Bloomberg, Miller -- Mitchell-Lama Proposals

[consigliere]

The story below, by David Chen, appeared in the October 30, 2003 online edition of The New York Times. The are similar, but less thorough, stories in the Daily News, Post, and Crain's New York Business.

Bloomberg and Council Seek More Protections for Tenants

Making a bid to win over the city's sizable and vocal tenant population, Mayor Michael R. Bloomberg yesterday proposed adding 32,000 units to the number of rent-regulated apartments in New York City.

Mr. Bloomberg's proposal applies to apartments covered by the state's Mitchell-Lama law, which has created housing for low- and moderate-income families in return for subsidies and tax breaks to developers. But in recent years, many residents in Mitchell-Lama developments have seen their rents jump sharply, as the developers left the program after 20 years and began charging market rates for apartments.

Already, 43 Mitchell-Lama developments with 17,000 units have opted out, and at least 11 other developments are considering doing so.

The mayor's proposal came just hours before Gifford Miller, the City Council speaker, was scheduled to address a rally about a new Council bill on Mitchell-Lama and hold a hearing on it. And while Mr. Miller declined to say whether he felt pre-empted by Mr. Bloomberg's announcement, he told reporters at the rally that the mayor's proposal was "a good step in the right direction."

Mr. Bloomberg said that he would present his proposal to the State Legislature within a few months. But it is unclear whether the proposal will have any political traction, given the Republican-led Senate's aversion to rent regulations, and the recent bitter legislative fight to extend the city's existing rent regulations.

Yesterday, John E. McArdle, chief spokesman for the majority leader, Joseph L. Bruno, said that while Mr. Bruno had not had a chance to review Mr. Bloomberg's proposal, "we have not been supportive of efforts to expand regulation in the city."

Should the mayor's proposal become law, it would be the first legislative change adding to the city's stock of one million rent-regulated units since 1971.

Under the Mitchell-Lama program, which began in the 1950's, about 140,000 units of both rental and co-op housing have been developed, supervised by the city and the state.

Under the mayor's proposal, rent stabilization protections — which typically apply to any development built before 1974 — would apply to projects built after that date. It would also protect all tenants regardless of when they moved in.

Mr. Bloomberg also proposed that owners get tax breaks to encourage them to stay in the Mitchell-Lama program. At present, there is a 6 percent ceiling on an owner's allowable return on equity; the mayor's plan would remove that ceiling.

Mr. Bloomberg said at a news conference that he wanted to balance the needs of tenants and developers. "If we don't have both groups happy, then we don't have a city," he said.

The City Council's proposal, which would apply to at least 65 city-supervised buildings totaling 25,000 units, would essentially buy tenants more time. It would require that owners give tenants 18 months' notice on a buyout, not the current 12.

But one landlord group, the Rent Stabilization Association, said that tinkering with Mitchell-Lama at such a late stage sounded unfair.
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[Cranky Tenant]

Mr. Bloomberg said at a news conference that he wanted to balance the needs of tenants and developers. "If we don't have both groups happy, then we don't have a city," he said.

A rather ironic statement from someone who pushed through an 18 percent property tax hike during a break-of-dawn vote. Not that I'm particularly sympathetic towards landlords but where did Bloomberg think Landlords were going to try to get the extra money?

Maybe these guys have finally begun to make the connection between a stable working class, a prosperous city, and votes.

[consigliere]

MAYOR MICHAEL R. BLOOMBERG PROPOSES STATE LEGISLATION TO PROVIDE PROTECTION TO MITCHELL-LAMA DEVELOPMENT TENANTS AND TAX RELIEF TO OWNERS
 
Mayor Michael R. Bloomberg today proposed new protections for Mitchell-Lama residents who might otherwise be vulnerable to large rent increases and potential eviction if their landlords opt to buy out of the program.
 
The State legislation being proposed by the Mayor would extend Rent Stabilization protections to 32,000 apartments in Mitchell-Lama developments built after 1974, and provide all tenants with rent regulation protections regardless of the initial date of occupancy. 
 
In return, owners would be entitled to real estate tax relief for those apartments that would be newly regulated, and the proposed bill would provide financial incentives to owners to remain in the Mitchell-Lama program by allowing them to increase their return on equity while maintaining Mitchell-Lama guidelines on tenant income and occupancy.  The Administration will work with its State legislators to introduce the bill in the 2004 session.
 
Today, our Administration takes another important step in preserving middle income housing by proposing new State legislation to protect more than 32,000 Mitchell-Lama tenants from large rent increases and possible displacement from their homes in the event of buyouts of their buildings,? said Mayor Bloomberg.
 
Preserving the City's stock of middle income housing is crucial to making New York more livable for our hard working families and more attractive to new businesses. That's why our Administration has developed a housing plan, which will build or rehabilitate 65,000 units of affordable housing in our City and includes $50 million in capital improvements to Mitchell-Lama developments that cannot afford conventional financing.
 
At the same time, it is critical that we provide tax relief to owners who will now be newly rent regulated.  The proposed bill would provide further incentives to owners who we hope will choose to remain in the Mitchell-Lama program.
 
This is a small investment that will yield a large return by preserving affordable housing for New Yorkers, especially in neighborhoods where they might otherwise be priced out, and by helping to keep owners of Mitchell-Lama developments in the program for another generation of middle income families. 
 
This solution will lessen the impact of a buyout for tenants, and thereby relieve the anxiety that accompanies talk of a buyout for many Mitchell-Lama tenants, while maintaining the owner's right to buy out of the program, said Housing Preservation and Development Commissioner Jerilyn Perine.
 
Under the terms of the Mitchell-Lama statute, after 20 years owners may buy out of the program by paying off their government mortgages and increasing rents to market levels if there are no other protections in place.  In return, they must pay full real estate taxes.  The process of buying out is often mired in conflict as tenants face uncertain rent burdens, and owners are often embroiled in costly and time-consuming litigation before they can buy out of the program.  Currently, there are two primary protections that cover some tenants living in Mitchell-Lama developments:
 
Those developments built before 1974 are subject to Rent Stabilization, thereby setting the post-buyout rents at the Mitchell-Lama rents and establishing restrictions on increases and evictions pursuant to Rent Stabilization.
 
Mitchell-Lama developments that have federally assisted mortgages from the U.S. Department of Housing and Urban development (HUD) (as many do) in addition to State or City mortgages, are eligible for special federal Section 8 Rental subsidies (known as sticky vouchers?) which are made available to households earning up to 95% of area median income (which is $59,600 for a family of four), thus insulating those tenants from large rent increases.
 
Therefore, the two groups of Mitchell-Lama tenants that are vulnerable to large rent increases, and potentially eviction, are those who live in developments built after 1974 without federally assisted mortgages, or live in developments built after 1974 with federally assisted mortgages, but whose household income exceeds 95% of the area median income.  The bill would extend Rent Stabilization protections to 32,000 apartments in Mitchell-Lama developments built after 1974.  Without the proposed legislation, those Mitchell-Lama's built after 1974 could be vulnerable to large rent increases because they neither have protection under Rent Stabilization nor access to federal rental subsidies. (About 21,500 households who live in Mitchell-Lama rental developments already have protection in the event of a buyout because their buildings were built before 1974).
 
Without the proposed legislation, for example, the rent for a family of four earning $62,800, which is more than 95% of area median income, could rise from its current $900 to a market rate of $2,800 without the proposed legislation.  This would be a 145% rent increase, and their rent burden would be 54% of their income, far higher than the national standard that families spend no more than 30% of their income on rent.  With the proposed legislation, the family in this example would be rent stabilized at $900 per month and would be subject to annual Rent Guidelines Board increases.
 
In addition, the proposed bill would give owners a tax exemption in return for tenant protections, provide incentives for owners to remain in the program, and continue to provide owners the opportunity to buy out, as of right, from the program.  The bill would remove the current 6% limit on the owner's permitted return on equity if the owner remains in the program.  The proposed tax relief is not expected to affect the City's budget because it has never been part of the City's revenue projections due to the unpredictable nature of buyouts.
 
Mitchell-Lama housing was developed under the authority of Article 2 of the New York State Private Housing Finance Law.  Both the City and State used this statute to create moderate-income developments beginning in the 1960s and ending in the mid-1970s.  The State Mitchell-Lama Statute provided government sponsored low-cost financing in return for the development of housing affordable to middle income households.  Owners were limited to 6% annual return, had to continue to rent vacant apartments to income-eligible households from a waiting list and were entitled to a tax exemption based on the limited rate of return.
 
Through the Mitchell-Lama program, a portfolio of about 140,000 units of both rental and co-op housing was developed, which was divided between State and City supervision.  The City sponsored 155 developments with 62,000 units and the State sponsored 116 developments with 77,000 units.  State law provides that owners may buy out of the program after 20 years, relieving the properties of both the rental restrictions of the program as well as the tax benefits.  
 
To date, 43 Mitchell-Lama developments with 17,000 units have bought out.  The pressure to buyout is greatest when Mitchell-Lama's are located in high market areas.
 
Buyouts are pending at the following Mitchell-Lama developments:
 
City-sponsored - Cooper Gramercy, West Village Apartments, Hudsonview Terrace, Leader House, Independence Plaza North, and Lands End I, all in Manhattan, and Ocean Park Apartments in Queens.
 
State-sponsored - Central Park Gardens and Roosevelt Hospital in Manhattan and Sea Park East and Sea Park West in Brooklyn.
 
Should the proposed legislation pass, the effective date would be October 29, 2003, the date of today's announcement.
 
 
PR-307-03 -- October 29, 2003
 
CONTACT:
 
Ed Skyler / Jennifer Falk   (212) 788-2958
Carol Abrams   (HPD) (212) 863-5176
 

[consigliere]

The article below, by Albert Amateau, appeared in the November 4, 2003 online edition of the Downtown Express:

Mayor knocks one housing bill, backs another

Tenant advocates, many of them from Independence Plaza in Tribeca, rallied outside City Hall last week.

The Bloomberg administration last week proposed to back state legislation that would put Mitchell-Lama rental buildings in the rent-stabilization system when they leave the program. The proposal was made public the same day the City Council held its first hearing on a bill that would make it more expensive and difficult for landlords of many Mitchell-Lama buildings to leave the program and charge market-rate rents.

Mitchell-Lama tenants of Independence Plaza North who rallied on the steps of City Hall on Wednesday in support of the proposed Council bill said they were glad the mayor had taken a stand on the issue but they were skeptical about Mike Bloomberg’s chances of pushing the bill through the Republican-dominated state Senate.

“We’ve had numerous bills like that pass the Assembly in Albany but the Senate always kills them,” said John Scott, the vice president of the I.P.N. Tenants Association. “The timing of the mayor’s announcement seems to say that we don’t need our bill.”

Indeed, Assembly Speaker Sheldon Silver said later that it will be up to the mayor to persuade his allies in the Republican controlled State Senate to pass the bill. “Ours is stronger,” Silver said of the Assembly bill, “but let him get the Republicans to pass his bill and we’ll pass it too.”

Moreover, State Sen. Martin Connor, whose district includes I.P.N., testified in favor of the Council bill on Oct. 30 but said the mayor’s bill would “have a long wait” in Albany. “I serve in the State Senate and I can tell you the likelihood of passing legislation opposed by the real estate lobby is nil,” Connor said. “The City Council legislation, Intro. 523, is needed and needed now,” Connor said.

The proposed council legislation, introduced in July by City Councilmember Alan Gerson joined by Council Speaker Gifford Miller and 34 other council members including Christine Quinn and Margarita Lopez. would affect an estimated 25,000 Mitchell-Lama units in the city, including 1,340 apartments at Independence Plaza North in Tribeca and 420 apartments in West Village Houses in the Village, which are in the process of leaving the program.

I.P.N. and West Village Houses tenant associations want to acquire their projects and create limited equity co-ops. The Council legislation, entitled “The Mitchell-Lama Conversion Protection Bill,” does not mention rent stabilization but is intended to force owners to negotiate many issues with tenants before city-supervised Mitchell-Lama buildings leave the program.

Marilyn Davenport, a vice president of the Real Estate Board of New York, testified against the Council legislation and also said later that legislation like the mayor’s proposal should be entirely voluntary. Real Estate industry representatives, including Edward C. Wallace, attorney for Stellar Management and its principal, Laurence Gluck, the new owner of I.P.N. who plans to take the complex out of the Mitchell-Lama program in a year, had even harsher words for the Council bill.

“It is blatantly illegal and holds out false hopes to tenants,” said Wallace, who predicted that the bill would not survive court challenges. “It violates the home rule and preemptive principals of the New York State Constitution.”

But supporters including Clayton Gillette, professor of contract law at New York University Law School, and Chad Marlow, a Village resident and lawyer who last year drafted a bill similar to the one in the Council now, testified that the Council bill is on solid legal ground.

The Mitchell-Lama law, enacted 43 years ago, allows landlords to leave the program and charge market rate rents after 20 years if they pay off outstanding mortgages and taxes.

The proposed legislation would apply to Mitchell-Lama rental apartments supervised by the city Department of Housing Preservation and Development and occupied after Jan. 1, 1974. Such buildings are not now subject to rent stabilization if landlords buy out of the program. Under the Council bill, an impact study on the effect of a building’s leaving Mitchell-Lama would examine the rent increases that tenants would have to pay, the availability of affordable housing and the number of families likely to be displaced as a result of higher rents. The owner would then have to pay for mitigating any adverse effects on tenants.

H.P.D. would also have to determine whether the owner had substantially complied with Mitchell-Lama laws and regulations. If the agency finds the owner did not comply, the new legislation would impose a civil penalty equal to three times the amount of damages suffered by tenants or the city.

At the hearing on the bill last week, H.P.D. Commissioner Jerilyn Perine, a Bloomberg appointee, agreed with opponents that Intro. 523 was flawed and “inconsistent with state law, making its future uncertain.”

Perine said the Bloomberg proposal recognizes the fear of Mitchell-Lama tenants that high rent increases would threaten them with eviction.

The Bloomberg administration “will seek the passage of state legislation that will extend rent stabilization protection to all Mitchell-Lama rental buildings that were occupied after 1974, thereby ensuring that such tenants will be protected from significant rent increases and arbitrary eviction.” Perine said.

At the same time, the city-sponsored bill, if passed by the State Legislature, would provide Mitchell-Lama owners with real estate tax exemptions on each apartment in rent stabilization if tenants, like some at I.P.N., are not entitled to other subsidies such as federal enhanced vouchers. In other neighborhoods where market rents would be similar to current Mitchell-Lama rents, owners would be exempt from the six percent cap on returns if they stay in the program. In even lower-rent neighborhoods where Mitchell-Lama projects have a hard time getting financing for rehabilitation, the Mayor’s affordable housing plan announced last December provides $50 million for low cost loans, Perine noted.

Gerson, however, remained skeptical about the Mayor’s proposal in the State Legislature. “What if the bill doesn’t pass?” he asked Perine. “What is plan B?”

Perine answered, “We’ll do everything we can to pass the bill. There is no plan B.” The commissioner added, “We have a good chance of getting it passed now, there is an urgency about Mitchell-Lama now.”

Nevertheless, Quinn recalled that she had spoken in vain with State Senate Majority Joseph Bruno during the last legislative session about help for West Village Houses leaving the Mitchell-Lama program. “This should have been done sooner rather than later,” said Quinn.

A spokesperson for Bruno’s office said the majority leader had not yet read the mayor’s proposal and would not comment.

Davenport, the Real Estate Board of New York vice president, said later that changes in State Mitchell-Lama rules should not be mandatory. “It’s very problematic,” she said of the main provisions of the mayor’s proposal. “Changing the rules now would be a breach of faith resulting in a loss of trust in government and would discourage participation in affordable housing projects,” she said.

However, Victor Bach, senior housing analyst for the not-for profit Community Service Society, said the Bloomberg rent stabilization and the Council bill are not mutually exclusive. “They complement each other,” Bach said, adding, “We’re pleased to see the mayor get behind the push to protect Mitchell-Lama tenants. And the Council legislation opens the door for tenants and owners to negotiate.”

Both the Council bill and the mayor’s proposal would be effective now rather than on the date of passage in order to protect tenants in Mitchell-Lama buildings currently in the process of leaving the program.

Kathryn Freed, an I.P.N. resident and former city councilmember, said, “Our homes are totally on the line. We came to Lower Manhattan without schools and without even a supermarket.” The Council bill, she added, would enable I.P.N. to remain a community where rich and poor can live.

Among I.P.N. tenants who testified in favor of the Council bill was Jose Torres, former light heavyweight boxing champion (1965-67) and an I.P.N. tenant for nearly 30 years. “The most important thing for me is the diversity at I.P.N.,” he said.

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Albert Amateau has a similar story, Mayor Has a Mitchell-Lama Proposal Too, in the November 5, 2003 online edition of The Villager.

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<small>[ November 09, 2003, 06:17 PM: Message edited by: consigliere ]</small>