Have we lost Harlem? Harlem is renewing its reputation and its landscape, and is currently the hottest piece of real estate in New York City. But at what cost? (Special Report).

THE SCENERY IN HARLEM IS CHANGING. TAKE A stroll uptown and you'll find great shopping, yellow taxicabs, and white people. "You know what?" laughs Sylvia Stephens. "People used to work three jobs to get out of Harlem. Now they're working three to get in." Stephens is referring to the new wave of residents clamoring to secure a home in a section of New York City that, for decades, was renowned as a mecca of black culture, but also stereotyped as a symbol of urban decay.

Stephens, 56, has been the successful owner of the Crystal Lounge uptown in the Bronx, New York, for 31 years. Thirty one years ago, she also had the foresight to buy a residential and commercial building on Adam Clayton Powell Blvd. (7th Avenue) between 122nd and 123rd streets. "I wanted to get as close to 125th Street as I could," she says. It was 1973, Stephens was 25, and her daughter, Crystal, was 5. It was just a few years before people began selling, or in some cases deserting, their properties because of urban blight. But for Stephens, there were certain sentiments that couldn't be left behind. "My mother was born here, and I remember, as a child, going to the Penny Arcade on 125th Street when it really was a penny, and playing in Mount Morris Park. Harlem meant a lot to me."

The section of New York City known as Harlem runs north and south from 110th street to 155th street, and east and west from the East River to the Hudson River in the borough of Manhattan. It's about the size of Cincinnati, Ohio, and like many urban communities in the U.S., it has become a hot spot of inner-city development, where new businesses, megastores, and an ethnically mixed population--mostly middle class--have pitched their tents. But whereas gentrification is occurring across the nation, the transformation happening in Harlem holds special significance. Harlem is, and has been, more than a black community. It was an incubator of African American culture and artistic expression with international resonance. It was the birthplace of the style of jazz known as bebop, and home to The Cotton Club, and the Savoy, where the likes of Billie Holiday and Charlie "Bird" Parker held sway. It is the home of the Hotel Theresa, where Fidel Castro once made a point of staying, and where the late Ron Brown lived while his dad managed the property. The Harlem Renaissance spawned great literary and intellectual talents. That's a tradition die-hard Harlemites don't want lost.

But revitalization is in full steam uptown. And where whites, Asians, and other ethnic groups once visited to sample soul food or swing to the sounds of jazz, they are now buying property, raising families, and lining up for church on Sunday mornings. What do these changes mean for Harlem? Although most would agree that there have been tremendous improvements to the historic area, they would also acknowledge that Harlem's redevelopment has either displaced or challenged those less economically capable, and could result in its cultural death.

WHY THE MAD RUSH UPTOWN?

"What has happened is [that] market forces have come to the realization that Harlem is one of the last frontiers," explains Kenneth J. Knuckles, the third president of the Upper Manhattan Empowerment Zone (UMEZ). Based in Harlem, UMEZ is part of the $5 billion Federal Empowerment Program spearheaded by Harlem representative Charles Rangel. "It is centrally located. It has one of the best transportation systems in the city, you can get anywhere in New York City from here. It has beautiful architecture and some of the best brownstones anywhere in the city," says Knuckles.

Matthew King II, owner of MK Capital Resources L.L.C., echoes his point. "If you want to live in New York City, particularly Manhattan, and you can't afford the downtown rents, you're going to start to move into areas you wouldn't have normally considered."

At the height of the boom, during the late '80s through 1999, Harlem properties were considered "steals" for middleclass professionals. Almost all of Harlem's new property owners who have smugly settled into their new brownstone homes or completed residential renovations would say, "We were lucky. We got in at the right time." Then, brownstones ranged in price from $50,000 to $250,000.

"It's amazing," exclaims King, 32, who formed his company in April 2002 and purchased his first brownstone in a partnership deal for $500,000 in 2000. He bought his partners out in 2002 for $610,000. Currently in the midst of renovations, his property is now worth $695,000. "I grew up on 159th [street] and watched [Harlem] go from abandonment to the development we have today. What's more shocking to me than anything else is the [rise in] property value."

Harlemites who are among the area's long-time property owners, and who have decided to sell, have seen a great return on their investment--especially those who have long paid off their mortgages. Today, with shells (unfurnished, non-occupiable residences) starting at $500,000 to $700,000, two- and four-story dwellings have already sold for as much as $1.3 million.

And the race to bring goods and services to the more than 300,000 people who live and work in Harlem has engaged not only mega properties such as HMV, Disney, Starbucks, Staples, H&M, and Marshall's but small business owners, including many African American entrepreneurs who own a variety of enterprises from boutiques to restaurants. The business boom has, in turn, quickened the pace of revitalization.

Construction plans and projects are unfolding throughout Harlem. Since it's inception in 1994, UMEZ has invested approximately $100 million into upper Manhattan. Fiscal reports for 2001 and 2002 show that UMEZ committed close to $41 million to upper Manhattan investments, with 81% of those investments going toward business development. The rest has been spent on tourism, cultural preservation, and workforce development initiatives. "Our original mandate was 10 years--from 1994 to 2004. At the end of 2000, our life was extended to 2009 as a result of the tax relief act of 2000," explains Knuckles. "We had not expended all of our money, so we needed time to do that."

They have presently earmarked $6 million--with commitments from New York State ($4 million) and New York City ($2 million)--for the construction of West Harlem Piers on the Hudson River waterfront from 125th to 135th streets, which will feature, among other attractions, boating, and ecological exploration.

HISTORY REPEATS ITSELF

Despite the excitement, the race for Harlem isn't a new one. During the late 1800s, New York City went through a building fever similar to what's being witnessed in Harlem today. According to records from the Landmarks Preservation Commission, prominent developers, such as David H. King Jr., were developing upscale homes with rents of $900 to $1,700 a year. This at a time when working-class renters paid roughly $120 to $180 a year. Excessive real estate speculation, however, caused the market to collapse in the early 1900s, at which time blacks from the south and the Caribbean had begun their migration to Harlem, particularly at the urging of black realtors. Between 1920 and 1930, Harlem's black population had grown to 180,000. Also growing was a middle and upper-middle class that ushered in the Harlem Renaissance.

The 1930s also brought the Great Depression, war, and poverty to the working class. By 1945, hope was being restored. The war had ended, Adam Clayton Powell Jr. had been elected to the House of Representatives (the first black congressman from New York and the district), and the following year, Bobby Robinson, a self-described "country boy from South Carolina," would start the first black business on 125th Street and Frederick Douglas Boulevard (8th Avenue) with Bobby's Record Shop, Bobby's Happy House today. In the 1950s, Robinson expanded into producing records. "Every Beat of My Heart" by Gladys Knight & the Pips, whom he also named, was one of his earliest hits.

"No other black store was here on this street when I first came," Robinson exclaims. "Not a single one." Robinson, now 86, is a short man with a sharp mind and shoulder-length white hair that he wears loose and parted on the side. "I remember Franks," he recalls, the upscale restaurant where the waiters wore tuxedos. "They weren't serving blacks. I was there the day it changed. There were stores that allowed you to shop but not work--except for the man who swept and mopped. I've seen Harlem change at least three times. I saw the drugs come in and knock out all the bars and restaurants, and now I see [business and community] coming back again. I didn't hear about it, I experienced it. I was here."

Several years ago, Robinson was forced to move a few doors down on Frederick Douglas Blvd. when a KFC franchise secured a 20-year lease from his landlord, but Robinson expects to be here through what many are calling Harlem's second renaissance.

COLD-BLOODED ECONOMICS

With the prices of shells going for approximately $500,000, requiring a minimum of $100,000 to $200,000 in renovations, "Realistically, who can afford that?" asks King. "If you're not making over $100,000, you're not getting qualified for the loan. The other challenge is the amount of the down payment you'll need to qualify for a loan. It's going to be 10% to 20%. So on a $500,000 loan, 10% is $50,000, and 20%--that's $100,000."

Many of New York City's subsidy programs operate on a lottery system and offer "affordable" housing to median income brackets way above what has been recorded for longtime Harlem residents in the past. The Renaissance Plaza, located at the corner of West 116th Street and Malcolm X Boulevard, is the largest mixed-use development built in Harlem in 20 years. Containing 241 cooperative apartments, it received more than 4,000 applications, and the apartments were sold to those whose yearly gross incomes were between $25,488 and $140,500. According to Claritas Inc., a consumer marketing information firm, the average household income (HHI) in 2002 was $44,805,92% higher than the average HHI in 1990. "The people who are complaining the most don't have the income," offers King.

Real estate and tax attorney Edward Myers Jr. has been a senior partner with Myers, Smith & Granady Real Estate Brokers on Adam Clayton Powell Jr. Boulevard, between 135th and 136th Streets, for 32 years. He also has witnessed, firsthand, the changing face of Harlem. In 2000, only about 8% of the property purchased in Harlem was by Harlem residents. According to Myers, that percentage is slightly lower today. The overall homeownership rate in Harlem, by residents and newcomers, is about 35%; not including SROs, rentals, co-ops, condos, and government subsidized housing. "There is an influx of people coming in and buying property--mostly whites, including Europeans, who can afford it," he says. "But quite a large number of black people with money are moving into this neighborhood as well."

This renewed interest in Harlem is attracting African Americans who want to reclaim it, says Peter A. Moody, a New York City real estate broker. Among them are Essence magazine's Editorial Director, Susan L. Taylor, Harvard professor Henry Louis Gates, former basketball star Kareem Abdul Jabbar, poet and author Maya Angelou, and rapper/actor DMX, who says he bought in Harlem because of all the new activity, but also because of its historic contributions.

Manhattan Borough President C. Virginia Fields believes black businesses are successfully staking a claim in Harlem. "I know many black businesses and organizations that are some of the largest owners of properties and businesses like the Harlem USA, Pathmark, and the Harlem Center on 125th Street and Malcolm X Boulevard," she says.

That was Brett Wright's plan when he and several of his business associates started looking for property in the late '90s. Originally from Montclair, New Jersey, Wright says, "There were about six or seven guys from the recording and publishing business. We were going to be the big ballers," jokes the 34-year-old president of NuAmerica Agency, an advertising and marketing firm based in Harlem. "We were all broke but our idea was, 'Let's go buy up Harlem.'" Four of them purchased their first homes in Harlem ranging from $150,000 to $200,000--all within a four-block radius of the historic Strivers Row and Hamilton Heights areas. Each property required an additional $200,000 to $300,000 in renovations.

Wright's property was an SRO (single-room occupancy) with nine apartments for which he paid approximately $200,000 in 1998. He had originally set his sights on Tribeca, a trendy section of lower Manhattan but, "It wasn't financially feasible for me at the level I would have wanted it. That same brownstone downtown on Waverly [Street] is $4 million or $5 million." Wright pays $2,800 for 4,000 square feet of office space in Harlem. His monthly office rent in Tribeca was $24,000 for roughly the same amount of space.

"Ten years ago, you could have rented a square foot on 125th Street for between $15 and $25," recalls Myers. "Today, many corporations are asking more than $125 a square foot. Increasing rents and the influx of large commercial properties have driven some out of business, including a number of longstanding favorites, such as Well's, best known for chicken and waffles, and 22 West (or Twenty-Two West), a breakfast spot that often hosted local politicians and businessmen, and the place Malcolm X used to meet and socialize with people."

NOT BUSINESS AS USUAL

One of the criticisms of the revitalization efforts has been the seeming lack of control on the local level. "The issue is how much impact do Harlemites have on what comes into their community?" asks Lloyd A. Williams, president and CEO of the Greater Harlem Chamber of Commerce. "A lot of that has to do with the politics of Harlem, and that is because the organizations that impact the decision making have, heretofore, been mainly government organizations."

UMEZ, which is based in Harlem, has received praise--and much criticism. But Randy Daniels, the current secretary of state in Gov. George Pataki's administration, has also been a force in commercializing Harlem. Working through the Empire State Development Corporation (ESDC) and the Metropolitan Economic Revitalization Fund (MERF)--in conjunction with local church-based development group Abyssinian Development Corporation--Daniels' current project is the Harlem Center, a shopping center that promises to bring 2,000 jobs to the community. Moody stresses that much of the planning for these developments, by these organizations and others, went on at a time when the former mayor of New York City, Rudolph Giuliani, refused to meet with black elected city officials, namely Rangel and Fields.

Knuckles argues that the frustration surrounding the UMEZ's involvement in Harlem's revitalization is misplaced. "Those mega deals, which have not characterized the Zone's activity at all, are most readily identified with the Empowerment Zone," he explains. "The real benefit, however, is jobs. There are between 300 and 400 jobs supplied by Harlem USA and those jobs, for the most part, went to residents of the Upper Manhattan Empowerment Zone."

Knuckles further argues that Harlem has benefited overall from having increased services. "This community, like a number of other communities, didn't have adequate choices or an ample supply of quality goods and services," he continues. "In an undercapitalized environment, both the business people and the consumer suffered. So having greater choices is a good thing. It creates competition. Smaller businesses are put under some strain, but at the end of the day, choice is the better alternative." UMEZ has also extended low-interest loans to African American and Latino businesses, including Hue-Man Bookstore (the country's third largest black bookstore), Mobile Woods, and several black-owned restaurants, including Well's, which is now closed.

Gregory Bartlett is the proprietor of On the Park Cafe, famous for having Harlem's largest selection of burgers (30 varieties). When the lease at the cafe's former location expired in 2001, he decided to expand the eatery and moved to their current location on 110th Street. Bartlett had financed $50,000 to open the cafe at its original location and was making about $200,000 a year. He explains that when it came time to move, "I went to Banco Popular and Chase on 125th Street. They told me things like, 'You don't make enough money', 'Your paperwork [isn't complete]', and 'We don't think your business is worth investing in.'" Bartlett was initially discouraged, but he knew that, "Financially, it would not have paid to stay [at the old location]." Having successfully relocated a little over a year ago now, the cafe's new location is much bigger and gets much more traffic than the old one. Bartlett says he expects to do some $400,000 in business this year.

Thirty-three-year-old Harlem native Vernon Scott has opened three businesses in the last three years: two mobile phone stores and a fast food restaurant called Cafe 22, which opened in January. He believes that blacks in the community can't rely on UMEZ or banks to realize their business dreams. "It's a lot of politics and I'm not that patient a person. A lot of people do tell me I should get a grant or a loan, but I just believe in sacrificing and saving my money, and things have worked out for me," he says.

For all three spots, Scott pays approximately $6,000 in rent. Escalating rents concern Scott, but he doesn't see them as an obstacle to growing his businesses, even without supplemental financing. "I've seen too many people get their hearts broken trying to get [grants and loans]. And the locations won't wait for you to get your money together. Either you're ready to roll or you're not."

THE NEW HARLEMITE

A stroll through Harlem with Russell Shuler is like a walk down memory lane as he points to abandoned and renovated sites that are historically dear to old-time residents of Harlem. Sites like Mr. B's, a once hot nightclub where scenes from Shaft and Superfly were filmed, and Small's Paradise, the nightclub that used to be owned by basketball great Wilt Chamberlin. "You know Harlem plays the best ball in the country," insists the executive director of Youth Education through Sports (YES), a New York City organization that academically prepares student athletes for college.

A tall, slender, charismatic man, Shuler greets and is greeted by several individuals on the street as he walks and talks. A renter and property owner, Shuler watches this new wave of migration into his beloved Harlem with mixed emotions. "We're seeing good looking and promising things, but the historical value is totally erased," he says. He feels that "foreigners," as he calls all new residents, will never have the same sentiment as old-school Harlemites; the same feeling of community. "I admit that we are sometimes reactionary. I wish we people here had the resources, and in some cases the vision, to do more."

As of 2002, there were 153,756 blacks, 126,794 Hispanics, and 23,187 whites living in Harlem, according to data from Claritas Incorporated. This data also shows that Harlem's African American population declined 7.5% between 1990 and 2002, while there was an increase of Hispanics, whites, and other ethnicities by 22.3%, 9.3%, and 68.5%, respectively. Additionally, the study estimates that between 2002 and 2007, Harlem's African American residents will decrease by 4.4%, and the Hispanic and Caucasian populations will increase 3% and 0.8%, respectively.

Nikhil and Kristin Hattiangadi were already familiar with Harlem and had enjoyed hanging out uptown with friends when they began looking for a home in 1998. They admit that the culture and the changing economic climate were a draw. They are now new Harlem residents who purchased an abandoned, four-story brownstone on Strivers Row in 2000. Nikhil was born in India and raised on Long Island. Kristin is white, from upstate New York. "My mother was concerned at first," she says. "But now she loves it."

They had been looking for a home since '98, living on West 63rd Street and West End Avenue in Manhattan, paying $2,000 a month for a one-bedroom apartment. The purchase price of their brownstone was $340,000. A total gut rehab, which converted their property into a single-occupancy home, cost them close to $500,000. A corner home across the street just sold for $1.2 million.

But the Hattiangadis are not planning to leave and are looking forward to raising their daughter in the Harlem community. "It's a real neighborhood," says Nikhil. "People say good morning to you and they'll take your mail if they know you're not there."

"We lived on the West End for eight years and didn't see anybody," adds Kristin. "They wouldn't even hold the elevator for you." Since their arrival, several new couples of different ethnic backgrounds, including African American, have moved onto the block also with young children.

"Transition is not particular to Harlem," says Moody. "It's the way of the world. I don't think we're losing the culture. When the tourists come to New York [City], they want to come to Harlem. They want to touch it, smell it, taste it. They want the flavor. If Harlem is enjoying its second renaissance, even with this influx of new residents," he says, "it's not going to change Harlem's flavor."