This is the story of a housing war, and an unexpected victory for some of the city's most maligned activists.

On one side were the Lower East Side's squatters, ordinary people who illegally occupied some of the city's most decrepit abandoned buildings. Against them stood the city of New York, which through three mayors was ready to use its full firepower to get them out. The story of their conflicts is one of pitched battles, paramilitary assaults, and incredible bravery and risk. And for more than 200 squatters who toughed it out and are still in their homes, it's now a story with a happy ending.

In the spring of 1989, the squatters of Umbrella House barricaded themselves in their building when the city's demolition crew arrived at the foot of Avenue C to tear it down. As the wrecking ball started to swing, biting into the vacant tenement next door and coming ever closer to their homes, they stationed themselves in their windows and defied the police to take them out.

"I put a big sign on my window that said, 'I'm willing to die for my home, how about you?,'" recalls Umbrella House squatter Siobhan Meow. "And I meant it, I really meant it. I wasn't fucking around. Because I had nothing other than that building."

During a three-day standoff, the police blocked off Avenue C between East 2nd and 3rd streets while the squatters bricked up their front door and ducked in and out through back alleys. They brought in water from a fire hydrant around the corner. They used buckets for toilets, scurrying out of their building under cover of darkness to empty the waste into city sewers. They took showers outdoors, in the runoff from rainstorms. Because the city Department of Housing Preservation and Development (HPD) had ripped out most of the interior staircase, they used the rear fire escape as stairs.

Compared with what went down at other squats, this was a minor skirmish. On May 30, 1995, hundreds of heavily armed NYPD riot cops invaded the East Village in an armored personnel carrier, evicting squatters from 541 and 545 East 13th Street and arresting 31. The battles were not confined to Manhattan: Between 1990 and 1995, the city used every weapon at its disposal--police officers, firemen, EMTs, housing cops--to evict hundreds of squatters, mostly low-income Latino factory workers and their families, from about 200 South Bronx apartments.

Three successive mayors--Koch, Dinkins and Giuliani--treated squatters as if they were more dangerous than violent criminals. The hardball tactics, along with changes in the housing market, seemed to spell the end of squatting in the city. By the late 1990s, there were only about a couple of hundred squatters left in Manhattan, most of them in a dozen buildings on the Lower East Side.

But now, 11 of the Lower East Side's 12 remaining squats are about to sign a deal with their old archenemy. The Loisaida squats, last bastion of illegal occupancy, are becoming official, and soon the squatters will own their homes. For the past three years, the squatters have been quietly working to buy their apartment houses from the city and turn them into low-income cooperatives. And after decades of arguing that legalizing squats would encourage squatters to invade buildings everywhere, the city has agreed to do just that.

In late August 1999, the Lower East Side's remaining squatters began secret negotiations with the Giuliani administration. Much like shuttle diplomacy in the Middle East, they never talked directly; instead, they communicated through an intermediary, the Urban Homesteading Assistance Board (UHAB), a local nonprofit that helps tenants take over and manage their buildings. After much discussion, they cut their own version of the Camp David accords. The squatters have agreed to tame their anarchist tendencies and become legal, hiring architects to bring their homegrown rehabs up to code. The city has agreed to sell the buildings to UHAB, which will take responsibility for them during the renovations and then sell them back to the tenants as low-income cooperatives.

The deal, hammered out during the last days of the Giuliani administration, was delayed after September 11. But Mayor Michael Bloomberg's staffers have honored the basic framework, and on June 26, the deal to save the squats passed the City Council. Several weeks later, Bloomberg signed off on it.

No one, not even those close to the deal, knows for sure why the city finally agreed to end this two-decade standoff. HPD Commissioner Jerilyn Perine declined repeated requests for an interview, issuing a written statement that said, "HPD is continuing its longstanding policy of conveying our in rem properties to quality, non-profit developers. We are confident that UHAB will make sure the buildings are rehabilitated and become safe, decent and affordable housing for local residents."

But the lengthy, bitter squatter battles of the past suggest what the city's reasons might be. Informed observers speculate that since most of the remaining squatter buildings are stable and well-run, they would resist attempts at eviction and get sympathetic press coverage in the process. Since at least one of the squats agreed to drop ongoing litigation, the deal has also saved the city considerable court costs--another one of Mayor Bloomberg's goals.

For the squatters, going legal means abandoning their outsider status, which has been both an ethical stand and a source of pride. "I'm kind of torn on that, because, well, I'm kinda proud of beating the system," admits John Wagner, who has lived at Serenity House on East 9th Street since the early 1990s. One friend of Wagner's, who used to live in the squat and thinks that the squatters are selling out, sends him letters addressed to "house thief John Wagner."

But going legit after decades of extralegal occupation is less of a contradiction than it might seem. While outsiders, city bureaucrats and even some housing activists regard them as middle-class anarchist scofflaws, the squatters themselves invoke the more practical notion of old-fashioned sweat equity ownership. Their longtime defiance may have been political, but it was also practical. They wanted to keep their homes. For Wagner and the others, legalizing the squats is just another way to do that.

"The whole issue of taking over vacant space and using it is revolutionary, according to the establishment," said Hafid Lalaoui--who lived in many East Village squats over the years, most recently at Bullet Space on East 3rd Street--as he basks in the afternoon shade on Avenue C. "But it's not stealing. It's recycling and transforming and building community. We were not anarchists, not anti-establishment. We were struggling to survive--period."

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New York's squats were born from the flames of arson and abandonment. Landlords deserted swaths of structures in the 1970s, and the city began foreclosing en masse, taking thousands of buildings at a time. Almost immediately, people began moving into the vacant buildings, rescuing them from destruction and decay. The early squatters were the typical New York melting pot: whites and blacks, Puerto Ricans and Latinos, party animals and politicos, gentle hippies and genuine radicals, lots of poor people and a few who seemed interested in upward mobility. For some, squatting was a political act, a way to reclaim unused and blighted property for the people where the government had clearly failed. For many others, it was just a way to afford a place to live.

By the early 1990s, there were between 500 and 1,000 squatters spread through 32 buildings on Manhattan's Lower East Side. The city had foreclosed on thousands of abandoned buildings during the 1970s and 1980s, so by then most of the squats were owned by the government. Squatting, initially embraced by neighborhoods and activists alike, was beginning to fall out of favor with both. Some community residents were openly skeptical about the values and motives of the Loisaida squatters, seeing them simply as pampered political white kids seeking a cheap rent. (In the homesteading heyday of the 1970s, the squats were probably about 70 percent Latino. And while it's true that they got whiter over time, they are far from monolithic: In the 11 squats going legal, 50 percent of residents are white, 20 percent Latino, 23 percent African-American, 2 percent Asian and 5 percent identifying themselves as other or mixed. There are families, too: 39 of the 236 squatters are children.)

Their bitterest enemies, though, were nonprofit affordable housing groups. For years, the Loisaida squatters refused to work through approved channels. This irked many progressives and local housing organizers, who saw them as interfering with legitimate affordable housing goals. The disagreements were partly political--some of the squatters' anarchist antics were bringing the neighborhood bad press. But for some affordable housing developers, the animus was more direct: They were competing for the rapidly shrinking city-owned housing stock.

The city painted squatters as enemies of affordable housing, evicting them if any developer had a plausible plan for low- or moderate-income apartments. Some in the housing development field played along eagerly. Antonio Pagan, a nonprofit-developer-turned-City Council member, labeled the squatters "yuppie gentrifiers disguising themselves in revolutionary garb to get free rent." For their part, the squatters viewed traditional housing activists as sellouts.

But for every ideological firebrand, there were other squatters who were almost apolitical. For every squatter who gleefully mouthed words of revolution there were others who had no time for ideology because they were too busy installing new beams. For every drug-addled party animal, there were squatters who were 9-to-5 working stiffs.

"The trouble with squats is they attract deadbeats like maggots to a corpse," recalls one squatter leader as he leans on a ladder near one of his homemade windows. "You've got a core group of workers, and then you've got the parasites. The squats that didn't survive were the ones where people used them to do drugs and get drunk."

The squatters who thrived did so by engaging in what might be called self-help opportunism. Interviews with successful squatters show that they actually have quite a bit in common with their sworn enemies, real estate developers.

For instance, just as developers often look to take over valuable buildings that may have fallen into city hands, many squatters who took over their buildings in the early 1980s took advantage of a controversial city program called Operation Pressure Point, a paramilitary police action against the drug trade that forced heroin addicts and dealers to abandon many buildings that had served as shooting galleries. When the dealers and addicts moved out, the squatters quickly moved in, figuring their actions might not be noticed while the police were otherwise engaged.

Successful squatters chose their takeover targets carefully. One particularly savvy local activist advised them to identify a building slated for the city's "cross-subsidy" program--a compromise plan allowing developers to do high-income construction in exchange for creating a certain number of affordable apartments. Because the program was controversial, even among housing activists, the squatters figured the cross-subsidy building they found would be mired in political red tape for years, and that their occupation might fly under the radar. It did, and today that building is the squat called Umbrella House.

When gentrification became the new threat on the block, canny squatters fought it. But they also put it to work for their buildings, pilfering from every neighborhood dumpster and construction site, scavenging joists, plywood, rebar, toilets, tile, pipes, plumbing. Others combed the neighborhood for materials, even hauling perfectly good used toilets out of the trash when buildings were required by law to install new water-saving low-flow models.

Through it all, the squatters maintained a relentless focus on making their buildings habitable. Though many squats started with an interesting blend of communitarian and libertarian values, the squatters quickly realized that if they were going to build something permanent, they couldn't run their buildings like Dodge City. They would need to lay down laws, too.

So, from the early days of occupancy, squatters at Umbrella House drew up a few rules: among them, no drugs, no violence, no theft, no racism, no sexual harassment. A few members of the initial core group were thrown out because they began to break those ironclad principles. Similarly, at C Squat--a haven for punk musicians with a penchant for loud noise and hard living--some hard-working residents were ultimately forced out when their addictions spun out of control.

Popeye has been in C Squat for eight years, which makes him a grizzled veteran, as the streak of gray in his hair confirms. Sprawled in a frayed chair in the roughly rehabbed room that is at once bedroom, living room and recording studio, he remembers the early days of C Squat. "It was total hectic hell when everyone was 18," he says. "Bohemia is devoted to freedom. But rules exist for a reason, too. We have applied them, and good friends have been tossed." In some cases, he adds, the threat of eviction pushed addicts to try to clean up. "Sometimes the prospect of being severed from your group of friends, from your family, is the only countervailing force" to addiction, he says.

After the 1988 riots in Tompkins Square Park, when police moved to break up a tent city, local squats welcomed many of the park's former occupants. It was a turning point, both for the neighborhood and for the squats. "We thought we could do this big liberal idealistic thing," recalls Umbrella's Siobhan Meow. "But you can't be nice to criminals. You can't give people stuff for free because they'll just shit on it. These guys were literally hanging their asses out the windows and shitting into the courtyard. They almost brought the house down....That we survived that was more of a miracle than the city leaving us alone."

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Outside, some of the Loisaida squats maintain a graffiti-scarred look, as if to inform passersby that they've been through the wars. Others look much like the gentrified rehabs that surround them. Some still require residents to black out their windows at night because they are afraid Con Ed will discover that they are stealing power and move to shut them down.

Inside, squatter apartments are done up in styles as diverse as the residents themselves. Some are spartan places--clean but rustic, with salvaged windows and crudely patched floors. Others are as genteel as you can imagine, with fine floors and carpeting, fully equipped kitchens, and plenty of exposed brick walls.

To climb the steps in C Squat is to walk up a living graffiti artwork. The halls resemble subway cars a few decades ago. But instead of monikers, these tags are battle cries for revolution, outlaw logos, complaints and humorous takes on official slogans. "School-Free Drug Zone," one door proclaims. At Umbrella House, the walls are much more restrained: One of the choicer tags notes that if you want to eat the rich, you've got to cook them first.

The Lower East Side squats inherited a tradition of do-it-yourself anarchist activism. But in the buildings that survived, residents did not spend all their time partying or pushing political platforms. While many squatters clearly were interested in a social revolution, they

didn't lose their focus on improving their homes. "The idea was to take this on as a construction project," says a politically active squatter who has occupied one East Village building for 17 years. (Like many other squatters interviewed for this article, she didn't want to be named: At the time, they were still illegal occupants in the city's eyes.) "First get the building, then secure the building, then waterproof the building, and on and on. Most squatters are not activists--they're workers." Squatters needed to do labor-intensive construction like fixing roofs, replacing joists and building walls. At Umbrella House, Geoff Dann remembers, "For the first five years, that's all we did--work."

Standing in the spacious but rustic top-floor apartment in Umbrella House that he shares with the 89 cats he has rescued from around the neighborhood, Siobhan Meow (who takes his last name from his feline roommates) recalls what kind of hell he lived in for the first few years. "This building was so rotten, it was literally like a rainforest in here," he remembers. "We had nothing. No money, no materials, no tools. We were just doing the lamest stuff."

The squatters learned as they went. "The roof leaked so bad that you could be in the basement, look up, and see the sky," adds Dann. "When it rained hard, we had these tarps to funnel all the water into buckets, and we had to run a bucket brigade to pour the water out the windows." The tarp system, and the fact that passersby would get soaked if they didn't have umbrellas, gave Umbrella House its name.

To replace the dozens of stairs that were missing, Meow scavenged thick rebar from a sidewalk replacement project on St. Marks Place. Then the squat held a staircase party at ABC No Rio, setting the rebar in molds and pouring concrete around it. As the finishing touch, artists embellished the concrete with tiles, glass fragments, even palm and face prints. "They were definitely not code," concedes Meow, but they worked fine until early this year, when the building finally agreed to accept new risers.

Every building has a similar story. At C Squat (155 Avenue C), the beams were so rotted that the building had sunk almost a foot in the center. The squatters jacked the building up and replaced the joists one by one. They got their replacement beams from workers at a nearby gut rehab. In return for six-packs of beer, the workers saved the old but still usable joists they were removing and passed them on to the squatters.

"For a year or more we lived like a Hopi Village, with ladders going up each floor," says Popeye, who was burned out of several East Village buildings before he moved into C Squat. He adds with a laugh that for a building with so many punk musicians, it was great having a huge hole in center of the house, because you could haul heavy amps up or down with a rope-and-pulley system.

After their three-day battle with police, Umbrella House's squatters outfoxed a city stop-work order by tunneling under Avenue C to install a waste line and tie it into the sewer main. "If they found out that we had no drains or waste line, they could have evicted us," explains Geoff Dann, who joined the Umbrella House crew in early 1989. "We were about halfway into the job when the city came. They came on a Friday night and really pulled our pants down."

The city inspector gave the squatters until Monday morning to fill in the hole they had dug in Avenue C. At a house meeting that evening, the squatters resolved to resort to subterfuge: They would cover the street with boards or steel plates, and tunnel under them to install the waste line in a secret underground marathon. Dann, who spent an eight-hour shift cramming himself into the narrow opening and chopping at the hard earth with a short-handled shovel, recalls dirt cascading onto his head every time a car passed overhead. After the pipe was installed, the squatters had to pack dirt back into the hole so the tunnel would be invisible when inspectors returned in the morning.

"We worked 24 hours a day for three days straight," says Meow of his time in the hole. "It was like a scene out of The Great Escape. We were the sandhogs from hell."

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For 15 years, various squatters had approached UHAB about the possibilities of becoming legal, hoping to guarantee they wouldn't get kicked out. And for 15 years, UHAB probed the matter with the city--and ran into a brick wall. From Koch to Dinkins, the answer was blunt: "Prior administrations refused to accept squatters as human," recalls Joe Center, UHAB's associate director.

But the Giuliani administration, whatever its reasons, finally decided to keep talking in the summer of 1999. The negotiations, which took three years, were not especially arduous. They were simply time-consuming, mainly because all the players needed some time to suss each other out.

At C Squat, many of the younger occupants just don't feel comfortable with authority figures, and they considered executives from nonprofit housing agencies to be hypocrites to boot. But UHAB's commitment to communitarian principles eventually quieted the squatters' fears. (It also didn't hurt that Center, though soft-spoken, has a long record in the city's radical movements and can cite guerrilla history as well as any squatter.) "We wouldn't be doing this without UHAB," says Ellen Kessler, who has squatted on East 7th Street since 1981 and now lives at number 278. "They're objective. They have nothing to gain or lose. And their principles are in line with what ours should be."

In the end, only one building, 272 East 7th Street, refused to participate, telling Center that they had documentation of the city's conspiracy to cleanse the Lower East Side of people of color, and would win in court if it ever tried to kick them out. Staying out of the deal is their right, notes Center, but it makes him fear for their future. "I think they've isolated themselves," he frets, adding that he doesn't think "a racist, classist court system" is going to protect them.

Once they learned to trust UHAB, the squatters had to trust the city. That the Giuliani administration was willing to allow them to stay is a mystery that even the squatters don't risk trying to explain. But they're beginning to believe that City Hall is not trying to arrest them this time around: When a fire broke out in 377 East 10th Street last March, HPD sealed the building and relocated the squatters through the Red Cross as though they were ordinary tenants. And when the Fire Department threatened to vacate Umbrella House for building code violations last fall, HPD pulled strings for the squatters, telling the city's building and fire inspectors to back off, informing them that the city was working to fix the problems, and fixing stairs and fire escapes. "That was, like, amazing," says Meow. "It's hard to be bitter enemies when they fix the stairs and fire escapes for free."

In another show of good faith, the city agreed to a fallback plan in the aftermath of September 11. Not knowing who the next mayor would be, HPD agreed to immediately lease the buildings to UHAB if the deal's future was threatened. (HPD disputes this version of events, saying that any reference to such an agreement is inaccurate.)

The final agreement relies on a fiction: The city is selling the buildings as if they are vacant, transferring them to UHAB for $1 each. Thus, on paper at least, the city still does not have to acknowledge the squatters as legitimate residents. More importantly, the city will not put any money into renovation. (That's not to say, though, that the squatters won't be attempting to corral funds from other government programs, such as block grant funding or low-interest loans, down the line.)

UHAB will then flip the buildings to the squatters, who will run them as limited equity cooperatives, meaning that squatters will not be able to make a quick fortune by turning around and selling what are supposed to be apartments for low-income people. The squatters have signed agreements that there will be no subleasing--indeed, no renting of apartments at all--and that all units must be sold back to the tenant association rather than to new shareholders, reducing the chance that anyone who suddenly becomes greedy will demand under-the-table payments for the right to purchase an apartment.

UHAB will also work with each building to cobble together the finances to make renovations possible. Center estimates that the total cost of rehabbing the 11 buildings will be about $4.9 million, to be paid for with a combination of cash equity, bank financing and, for three of the squats, revenue from ground-floor retail storefronts. The construction credo can be summed up in a few words: "You make it legal," says Center. "You don't do anything else. These buildings are going to become barely legal." The number of electrical outlets, for example, will be the code minimum instead of UHAB's more generous standard of one outlet per wall.

Ultimately, Center estimates that monthly maintenance payments could balloon to about $120 a room--or perhaps 25 percent more than is the norm in the average new limited equity coop--mostly because the buildings will have to take on some debt. But costs will still be far, far below the thousands a month the apartments could command on the open market.

For Umbrella House, that may mean "rents" (or "donations to the building fund," as Siobhan Meow prefers to say) rising to $500 a month from about $100. "That will be hard," he admits. And at 544 East 13th Street, one of the original invaders, who entered the building in 1984, notes that her monthly payments will rise 400 percent--from about $100 a month to over $400. "I'm going to feel the pinch," she admits.

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As they prepare to become owners, the squatters will face some culture shock. For one, they have always been outsiders--and they've learned to live with hardships. Many of the buildings still have no heat and no gas--at least, not legally.

Now, with higher monthly rents and an ownership stake, some squatters worry the complaints are going to start--about how clean the halls are or whether staircase light bulbs are promptly replaced, or about the state of the paint job in the common areas of the building, or about junk someone may be storing on the roof. In a way, the squatter buildings now risk becoming a bit middle class.

"We have to make choices based on what's going to be good for this building 10 years down the road," says Meow. "And there's a danger that the tenant association could turn into a bunch of backbiting freaks." Already, at least one of the squats has split into bitterly opposing factions.

Hafid Lalaoui, who now lives in Portland, Maine, supports the plan for the squatters to own their homes. But he's a bit sad, too. "I think this idea of having the building owned will be a big change," he says. "People will begin to have the concept of 'this is mine.' That wasn't what it was about originally, and I'm worried about that."

Meow agrees. "I would rather continue the way we're going--if we could be left alone," he says. "But the stakes have changed. We know that if we don't take the deal it would be a matter of time before the city came after us."

Up at C Squat, Popeye becomes philosophical as he considers the future.

"This place is an ongoing experiment, an informal urban commune," he says. "It's easier to pay rent and not have to know or depend on the person who lives next to you. For whatever reason, the city made a mistake. We slipped through the cracks in this place that abhors what we are. Being here, in a mundane and tiny way, is committing treason."

Popeye sees the squats--particularly the punk vision of C Squat--as heir to the democratic tradition of the beats and the hippies. The coop vision, he says, won't end those ideals. In a way, it will enable them to continue, by ensuring that "this little place that ain't like the rest of the world will go on. As long as this little thing is here, this kind of spirit will persist in Manhattan."

Besides, he adds, owning their apartments will not change people's spirit, and new walls and fresh paint won't crush the C Squat aesthetic. Says Popeye, with a wry smile as he heads out the door to go to work, "I can guarantee you: After the rehab, we'll just tag it to death anyway."

Additional reporting by Annia Ciezadlo.

Don't forget to check out "Taking Liberties: A Brief History of New York's Squats." and "Homes Above Ground: A Guide to the Lower East Side's Legal Squats."