Mitchell-Lama Tenants Fight Buyouts
By Bob Woolis

Buyout fever has hit the Mitchell-Lama community. This moderate-income housing program is in trouble because the state law that created it also allows landlords to leave the program and convert to market rates after 20 years. The first buyouts occurred in the 1980s, but due to the downturn in real-estate prices in the early ’90s, there have been none in recent years. Until now.

The landlord of Westgate Houses on Manhattan’s Upper West Side prepaid the state-subsidized mortgage and bought out of Mitchell-Lama last year. Because the building was first occupied before 1974, the apartments are now subject to the state’s rent-stabilization laws. So the tenants will have protection against unlimited rent increases and unjustified eviction. In approving the buyout, the state Division of Housing and Community Renewal allowed the landlord to walk away with a $7 million reserve fund built up over the years from rent payments by tenants. Now the landlord has applied to DHCR for permission to raise stabilized rents to the level of market rents in the surrounding neighborhood, which would mean a 700 percent rent hike.

The landlord of Kew Gardens Hills in Queens, with 1,263 apartments, also left the Mitchell-Lama program last year. This development was subject to supervision not by DHCR, but by the city Department of Housing Preservation and Development. (Outside New York City, all Mitchell-Lamas are supervised by DHCR, while in the city some buildings come under DHCR and others HPD.) Owners of three more Mitchell-Lama developments in Manhattan have filed buyout applications with HPD: Ruppert-Yorkville Towers on the Upper East Side, Cooper-Gramercy at Second Avenue and East 23rd Street, and North Waterside at 23rd Street and the East River. These three developments contain 1,793 units of affordable housing.

Because all three were first occupied after 1973, tenants will not be protected by rent stabilization after the buyout. This means the landlord can charge any amount of rent and terminate tenancies at will, without good cause.

While for now buyouts are occurring only in New York City, there is every reason to believe that other areas of the state will see them soon. In fact, the first Mitchell-Lama buyouts were in upstate cities in the 1980s. Upstate tenants are in the same fix as downstate tenants in buildings occupied after 1973, because rent stabilization applies only to New York City and the three suburban counties of Nassau, Rockland and Westchester. Tenants in all the affected developments are organizing to protect their homes. Residents of other buildings are worried.

Assembly Housing Committee chair Vito Lopez (D-Brooklyn) took early action to protect Mitchell-Lama tenants when the legislative session opened in January, introducing three bills that have already passed that house. A-1989-A prohibits buyouts for 50 years. A-1988-A extends rent stabilization protection to post-1973 buildings that leave the Mitchell-Lama program, but only downstate. A-1990-A requires landlords to give tenants notice of intention to buy out at least one year before beginning the process.

Assemblymember Edward Sullivan (D-Manhattan) has also reintroduced a bill to prohibit buyouts for the life of the mortgage, typically 40 or 50 years (A-4350). Its State Senate companion is S. 2739, introduced by Eric Schneiderman (D-Manhattan). The Sullivan bill has passed the Assembly in recent years, but has never been considered by the Republican leadership in the Senate, where it was sponsored by Schneiderman’s predecessor, Franz Leichter.

What Is Mitchell-Lama Housing?

The Mitchell-Lama program is a moderate and middle-income housing scheme established by the state Legislature in the 1950s. Rents are set according to the development’s expenses, and landlords receive tax abatements for the life of its mortgage. Mitchell-Lama developments house about 200,000 people in the city, and 400,000 in the state.

The program, says Mitchell-Lama tenant leader Bob Woolis, is one of the few examples of affordable housing being built by private owners on a large scale, the other times being the tenements of the 1880s and the outer-borough building boom of the 1920s. Most of the city’s Mitchell-Lama housing was built between 1965 and 1975, when the city was enduring both civil unrest and a severe shortage of affordable apartments. “They were afraid of what would happen if they didn’t build more housing,” says Woolis. The buyout provision, he says, was written into the law because “it was thought that after 20 years the housing crisis would dissipate.”

—Steven Wishnia