The Law That Created the Billion-Dollar Scaffold Industry Has Turned City Sidewalks Into an Obstacle Course

​January 24, 2016

Aaron Elstein, Crain's Business New York

One day in 2004, workmen arrived at the corner of West 123rd Street and Lenox Avenue in Harlem to erect a sidewalk shed, one of those unsightly steel-and-wooden structures that pop up any time a building is under construction. Twelve years later, it's still there.

"It's completely demoralizing," said Laurent Delly, a real estate broker with a master's degree in civil engineering who lives down the street from the shed. Sidewalk sheds and the scaffolding that usually sits atop them are intended to protect pedestrians from falling bricks and debris. But the chief purpose of this particular shed, on a handsome block in the Mount Morris Park Historic District, seems to be to collect garbage and provide shelter to the loiterers who lurk underneath. Repairs at the building it surrounds move at a glacial pace.

Delly has complained over and over to the city, elected officials and building inspectors, who have fined the owner for numerous violations. He contacted The New York Times, which wrote a feature on it two years ago. Still, the shed remains.

"This is a beautiful block, and people here care about our streets," Delly said. "Do you think this would be allowed to happen if we lived on the corner of Park Avenue and 72nd Street?"

Plenty of New Yorkers can understand his frustration. Across the city, sidewalk sheds and scaffolding spread like kudzu. They devour precious sidewalk space, cut off sunlight, create safety hazards and hurt businesses. There are now nearly 9,000 sheds entombing city streets, according to the Department of Buildings, up from about 3,500 in 2003. That's 190 miles worth of sheds, or 1 million linear feet—equal to the distance between Gansevoort Street in the West Village and the hamlet of Gansevoort in upstate Saratoga County.

"New York is insatiable right now when it comes to sheds," said George Mihalko, a shed-equipment supplier who said his biggest challenge is finding inventory to fill the five 25-foot-long truckfuls of steel pipes and beams that he sends out daily from his North Bergen, N.J., warehouse. "I've never seen anything like it in 30 years."

The unprecedented demand is driven in part by the new wave of construction fueled by the city's robust economy. But there's another, more important reason: Thirty-six years ago, the city passed a law requiring regular inspections of older buildings to ensure concrete and bricks don't fall on pedestrians. And since then, the City Council has strengthened the law while adding new ones, giving rise to an industry that generates $1 billion a year—$200 million of that is for the street-level sheds, and the rest pays for the scaffolding and the workers who repair the façades.

One of the shed boom's biggest winners is William Laffey, a 36-year-old native of Bellerose, Queens, who, after graduating from Albany's Siena College in 2001, started out managing the tool inventory at a Home Depot. He is now president of Spring Scaffolding, a Long Island City-based firm that builds more sheds than anyone else, with 583 standing around the city, according to Buildings Department records. "I wouldn't say this is recession-proof, but someone always needs scaffolding," Laffey said.

Of course, what some might call boom times for sheds would be described by others as an epidemic.

"Sheds are awful and everywhere," lamented Dan Biederman, president of the 34th Street Partnership, a midtown business district where sheds cover about 20% of the sidewalk space.

"So many things about the city have improved, yet sheds are the same gloomy thing they've been for more than 40 years," groaned Stephen Varone, president of Rand Engineering & Architecture.

Even shed builders agree their works don't exactly please the eye. "Basic sidewalk sheds are built for safety, economy and functionality, not beauty," said Ken Buettner, CEO of York Scaffold Equipment Corp. in Long Island City.

Sheds themselves can be safety hazards. Last year, Mayor Bill de Blasio described sheds as "great for criminals as a place to hide" and "great for folks who want to throw their trash on top." On Jan. 8, his administration announced a "shed safety sweep" in which inspectors will examine sheds to ensure they're well-lit and code-compliant. In 2007, a New York police officer chasing a suspect slammed into a poorly lit shed at the corner of Riverside Drive and West 109th Street, and was injured. "I never saw the pole ... the light was--it was black, dark," the officer later testified. Small-business owners complain that sheds obscure signs and shop windows and drive potential clients across the street. Last month, the Upper West Side's Ocean Grill shut down after a shed and construction noise drove away customers, according to a lawsuit the owners filed against their landlord. BLT Fish in the Flatiron district called a shed outside its restaurant a "kiss of death" in a 2013 lawsuit against its landlord that was settled a few months ago.

Residents loathe sheds because some never go away. The Mount Morris shed has lingered uptown longer than Wicked has played on Broadway. "The city assumes if you want a permit, there's work to be done, and clearly that isn't always the case," said Robert Rodriguez, an assemblyman from Harlem. Last summer, the de Blasio administration removed eight miles of sheds from New York City Housing Authority properties where no active work was taking place, and last month, Gov. Andrew Cuomo signed into law a bill that requires the Housing Authority to remove any remaining dormant sheds on its sites. Rodriguez, the bill's sponsor, wants the legislation extended to private landlords.

Six years ago the building industry held a contest to create a nicer-looking shed. The winning entry was an attractive assemblage of high-strength recycled steel, translucent plastic and LED lighting, called Urban Umbrella. But it flopped because it costs more than traditional steel-and-wood sheds and is harder to assemble.

And so the dismal spread of sheds continues.

"What's supposed to be a temporary structure has become an architectural feature of the city," said Andres Cortes, Urban Umbrella's designer. "How do we get out of this?"

The Ancient Greek historian Herodotus described how Egyptians used scaffolding to build pyramids, but the modern business dates to 1938. That's when a Milwaukee contractor named Reinhold Uecker patented the first scaffolding system of steel beams and pipes, after the wooden structure he had used on a church steeple collapsed. Today, the scaffolding business nationally generates more than $10 billion a year in revenue, says Marty Coughlin, past president of the Scaffold & Access Industry Association, a national trade group.

In New York, the business is dominated by outfits including York Scaffold, United Hoisting & Scaffolding, and Universal Builders Supply, which not only install sheds but also build scaffolding and construction elevators above them. Universal, which helped erect the Empire State Building in 1931, generated $75 million in revenue last year, according to the trade journal Engineering News-Record. Its scaffolds once covered the Statue of Liberty, St. Patrick's Cathedral and the Time Warner Center on Columbus Circle. "It's not an exaggeration to say we helped build a lot of the New York skyline," said President Kevin O'Callaghan, the third generation to run the family business. His firm's central role in the city's real estate scene puts O'Callaghan in regular touch with everyone from corporate CEOs to truck drivers—"the whole gamut of society."

That said, he doubts he will pass on the company to his children, one of whom works at Goldman Sachs, another at Deutsche Bank and a third at Yext, a Manhattan-based firm specializing in digital-location management software. He's proud of his kids, but adds, "They're moving paper."

Starting in the early 1980s, O'Callaghan and other big scaffold builders started to see new competition. There's a founding figure for that story, too. Her name is Grace Gold.

Gold was a graduate of Brooklyn's John Dewey High School who was fluent in Spanish and liked to sing and play guitar. She finished high school early and was only 17 when she completed her freshman year at Barnard College on the Upper West Side. On May 16, 1979, after attending the annual graduation ceremony, she headed with some friends to get cash at a bank at the corner of Broadway and West 115th Street. Then a piece of masonry fell off the building and struck her on the head. "Her friends watched her die on the street," recalled her sister, Lori Gold.

A year later, the city enacted a law requiring owners of buildings higher than six stories to inspect their properties' street-facing façades every five years. The law created a need for anyone skilled in replacing aging bricks or stonework. "Grace's death catapulted what had been a cottage business into an industry," said Wayne Bellet, owner of Bellet Construction, a 70-employee firm that specializes in renovating old buildings.

The statute, Local Law 10, was also a boon to the shed industry because there were 13,000 buildings around the city that needed inspecting and a shed had to be installed any time restoration work was deemed necessary. Hundreds of startups rushed in, including Spring Scaffolding and Skyline Restoration, which merged in 2011. In 2013, Skyline was ranked by Crain's as one the 50 fastest-growing companies in the city, with $66 million in revenue. (That figure is now more than $90 million, according to a person familiar with the firm.)

Over time, the city broadened its inspection laws, usually in reaction to accidents. In 1998, Local Law 11 came into effect and required inspections of side and rear façades. In 2010, the city staggered deadlines for filing safety reports to avoid mass sprints to the finish line, in the process creating a never-ending stream of work for shed builders. In 2013, after a 35-year-old woman was killed when a balcony railing collapsed, the city added railings to the checklist.

"I'm sure it was never anyone's intention to have sheds pop up all over the place," said Rand Engineering's Varone, who started his firm in 1987 to help buildings comply with Local Law 11. "But that's how it worked out."

Business grows constantly. Even the financial crisis didn't hurt, with Universal Builders Supply's revenue rising every year between 2007 and 2013.

The emphasis on building safety has had a demonstrable impact. Complaints about falling bricks or other debris decreased by more than half from 2005 to 2015, according to city records of 311 calls. "There's no doubt in my mind that decline is due to the city's laws," said Eric Cowley, founder of Cowley Engineering, a firm that has renovated New York buildings since 1985.

The improvement also comes at considerable cost to building owners, with expenses ratcheted up in part because cautious city officials sometimes require a shed even when it isn't warranted. One reason is constrained resources: The Department of Buildings' 500 inspectors monitor thousands of construction sites, and harried officials sometimes order a shed to protect pedestrians until they get time to visit the building. Cowley said officials sometimes demand sheds for minor projects that don't even need permits, such as masonry-joint repair.

"The city has become a little overzealous when it comes to requiring sheds," he said.

That probably wouldn't be so bad if the structures really were temporary. But once they go up, there's no law saying private landlords must take down dormant sheds, nor does it always make financial sense to do so. The laws of shed economics explain why.

The ever present shed on Delly's Harlem block sprouted up about four months after the four-story, eight-unit building was acquired in 2004 by Muhammad Shahid.

Shahid, who is listed in city records as presi-dent of a firm called Zamzam Realty, said the shed has stood for so long because the area's landmark status has made it hard to get renovation plans approved. "I have no idea when the shed will come down," he said.

Shahid may infuriate people who live near his property, but he's one of many landlords who have concluded it's cheaper to keep up a shed—and pay fines for violations—than it is to fix a building.

Here's the math: To erect a 200-foot-long shed costs around $25,000, half of which is paid upfront and the rest when the shed is taken down. In between, the shed builder would collect about $700 per month in rent. Suppose the building owner needed to replace loose bricks and masonry, tighten the parapet and waterproof the roof. If the building were higher than 15 stories, he would need to employ a full-time site-safety inspector, install protection over neighboring buildings, and put up a shed that extends 20 feet past the end of its façade in each direction. The entire cost of the renovation project, including the shed and scaffolding? Easily $250,000, according to Cowley. Even a prosperous building owner would probably flinch at that expense; the less wealthy simply put up the shed and worry about when it will come down some other day.

This could be remedied with legislation similar to the law requiring the Housing Authority to take down its sheds. But City Council Speaker Melissa Mark-Viverito wouldn't comment on whether she would support such a law, and the state couldn't pass one without the city giving its go-ahead.

Shed builders certainly would not welcome more government oversight, in part because their business is already heavily regulated. Nearly every aspect of a shed is determined by the city government.

It starts with the city saying the structures must be strong enough to support 300 pounds per square foot—twice as much as demanded by any other city. That rule, which has been on the books since at least the 1960s, ensures structures are strong enough to absorb the shock of a brick falling 20 stories, but it also means a column is required every eight feet to support the load. That helps explain why New York sheds gobble up so much sidewalk space.

Until 2013, sheds came in a variety of colors, including blue, silver and beige, which contractors used to identify their projects. Then Mayor Michael Bloomberg decided to put an end to that. "What we are looking for is a color that is, you know, what maybe psychologists think are soothing colors," then-Buildings Commissioner Robert LeMandri told the City Council. "And so we chose green."

The edict was big news for Michael Schnurr, president of National Paint Industries, the leading paint provider to the city's biggest builders. His factory in North Brunswick, N.J., got busy producing the exact type of paint chosen by the city, a blend that he calls Hunter Green 1390. Sales of the color immediately quadrupled, to more than 80,000 gallons per year at $25 a can, and today it's almost impossible to walk the streets without seeing Schnurr's green paint. "Not bad for a kid whose dad started mixing paint in the back of his shop in Brooklyn in 1959," he marveled.

The laundry list of rules and regulations leave almost no room for personal touches in shed construction, though builders take pride in placing the plywood panels close enough together that they look like a wall. "We always make it nice and smooth and seamless," said Spring Scaffolding's Laffey. He paused to look at a photo in his office that showed the Paramount Building's marquee practically swallowed up by his firm's shed. Whatever Times Square pedestrians negotiating their way around the shed may have thought, the wood panels were certainly smooth. "It was a quality job," Laffey said.

While there is huge demand for sheds, profits in the business have been constrained for years by steadily rising labor costs. The average New York construction laborer's pay rose by a third from 2004 to 2014, according to the U.S. Department of Labor, while the price of steel rose by more than 50% and lumber prices nearly tripled before retreating in the past year. Amid rising costs, developers and contractors have hired more nonunion shed-building firms.

Nonunion shed builders tend to get paid about $20 an hour without benefits, compared to nearly $70 an hour, which includes the costs of benefits, for union members. Even with lower labor costs, nonunion shed builders claim their profit margins are only around 4%. Given that one shed is almost exactly like another, the low bidder usually wins. And there are hundreds of firms competing for work.

Shed building isn't as dangerous as other kinds of construction work because much of it is done fairly close to the ground. Buildings Department data shows that 11 of the 199 construction accidents reported in the first half of last year involved scaffolds and sheds, with no fatalities.

Wendy Whitesell is trying to make the city's sheds look better. Her photography is displayed outside Barclays Center after it was selected by Art Bridge, a nonprofit that decorates sheds with works by emerging artists. The exposure even helped her sell a few pictures. "It's like being displayed in a gallery, only better," Whitesell said.

Art Bridge Executive Director Stephen Pierson would love to get more up-and-comers' work displayed on sheds. "It's a good way for a building to brand itself," he said. Yet the going is slow. Perhaps 20 buildings have allowed art to be displayed on their sheds. The chief culprit is cost.

"People don't want to pay for sheds, never mind decorating them," said Joe Covello, vice president at United Hoisting & Scaffolding, and a member of Art Bridge's advisory council.

Indeed, ideas to make sheds look better almost invariably go nowhere because developers figure that no one ever paid more to rent an office or buy an apartment because the building once had a nice-looking shed. For most real estate executives, the expense of installing an aesthetically pleasing shed just is not worth it. As Jonathan Drescher, senior vice president for project development at the Durst Organization, delicately put it, "We try to do everything in the best way we reasonably can."

It doesn't help that the Urban Umbrella experiment was a bust. Great as it looked--Mayor Bloomberg called it the shed for the 21st century--contractors said it didn't fit well into the city's busy sidewalks, couldn't support scaffolding and cost twice as much as a conventional shed. Urban Umbrellas have been installed in downtown Toronto, and Cortes said he is working on improvements. "For the public, it's a forefront issue," he said. "To developers, it's a line item."

Another reason sheds don't change is that builders have assembled massive collections of parts over the decades and aren't interested in starting anew. At United Hoisting & Scaffolding's headquarters in Long Island City, stacks of beams, pipes and planks for sheds and scaffolds fill an 80,000-square-foot yard. "We've got 10 times more stuff in use out in the field," Covello said.

And developers may not be inclined to spend on nicer sheds because of the growing cost of settling lawsuits brought under New York state Labor Law 240/241, better known as the scaffold law. The statute holds building owners and contractors 100% liable for any gravity-related accident in which they are at least partially at fault. Critics say the law has caused construction-insurance and legal costs to soar by $3 billion annually across the state. Efforts to repeal it were thwarted by former Assembly Speaker Sheldon Silver, who was of counsel to a personal-injury law firm that reaped fees from such lawsuits. Now that the convicted Silver is out of the picture, the door is open to change, but trial lawyers remain one of Albany's most powerful lobbies.

"Sheds aren't meant to be beautiful, but sometimes they just are."

The building community and city took another crack at shed-beautification by announcing four winners of another contest last month. Unfortunately, shed builders aren't happy with the latest crop, although Covello said all were pleasing to the eye and meet code. "Investing in a system that satisfies minimum requirements is not a good investment for me unless a customer of ours is willing to overpay, which is rare. But it does happen," he said. Another contractor said only one design looked "slightly realistic" and worried that all the contest winners would collapse if hit by a car or bus because their spans are so long. "I doubt that any of the designers or engineers were asked to consider such a real-life situation," the shed builder said. "This real-life situation happens all the time."

So it looks like New Yorkers will be stuck with the old sheds for a while. If that's the case, it may be best to learn how to appreciate them. That's no easy task, but Benjamin Marcus, an architect and a former construction-site manager at Tiffany's flagship store on Fifth Avenue, has learned to see the brighter side.

"Sheds aren't meant to be beautiful, but sometimes they just are," he explained, walking along West 37th Street one rainy afternoon.

He came upon a shed on the south side of the street, between Seventh and Eighth avenues, and at first he didn't like what he saw. Several lights weren't functioning and a graffiti-writer had spray-painted some of the columns. "Pretty disappointing," he said, after a female pedestrian hissed "Excuse me!" upon bumping into him.

Then the shed's artistic qualities began to come out of the woodwork. Look, Marcus said, at how the shed comes within an inch of touching the building without actually coming into contact, because that would leave a mark. Down below, the uneven sidewalk sloped toward the street, so the builders had stacked mudsills to even things out. "That is creating a perfectly level condition using really simple materials," he said.

The roof was perhaps most impressive: The builders had lined planks above the corrugated steel ceiling to create a space that was safe to walk on. "They built a rudimentary floor without nailing things together, and they're relying on tension to make it work. And the way they've arranged the wood has a lovely pattern to it," Marcus said, snapping a picture for his Facebook page.

"The sidewalk shed, to me, is the found art of New York City."