Mitchell lama
Encyclopedia
The Mitchell-Lama Housing Program is a form of housing subsidy in the state of New York. It was proposed by New York State Senator MacNeil Mitchell and Assemblyman Alfred Lama and signed into law in 1955 as The Limited-Profit Housing Companies Act (officially contained in the Private Housing Finance law, article II titled Limited-Profit Housing Companies and referring to not-for-profit corp., whereas article IV titled Limited Dividend Housing Companies refers to non-Mitchell-Lama affordable housing organized as business corp., partnerships or trusts from 1927 on).
The program's publicly stated purpose was the development and building of affordable housing
, both rental and co-operatively
owned, for middle-income residents. Under this program, local jurisdictions acquired property by eminent domain
and provided it to developers to develop housing for low- and middle-income tenants. Developers received tax abatements as long as they remained in the program, and low-interest mortgages
, subsidized by the federal, state, or New York City
government. They were also guaranteed a 6% or, later, 7.5% return on investment each year. The program was based on the Morningside Gardens
housing cooperative, a co-op in Manhattan
's Morningside Heights neighborhood that was subsidized with tax money.
The state government agency, formerly the New York State Division of Housing and Community Renewal (DHCR), was merged with the NYS Housing Finance Administration in 2010 to create the New York State Homes and Community Renewal agency that subsidized the mortgage supervises the building's financing and function as long as it is in the Mitchell-Lama program.
s were built under the program." It has resulted in developments that were and are ethnically and even economically diverse as some of the original tenants became more successful (and therefore pay a surcharge) while others found themselves closer to or in poverty. The tenants have formed stable communities that in some cases (such as on the Upper West Side
of Manhattan
) have resulted in substantially increased property values.
s generally may remove the developments from Mitchell-Lama and privatize them by pre-paying the mortgage. In most cases, that happens 20 years after the project was developed, but in some cases, special land use agreements specify more time. Between 1990 and 2005, Mitchell-Lama housing lost "22,688 units, over a third (34 percent) of its stock". That pace is now increased in pace with the real estate market for rental buildings. When a building is privatized, it loses its tax abatement, the owner generally must refinance the mortgage, and the owner loses the right to a 6% annual return on investment.
What happens to the tenants in those buildings depends on when they were built and public policy.
In addition, landlords have asserted that those buildings' apartments which were occupied after July 1, 1971 -- and all apartments in buildings constructed between March 10, 1969 and January 1, 1974 -- are subject to an additional increase in the initial rent stabilized rent due to "unique or peculiar circumstances" - and increase that could raise the rents substantially. New York State's Division of Housing and Community Renewal enacted regulations stating that just leaving Mitchell-Lama is not a "unique or peculiar circumstance." Building owners are challenging that policy in court, so far without success.
The fact that these buildings are no longer in a rent regulation program poses a particular problem for tenants who were receiving special subsidies based on poverty, age, and disability, - subsidies that do not exist in free market buildings.
In some of these buildings, tenant associations are negotiating "landlord assistance plans" (LAPs) to implement the increases at a slower rate and protect some of the weakest tenants. These plans are often limited to a specific number of years, and upon their expiration, tenants may be vulnerable. LAPs do not preserve the stock of affordable housing for future tenants.
s may decide according to their co-op voting rules to "privatize" (demutualize
) their building as well. This may permit them to sell their apartments at enormous multiples of the prices they paid, but can potentially increase the rents of remaining residents since the building loses its tax abatement and may have increased payments for a non-subsidized mortgage. Flip tax
es on resales can be used to mitigate such increases, but right now that is up to the co-op boards. (There is some effort to require them by legislation, but that has so far been unsuccessful. Such demutualization thus simultaneously diminishes the stock of affordable housing in a given area and increases tax revenue.
Given the lack of accountability from state legislators who reside outside of New York City, many tenants interested in preserving affordable housing in New York City seek to shift control over rent regulation from the state to the city by restoring "home rule." Other bills have called for a one-year moratorium on all privatization ("buy-outs").
Many Mitchell-Lama tenants have joined together to try to save their homes and affordable housing. Among other things, they work to elect pro-tenant politicians, and to enact legislation that would put into rent stabilization all buildings taken out of Mitchell-Lama or Section 8 programs, without regard to the year of their construction and without "unique or peculiar circumstances" increases.
Organizations like Tenants & Neighbors, the Mitchell Lama Residents Coalition and the Urban Homesteading Assistance Board have joined forces with building tenant associations in a coalition supporting "Protection for tenants, Incentives for landlords to stay in the program, and Enforcement of the law" -- or "PIE". The Mitchell-Lama PIE Campaign is working to educate tenants and preserve Mitchell-Lama housing - primarily rental housing. The P.I.E. campaign is also participating in the Real Rent Reform Campaign. Some residents of Mitchell-Lama co-ops who want to preserve that status have formed the group Cooperators United for Mitchell-Lama.
The program's publicly stated purpose was the development and building of affordable housing
Affordable housing
Affordable housing is a term used to describe dwelling units whose total housing costs are deemed "affordable" to those that have a median income. Although the term is often applied to rental housing that is within the financial means of those in the lower income ranges of a geographical area, the...
, both rental and co-operatively
Housing cooperative
A housing cooperative is a legal entity—usually a corporation—that owns real estate, consisting of one or more residential buildings. Each shareholder in the legal entity is granted the right to occupy one housing unit, sometimes subject to an occupancy agreement, which is similar to a lease. ...
owned, for middle-income residents. Under this program, local jurisdictions acquired property by eminent domain
Eminent domain
Eminent domain , compulsory purchase , resumption/compulsory acquisition , or expropriation is an action of the state to seize a citizen's private property, expropriate property, or seize a citizen's rights in property with due monetary compensation, but without the owner's consent...
and provided it to developers to develop housing for low- and middle-income tenants. Developers received tax abatements as long as they remained in the program, and low-interest mortgages
Mortgage loan
A mortgage loan is a loan secured by real property through the use of a mortgage note which evidences the existence of the loan and the encumbrance of that realty through the granting of a mortgage which secures the loan...
, subsidized by the federal, state, or New York City
New York City
New York is the most populous city in the United States and the center of the New York Metropolitan Area, one of the most populous metropolitan areas in the world. New York exerts a significant impact upon global commerce, finance, media, art, fashion, research, technology, education, and...
government. They were also guaranteed a 6% or, later, 7.5% return on investment each year. The program was based on the Morningside Gardens
Morningside Gardens
Morningside Gardens refers to a private housing cooperative in the borough of Manhattan, New York City. It is composed of six apartment buildings of 21 stories each, for a total of 980 apartments. Some spaces that would otherwise be apartments are used by affiliated groups such as the pre-school...
housing cooperative, a co-op in Manhattan
Manhattan
Manhattan is the oldest and the most densely populated of the five boroughs of New York City. Located primarily on the island of Manhattan at the mouth of the Hudson River, the boundaries of the borough are identical to those of New York County, an original county of the state of New York...
's Morningside Heights neighborhood that was subsidized with tax money.
The state government agency, formerly the New York State Division of Housing and Community Renewal (DHCR), was merged with the NYS Housing Finance Administration in 2010 to create the New York State Homes and Community Renewal agency that subsidized the mortgage supervises the building's financing and function as long as it is in the Mitchell-Lama program.
Success
According to the New York State Homes and Community Renewal (formerly DHCR), "A total of 269 Mitchell-Lama developments with over 105,000 apartmentApartment
An apartment or flat is a self-contained housing unit that occupies only part of a building...
s were built under the program." It has resulted in developments that were and are ethnically and even economically diverse as some of the original tenants became more successful (and therefore pay a surcharge) while others found themselves closer to or in poverty. The tenants have formed stable communities that in some cases (such as on the Upper West Side
Upper West Side
The Upper West Side is a neighborhood in the borough of Manhattan, New York City, that lies between Central Park and the Hudson River and between West 59th Street and West 125th Street...
of Manhattan
Manhattan
Manhattan is the oldest and the most densely populated of the five boroughs of New York City. Located primarily on the island of Manhattan at the mouth of the Hudson River, the boundaries of the borough are identical to those of New York County, an original county of the state of New York...
) have resulted in substantially increased property values.
Buy out
LandlordLandlord
A landlord is the owner of a house, apartment, condominium, or real estate which is rented or leased to an individual or business, who is called a tenant . When a juristic person is in this position, the term landlord is used. Other terms include lessor and owner...
s generally may remove the developments from Mitchell-Lama and privatize them by pre-paying the mortgage. In most cases, that happens 20 years after the project was developed, but in some cases, special land use agreements specify more time. Between 1990 and 2005, Mitchell-Lama housing lost "22,688 units, over a third (34 percent) of its stock". That pace is now increased in pace with the real estate market for rental buildings. When a building is privatized, it loses its tax abatement, the owner generally must refinance the mortgage, and the owner loses the right to a 6% annual return on investment.
What happens to the tenants in those buildings depends on when they were built and public policy.
Rentals built before 1974
Tenants in rental buildings built before 1974 go into rent stabilization upon leaving Mitchell-Lama. That means their rents increase according to the New York City Rent Guidelines Board orders for each new lease, as well as according to orders by the State's Office of Rent Administration for and landlord hardship.In addition, landlords have asserted that those buildings' apartments which were occupied after July 1, 1971 -- and all apartments in buildings constructed between March 10, 1969 and January 1, 1974 -- are subject to an additional increase in the initial rent stabilized rent due to "unique or peculiar circumstances" - and increase that could raise the rents substantially. New York State's Division of Housing and Community Renewal enacted regulations stating that just leaving Mitchell-Lama is not a "unique or peculiar circumstance." Building owners are challenging that policy in court, so far without success.
Rentals built from 1974 on
Upon leaving Mitchell-Lama, the owners of rental buildings built from 1974 on raise rents to whatever the market will bear. Tenants whose buildings had federally subsidized "236" mortgages may qualify for federal "enhanced" vouchers, which will permit them to pay at least what they are paying now, and no less than 30% of their income in rent. (The government pays the balance.) Tenants who do not qualify for enhanced vouchers -- including all tenants in post-1973 buildings that were not federally subsidized -- face losing their homes if they cannot pay the increased rents.The fact that these buildings are no longer in a rent regulation program poses a particular problem for tenants who were receiving special subsidies based on poverty, age, and disability, - subsidies that do not exist in free market buildings.
In some of these buildings, tenant associations are negotiating "landlord assistance plans" (LAPs) to implement the increases at a slower rate and protect some of the weakest tenants. These plans are often limited to a specific number of years, and upon their expiration, tenants may be vulnerable. LAPs do not preserve the stock of affordable housing for future tenants.
Housing cooperatives
After a certain period of years, owners of Mitchell-Lama limited equity housing cooperativeHousing cooperative
A housing cooperative is a legal entity—usually a corporation—that owns real estate, consisting of one or more residential buildings. Each shareholder in the legal entity is granted the right to occupy one housing unit, sometimes subject to an occupancy agreement, which is similar to a lease. ...
s may decide according to their co-op voting rules to "privatize" (demutualize
Demutualization
Demutualization is the process by which a customer-owned mutual organization or co-operative changes legal form to a joint stock company. It is sometimes called stocking or privatization. As part of the demutualization process, members of a mutual usually receive a "windfall" payout, in the form...
) their building as well. This may permit them to sell their apartments at enormous multiples of the prices they paid, but can potentially increase the rents of remaining residents since the building loses its tax abatement and may have increased payments for a non-subsidized mortgage. Flip tax
Flip tax
A flip tax is a fee paid by a seller or buyer on a housing co-op transaction typically in New York City. It is not a tax, and not deductible as a property tax...
es on resales can be used to mitigate such increases, but right now that is up to the co-op boards. (There is some effort to require them by legislation, but that has so far been unsuccessful. Such demutualization thus simultaneously diminishes the stock of affordable housing in a given area and increases tax revenue.
Legislation
Tenant groups have asked politicians to prevent the loss of this affordable housing, to which end some politicians have proposed bills to the New York State legislature that would put all buildings leaving or that have left Mitchell-Lama (and Section 8 projects) into rent stabilization upon their privatization and would prevent "unique or peculiar circumstances" increases. However, the Rent Act of 2011 signed into law on June 24, 2011, on did not mention Mitchell-Lama rentals or co-operatives.Given the lack of accountability from state legislators who reside outside of New York City, many tenants interested in preserving affordable housing in New York City seek to shift control over rent regulation from the state to the city by restoring "home rule." Other bills have called for a one-year moratorium on all privatization ("buy-outs").
The law, the lawsuit, and tenant groups
In November 2007, the State's Division of Housing & Community Renewal (DHCR) - now NYS HCR - adopted regulations stating that just removing a pre-1974 Mitchell-Lama from the program is not a "unique or peculiar circumstance" justifying a substantial rent increase. Several landlords challenged that policy in court, asserting that it contradicts a court decision, KSLM-Columbus Apts. v. NYS DHCR, and a lower court's reference to DHCR policy letters. Justice Schlesinger of the New York State Supreme Court ruled that the regulations are legal, and one of the owners (Steven Witkoff, owner of 95 W. 95th Street, now called "Columbus 95") appealed to the state's mid-level Appellate Division. On December 28, 2010, the Appellate Division, First Department (covering the New York City boroughs of Manhattan and the Bronx) unanimously upheld DHCR's regulation. The owner of Columbus 95 must receive judicial permission to appeal to New York State's highest court. It has been denied so far by the Appellate Division, and he has until July 25 2011 to formally ask the NYS Court of Appeals in a second request.Many Mitchell-Lama tenants have joined together to try to save their homes and affordable housing. Among other things, they work to elect pro-tenant politicians, and to enact legislation that would put into rent stabilization all buildings taken out of Mitchell-Lama or Section 8 programs, without regard to the year of their construction and without "unique or peculiar circumstances" increases.
Organizations like Tenants & Neighbors, the Mitchell Lama Residents Coalition and the Urban Homesteading Assistance Board have joined forces with building tenant associations in a coalition supporting "Protection for tenants, Incentives for landlords to stay in the program, and Enforcement of the law" -- or "PIE". The Mitchell-Lama PIE Campaign is working to educate tenants and preserve Mitchell-Lama housing - primarily rental housing. The P.I.E. campaign is also participating in the Real Rent Reform Campaign. Some residents of Mitchell-Lama co-ops who want to preserve that status have formed the group Cooperators United for Mitchell-Lama.