as $650-$700 per square foot.

As we've become more knowledgeable in differentiating SRO and legal 1-4 family townhouses, Harlem continues its historic upswing and race to remain New York City's hot new residential neighborhood. Longtime residents and those walking the storied blocks for the first time can appreciate the growth and uncovered potential that Harlem townhouses offer.

ANDREW SALOMON, SALES DIRECTOR, CENTRAL HARLEM, MASSEY KNAKAL REALTY SERVICES