There is a note taped up in the lift. It is written with Magic Marker in a child's handwriting. "Wanted: Gold buttons. My brother Pascal needs gold buttons for a school project. Do you have any to spare? Leave at the front desk." A day later, the note has a running commentary at the bottom. Someone has written in black ink, "Why didn't Pascal write this note?" and underneath that in blue ink someone has responded, "Because his brother rocks", and then underneath that in pencil someone else has added: "Because Pascal is 5 years old!"

It is late in the day on a frigid January afternoon. There is a man checking in at the front desk. His name is Mr Parrot and he is in a long cream-coloured robe with a turban. He is checking in with his falcon. They are frequent guests.

There are 240 apartments in the Chelsea Hotel. Sixty per cent are residential and 40% are hotel rooms. Contradictions play out everywhere. It is a place of permanence and transience. Some who live there enjoy feeling shut off from the world - it is a place where they can disappear from view. Others enjoy feeling part of a community, describing it as a "vertical village". The Chelsea exists as a microcosm of New York - where income levels vary. Those who struggle share the lift with those who don't, it's multi-generational and there are hidden stories behind every door.

Like the city itself, it's a refuge for reinvention. Some people come to the Chelsea Hotel because they can become someone else. And some people come because they know it's a place where they can be themselves. But the one thing, perhaps the only thing, that everyone who lives there agrees on is this: despite everything that's been written or said about it, in all the books and all the movies that have eulogised it, nobody has got it right.

What was missing? Why has it become iconic? Nobody knows. It's got history. So much has been created within its walls. It's a slice of old New York. Parts of it are dark and crummy. Other parts are exquisite. Etched glass and beautiful tiles. It's how New York used to be. The lights are dimmer. It gets under your skin. Stepping inside, it's like stepping off the map. It's running on a different current.

Located on West 23rd Street, the 12-storey red-brick building was erected in 1884, one of the tallest buildings in New York City at the time. Originally intended for 40 wealthy families, at the turn of the century it went bankrupt and became a hotel. The vast, palatial apartments were broken up and no two rooms are alike. The lobby, which feels like my grandmother's sitting room if my grandmother had lived inside an art gallery, has a collection of people as interesting as the art on its walls.

Norman Gosney has been a resident for 22 years and occupies Sarah Bernhardt's former apartment on the top floor. There is a shrine to Charlie Parker in his rooftop garden. Gosney, who is from Bristol, runs a 1930s burlesque and vaudeville cabaret called Guilty Pleasures, which features his vivacious girlfriend, Miss Amelia. He no longer gives interviews - ever since the Japanese tourists knocked on his door asking if he could show them the room where Sid Vicious killed Nancy - but he will, nonetheless, agree to talk to me. And part of what he will explain is the lobby scene.

"Walk through the lobby, they're watching for you. They know all about the Chelsea: the lobby chick - usually an attractive crazy girl, late teens, early twenties, who arrives with enough money for a week. Guys when they're single go down to see if there's one there. There is also the sleeper - there's usually someone asleep down there. Then there are the talented bums who've attached themselves here, and rich idiots who've bought their way in to be hip and bohemian."

There are conflicting versions of what defines the Chelsea Hotel, but that it's indefinable is in its favour. What the hotel isn't is more precise. It isn't the sensationalised stories, the mythology, or the people who have famously lived and died in the rooms. The bronze plaques near the door pay homage to some of those residents - Sir Arthur C Clarke wrote 2001 here, and Brendan Behan binged on a pint of vinegar thinking it was alcohol.

It's known because it's where Dylan Thomas collapsed into a coma after a drinking binge in 1953, where the beat poets Allen Ginsberg and Gregory Corso discussed ideas and philosophy; William S Burroughs, Jimi Hendrix, Tennessee Williams, Mark Twain and Virgil Thomson made it their home, as have James T Farrell, Arthur Miller, Patti Smith and Ethan Hawke.

There have been suicides, murders, fires, drugs, punks, poets, painters, but in the end what does it add up to? The experience of living there is far less eventful than people would suspect. It's a familial environment - not self-consciously cool or hip - where neighbours are kind to each other and children roller-skate in the white marble hallways. But things that might seem extraordinary are part of everyday routine.

Scott Griffin, a former conductor for the New York Philharmonic who is now a theatre producer, and last year produced Arthur Miller's Resurrection Blues at the Old Vic, has lived at the hotel for 13 years and says he associates it with when his life began. "It's like an ecosystem that edits itself. It's not an environment that you adapt to. You either fit in or you don't."

Since 1946, the Bard family has been in charge. Stanley Bard, the managing director, took over from his father in 1955. He rarely takes a holiday. His son, David, 41, works there too.

"This place is his alter ego. It's in his blood, it's in his genes," David says. He paints a picture of his father as a man driven by devotion. "When he leaves here at night, the first thing he does when he gets home is call the hotel - before he changes - and it's the first thing he does when he wakes up in the morning. You can hear him whispering into the phone. He wants to know who's checked in, who's checked out; he knows everything that goes on."

Stanley understands the value of having an environment where artists can create. But he is a businessman too. Today the hotel has corporate ownership with stockholders and he is a stockholder, one of many. Among the residents, there is concern that if there were to be a change in management and the hotel were sold, it would have tragic consequences. There is a collective sentiment that Stanley Bard is the Chelsea Hotel. Without him, it could become another dime-a-dozen, flat-screened, antiseptic franchise.

"It makes me feel good that my tenants feel I respect them," Stanley says. We are sitting in his cavernous oak-panelled office just off the lobby. From the moment he sits down, he seems eager to get up and get back to work behind the front desk. Now 72, he tells me he hopes he has another 50 years left at the hotel.

Landlords are not generally regarded as paternal figures or patrons of the arts. In keeping the spirit and the heart of the Chelsea intact, he slackens the rope on occasion with some of the tenants and, he admits, sometimes feels taken advantage of. "I'm here to help them and protect them as much as I can - but I'm not their father. They have to carry their weight in society."

In his piece The Chelsea Affect, Arthur Miller lionised life in the 1960s at the hotel: "? it was thrilling to know that Virgil Thomson was writing his nasty music reviews on the top floor, and that those canvases hanging over the lobby were by Larry Rivers, no doubt as rent, and that the hollow-cheeked girl on the elevator was Viva and the hollow-eyed man with her was Warhol and that scent you caught was marijuana".

But drug-taking freedom and cheap rent seem to be a thing of the past. One tenant told me he pays $4,000 a month, which for a small two-bedroom rental in Manhattan is hardly a bargain. Rents now at the Chelsea are for people like Ethan Hawke: bohemians at heart, with a movie star's bank account.

Over the years, Stanley has dealt with a drunken Hendrix, a psychotic Joplin and every other scene imaginable. So what would make him throw someone out? He thinks for a few seconds. "A barking dog. It bothers people. You have to control your pet."

All of the market forces say the Chelsea should be condos. Twenty-third Street is an expensive area. A few doors away there was once a bait-and-tackle fishing store that has now shut down and the dusty health-food store has been edged out by the mega-chain Whole Foods. In this respect, the hotel seems like a relic. The grittiness, which is part of its heritage, has not been sanitised and the red-and-white-striped canopy over the entrance remains faded.

Physically the building is indestructible. The body of the hotel is fireproof and has survived numerous tests of fate. When Andy Warhol's muse Edie Sedgwick set fire to her room, the blaze was so fierce that the inside was destroyed, but the people in the room next door didn't even know it was going on. There is a saying from the 1960s that if you turned the Chelsea Hotel upside down, nobody would notice. It partly applies to how stoned everyone was, and partly to how solidly built it is.

It is soundproof - in theory. A former resident tells me he lived next door to New York's premier submissive, and every afternoon he would hear her getting spanked. "She was a nice girl, quiet and shy, and these guys who looked like schoolteachers from the suburbs used to stand at her door. Then you'd hear a faint 'whack!'"

The building is divided into two sections. The back is sunny, quiet, birds singing, doves, ivy around the windows. There is no obstruction of the view and the light is golden. The front of the building has more street noise, bus fumes; these rooms look out over 23rd Street and have cast-iron balconies.

It smells old: a combination of bricks and marble mixed with paint fumes and cigarette smoke. And one of the most distinctive elements of the Chelsea is the aesthetic. The spine of the hotel is the wrought-iron staircase that runs from the lobby to the 12th floor. There is art work hanging on every wall as you climb the stairs. And in the hallways too. It's even hanging from the skylight at the top - Arthur Weinstein's brightly coloured plastic discs spin and catch the light, projecting images onto the wall.

Most of the art is from residents, past and present. The painter Joe Andoe lived and worked at the Chelsea for 10 years. At one time he kept three apartments - a one-bedroom, a studio and an office - all on different floors. One of his paintings hangs in the lobby. It is 7ft high and nearly 6ft wide and it covers an entire wall. "Twenty-four hours a day, seven days a week in New York City, that painting is on display. You can see it from a car at 60mph. Thousands and thousands of people have seen it. You can't buy that kind of exposure." He says of the Chelsea: "It's like a ghost that can't be photographed."

Artists have always been drawn to the Chelsea. David Remfry, born in Sussex, brought up in Hull and awarded an MBE in 2001 for services to British art in the United States, moved into the hotel 12 years ago with his wife. I visit him one morning in his studio on the 10th floor, where northern sunlight fills the room. It's the most constant light, ideal for painting, he says.

Remfry never answers his door unless he knows who it is. Every day he arrives at his studio at 9.30am and paints until 7.30pm. Then he returns home to his apartment across the hall. Initially Remfry came to New York because of a commission to do a portrait and he knew someone who had lived at the hotel in the 1980s. He rang Stanley, who said, "Come and see me when you get in," and he and his wife, Caroline, arrived late one night from London with 17 pieces of luggage, no reservation and no idea if they were staying. The next day, Stanley showed them a room with a little kitchen and they took it. When an apartment became available down the hall, they jumped at it, and that room has become his studio.

Aside from the light, and the creative spirit, one reason the Chelsea attracts so many artists is the simplicity of having to write only one cheque. It is notoriously difficult in Manhattan to get an apartment and, whether you're buying or renting, there are always credit checks. The life of an artist doesn't always provide an acceptable credit rating and the hassle of proving to be a suitable tenant is eliminated.

Stanley decides who lives at the Chelsea with an uncanny instinct for who will adapt and survive and enhance its environment. Raymond Foye is a longtime resident who arrived at the hotel in 1976 just after he finished high school, hoping to bump into Allen Ginsberg. "I think of this place as a museum of living people and Stanley is the curator," he says.

Foye's apartment is a tidy one-room space with no traditional furniture. Everything is on the floor - books, candles and cushions. The walls are covered with art by Francesco Clemente, an illustrated poem by Ginsberg, and a painting by the poet and artist Rene Ricard, who lives upstairs. "Rene's a very important poet. He's held a reign of terror over New York for the past 40 years now," Foye says with a smile. "It's remarkable. He's mellowed a lot but his productivity is very high. It's nice being close to him here. He writes something and brings it downstairs. I type it up - he likes to revise. It's a very rewarding relationship."

Foye had a similar relationship with the late poet James Schuyler, who won the Pulitzer prize for a book of poems he wrote while at the hotel.There is a plaque in his honour out the front, next to the one for Sir Arthur C Clarke. Foye tells stories, including his own of befriending his heroes. He tells of how there used to be salons - to eat and drink and socialise - but then there was more time back then to hang out. Artists and writers didn't have to worry about money and rent as much as they do today, as the commercial pressures weren't as high. "It's still a creative place, but it's not as underground as it used to be.

"I once spent the day with Rene where he picked up $10,000 in the morning for a text he wrote, and we went around the city and in the course of the day he spent all the money and I left him at a men's shelter on the Bowery that evening." What did he spend the money on? "We went to the Russian Tea Room and he ordered champagne, blinis and caviar, he bought some expensive Jean Paul Gaultier underwear and a pair of shoes. The rest of the money he spent on gifts for people. I thought, 'This is the true poet - la vie bohème.'"

When the topic turns to Stanley, he speaks of him with genuine admiration. "There are a lot of people in this hotel who would be out on the street if it weren't for him. I was with Rene the other day, and we were walking out of the lobby and Stanley asked if Rene had any money for him, and Rene said, 'Oh, Stanley, you should be paying me to live here!'"

Rene Ricard was one of the stars of Warhol's Chelsea Girls, and the only one actually living in the hotel in 1966. Since then he has come and gone. He is authentic, vibrant, with a sense of humour and an urgency about him too - every time we meet, he is on the go. Once again he is living at the hotel but he doesn't answer his house phone and is difficult to contact. When he agrees to talk to me, I'm told to knock on his door. "But don't call out 'Rene! Rene!'" he instructs, "because I know who I am. You have to knock and say, 'It's Ariel' so I know it's you!"

He has one room, a shared bathroom ("which I love because I don't have to clean it!") and no kitchen, which means most nights he goes out to dinner. Taped to the outside of his door are notes from people who have come by to see him to no avail, and an eviction notice.

We sit on a bench in the hallway near the staircase. Rene is elegantly dressed in a blue cable-knit cashmere sweater that matches his eyes. "Stanley is an old friend. I was homeless a few years ago. I was walking by the Chelsea, I had $3,000 in my pocket and, well?"

When he's asked the best part of living here he doesn't hesitate. "Stanley! He puts up with a lot. He throws me out and then we work backwards from there. I don't own anything. I always manage to come up with the rent, knock wood. 'Poet' is not a salaried occupation. And anyone reading this who's in need of a poem? we can talk."

At any time on any given day, there are people creating, writing, painting, composing, in their one-room or their art studio or their four-bedroom palace. Several people mention that I should speak to Sally Singer, a Vogue journalist, who lives at the hotel with her husband, the Irish novelist Joseph O'Neill, and their three children. She left the hotel, moved with her family to Brooklyn, and then famously moved back.

Sally and her husband first moved to the hotel in the spring of 1998, where they had a seventh-floor one-bedroom for a year and a half. When her first son was born they moved to a bigger place upstairs. Then, after having two more children, they purchased a house in Brooklyn for more room, renovated, and moved. But they were miserable. "We would 'ship out' our friends from the hotel - get a car service to bring them to Brooklyn. Our baby-sitters - it was a continuation of the community."

After 18 months they sold the house and moved back to the hotel. What was it that she missed so much? "It surprised me how attached I am and how much it matters to me to live here. It's a village that I feel at home in. I like that there are transient people coming in every night. The fact that it is a hotel is key to its character. There is a continual stream of people to look at. I don't want to live in my own closed-off space. People just drop by. They knock on your door. I want to open my door and let the world in and let my kids out. You have to want to live in the shtetl. That's in my DNA."

The hotel has such a storied past and she is happy to be part of the story. "It defines my existence in New York probably more than any other element. It's a grounding place. It's the truth of my life."

A few days have passed before I see Rene again, and he has some succinct words to share about Stanley: "Culture isn't something in the past. Culture is happening and it is caused by people. Stanley Bard believes in an idea of the Chelsea Hotel and he is still creating this culture in this hotel and, the pressures of the marketplace notwithstanding, he is still trying to find room for a poet in this building. Poetry isn't just the bronze plaques on the facade for Stanley."

When Stanley and I resume talking, I tell him I've spoken to Rene and ask about the eviction note. There is a sensitivity to this subject but clearly a combination of warmth and frustration emerges when he speaks of Rene.

"I give him every opportunity and sometimes more than I feel I should, but because he comes through and has come through in the past?" He pauses. "And I think he's a bloomin' genius. He's a genius. I've very rarely met a person who knows so much about so many things as this guy. I like the man very much."

The previous night, the Chelsea Hotel hosted the premiere party for Factory Girl, the movie in which Sienna Miller plays Edie Sedgwick, and along with the movie stars, many of the people associated with that period turned up. "So many people came over to me that I knew 25 years ago. It was a very exciting period of my life. Nat Finkelstein, he worked for Warhol at the Factory and he worked on the movie, he's now in his seventies. He came over to thank me for what I did for him and introduced me to his wife and said, 'This guy saved my life!' I don't even remember what I did for him. I said, 'Okay, I'm happy.'" He has a pride about the hotel that makes it seem as though he is talking about a child. "It might not be the Waldorf or the Plaza, but it's my Waldorf, my Plaza."

And his answer as to why so much great work has been, and is still being, created under this roof? "This place affords that. There is a happy spirit. There's nothing more important to a creative person than to be in a good place, a happy place, a creative space. All the elements have to be in place."

Since there is nobody who knows more about the Chelsea than Stanley, I suggest he is the one to tell the truth. He nods. "I know. It's important. Before I get senile. It will be a good book."

A few days later, the sun is setting as I sit with Norman Gosney in his jewel-box apartment and discover how an Englishman came to end up on the top floor of the Chelsea Hotel.

"In 1975 I'd been in Santa Monica, California, dressed by Vivienne Westwood, and couldn't get served in restaurants, but I had a good time. I looked so weird the skate kids came up to me and said, 'Dude, what's your deal?' - and I ended up taking the boards back to England. For six months I tried to find a backer. You know Bristol is a merchant-banker town - you should have seen it. I'd go in and say, 'This is the next big thing,' and they'd say, 'What, a piece of wood with four wheels? F*** off!' And then I finally found a rich crazy guy?"

From bringing the skateboard to England to managing punk bands, to designing nightclubs, and now running a burlesque cabaret, the discussion bleeds into his extensive knowledge about the history of the hotel: the architects and the terracotta panels and the white limestone, and the solid columns of masonry and cement and steel and the girders that anchor onto those, until it becomes clear - the lines are blurred. The histories are intertwined. There has been a great deal of attention paid to the former Sex Pistol Sid Vicious and his girlfriend, Nancy Spungen, who was stabbed to death here. The room they once lived in no longer exists. The door has been sealed up and it's become part of another apartment.

"Most people don't have the official story straight," Norman says. "The actual murder never went to trial. There were too many people who saw Sid pass out at around midnight, in a real state, unlikely to awaken for several hours (which is how he was found later), and that notorious douche bag and heroin dealer Rockets Redglare (now deceased) was the last person seen in the room." For those who live at the hotel, this topic has been exhausted. "The truly interesting story here is the fascination with it and why it continues," he says.

As the days go by, the more time I spend there, I begin to understand the invisible boundaries; everyone seems to know when you can knock on a door and when it's okay to enter.

Gerald Busby was a child-prodigy pianist. He composes theatrical chamber music, has written operas, and his compositions were celebrated on his 70th birthday at Carnegie Hall. He has been at the hotel for 30 years. We are sitting in his apartment with its 11ft-high ceilings. He doesn't know the square-footage, so we estimate 300. His upright piano is against one wall, his sofa against another, and sheets of music are stacked vertically. "The parameters of sanity here are quite undefined," Busby says. "Which is very realistic. Because the world is basically chaos.

"Twenty years ago there was a married couple down the hall who were always yelling and screaming at each other and slamming doors, and one day I came out and the husband was standing in the hall drinking beer out of a can. He looked rather strange, but then he always looked strange, so I said hello, and as I was going to the elevator, suddenly the doors open up and 20 policemen rush in and grab him and run into the apartment. He had just shot and killed his wife. He was standing there drinking a beer, waiting for the police to come.

"In the first few years I lived here, there used to be a fire and/or a suicide every year. People would jump down the stairwell. I would come out of my apartment and there would be a policeman directing me to take the elevator - I'd see a shoe. Then there was Tex - the folk singer whose girlfriend poured kerosene over all his fancy shirts. He had emphysema anyway and was asphyxiated." He pauses. "This building has two huge firewalls with sand in them, so fires don't spread easily."

But in the past few years, he says, there's been a lot less drama. "I think of this place as a cross between an artists' colony and a college dorm," he says, smiling.

One of the most trenchant qualities of the Chelsea is that there is in equal measure a feeling of safety and uncertainty. You can be crazy and there will always be someone crazier. And in a world where imitation is celebrated, the lack of sameness and predictability is a comfort. Did Rene ever come up with the money? Did Pascal receive any gold buttons? Not everything needs to be known. And such is life at the Chelsea Hotel.