City Limits, May 8, 2007
Efforts Flowering this Spring to Save Mitchell-Lama
A variety of efforts to protect the affordability of current and former Mitchell-Lama developments are coming to a head this spring, as court rulings, legislative votes and policy announcements on how much rent can be charged all are expected over the next few weeks. There will be outcomes affecting thousands of tenants in the former Mitchell-Lama buildings, who stand to lose some of the city's most affordable rents, and owners, who stand to receive higher profits from the developments.
Providing perhaps the most suspense is what's known as the "unique or peculiar" provision, part of the Emergency Tenant Protection Act of 1974. That provision lets building owners set a new rent without having to base it on an unusual one, such as a reduced rate the owner was charging a family member. But since 2005, a state court ruling has allowed this so-called "unique or peculiar" provision to apply to many apartments coming out of the Mitchell-Lama program. The upshot is that some owners of Mitchell-Lama buildings leaving the program can apply to the state for the "unique or peculiar" exemption, letting them base the new rents on market rates, instead of the low rents under Mitchell-Lama.
These factors are key as owners – who received tax breaks and favorable loan rates in this signature New York state housing program in exchange for keeping rents well below market rate for at least 20 years – move in ever-greater numbers to remove their buildings from the affordability program, as the original law allowed, and profit from the city's hot real estate market.
It's the state Division of Housing and Community Renewal (DHCR) that has the power to grant or deny the "unique or peculiar" designation for former Mitchell-Lama developments, and it's DHCR that may be making one of next moves. In a meeting last month between housing advocates and DHCR officials, including Commissioner Deborah VanAmerongen, the division said it will issue a policy on "unique or peculiar" in "a few weeks," according to Dina Levy of the Urban Homesteading Assistance Board (UHAB), who attended the meeting.
A spokesman for DHCR, Dan Irizarry, wasn't able to immediately confirm the division's plans. But DHCR officials said "they want to set a policy, they have the authority to set a policy, and they're looking to do so very soon, within the next several weeks," according to Amy Chan, a tenant organizer with Tenants & Neighbors who also was at the meeting, which she called an informal meet-and-greet session with DHCR. Chan said it was an informal meeting, with DHCR inviting a few housing groups to meet the recently appointed deputy commissioner of rent administration, Leslie Torres.
Meanwhile, the owners of 11 developments that left the Mitchell-Lama program in 2005 and 2006 have filed papers in state supreme court. The filings ask the court to force DHCR to let them base post-Mitchell-Lama rents on "prevailing rents" in the neighborhood – in short, to make DHCR act on their "unique and peculiar" applications. Larry Gluck of Stellar Management is a stakeholder, as well as the manager, for all 11 buildings. Court proceedings are scheduled for June 13 – but it's possible DHCR will rule first.
"I think the regulations will supersede the court case," said Jacques Rose, the lawyer for two of the 11 developments, which are located in several boroughs. "If those regulations are issued, the court case may become moot."
Gluck's spokeswoman, Kathy Cudahy, could not be reached for comment.
According to legal papers filed for four of the 11 developments, the difference between the base rents using Mitchell-Lama figures and the prevailing rents can be enormous. The base rents "ranged from $570.00 for a studio apartment to $1,319.00 for a three bedroom apartment, while comparable rents on the Upper West Side of Manhattan for the relevant time periods ranged from $1,581.00 for a studio apartment to $5,375.00 for a three (3) bedroom apartment," the papers say.
Many apartments will be on the receiving end of the court's decisions, whether in favor of or opposed to the "unique or peculiar" increases. There are more than 2,100 apartments in those 11 buildings, according to Sue Susman, president of the tenants association at one of them, Central Park Gardens, on the Upper West Side. Meanwhile, DHCR's decisions will have an impact on all of the Mitchell-Lama rental apartments built before 1974 that have recently left the program's umbrella and don't have new rents in place. Any new DHCR regulations also will determine what's ahead for pre-1974 rentals currently in the program.
There’s a chance this kind of legal fight could become a thing of the past, however, if bills moving through the works in Albany become law. A bill introduced just this week by state Senator Andrea Stewart-Cousins, a Yonkers Democrat, takes the step of authorizing localities with rent-regulation laws – including Buffalo and Westchester in addition to NYC – to require that units leaving Mitchell-Lama immediately enter rent-stabilization, with no option for charging higher rents, "unique or peculiar" or otherwise.
According to Travis Proulx, a spokesperson for state Senator Liz Krueger, a Manhattan Democrat who's co-sponsoring the bill, Stewart-Cousins has been working on this concept for some time, and her initiative is unrelated to other legislative efforts underway. "The most important thing is ensuring the longevity of these units as affordable," Proulx said. "In some ways that doesn't seem groundbreaking, but it hasn't been done before."
Another bill already pending in Albany would eliminate the "unique or peculiar" provision for New York City developments leaving the Mitchell-Lama program.
That legislation, sponsored by Assemblyman Jonathan Bing, a Manhattan Democrat, would force building owners to use the last rent authorized under Mitchell-Lama as the basis for the development's post-Mitchell-Lama rent. (It applies only to Mitchell-Lama rental developments, and only to those built before 1974).
The bill passed the Assembly last year, and it has been introduced in the state Senate by Senator Frank Padavan, a Queens Republican. Bing says he's hoping the bill will pass the Senate before the legislative session ends in June.
Tom Waters, a housing policy analyst at the Community Service Society, gives that bill and a second piece of Mitchell-Lama legislation a chance at passing, especially given the current dynamics in Albany, with Gov. Eliot Spitzer’s administration, the Democratic assembly and the Republican senate.
While Waters wouldn’t offer an outright prediction on whether the bills will fail or succeed, he said that “last year, I could have confidently predicted that it would not pass.”
A third bill, known as the “Starrett City bill” because of its relevance to that 5, 888-apartment, high-profile Mitchell-Lama development in East New York, seeks to allow New York City Mitchell-Lama developments built in 1974 or later to come under rent stabilization after a buyout. Currently, they can go to market rate. The bill, sponsored by Assemblyman Vito Lopez, a Brooklyn Democrat, is on the floor of the Assembly.
Lopez's chief of staff, Jonathan Harkavy, said Lopez anticipates the bill passing the Assembly, "probably in the next two to three weeks."
The next step would be to get a Republican to sponsor the bill in the Senate, said Harkavy, and "we're talking to a couple Republican senators from New York City." Like Bing's "unique or peculiar" bill, Lopez's bill applies only to the city.
The Lopez bill does have the support of Mayor Bloomberg: It's legislation the Bloomberg administration has been “pushing for in Albany for the past few years,” said Neill Coleman, a spokesman with the city's Department of Housing Preservation and Development (HPD).
“We’re certainly pleased that there seems to be more momentum behind it at the moment,” he said.
In addition, there's a City Council resolution calling on Gov. Spitzer to support both the rent-stabilization and unique-or-peculiar bills. Speaker Christine Quinn's office expects the resolution to go to the full Council for a vote this month.
These moves by DHCR, landlord Gluck, the courts and Albany will affect the thousands of rental apartments that have left the Mitchell-Lama program where the owners haven't been able to finalize the rents. Also affected are the rental developments still in the Mitchell-Lama program. There are fewer than 40,000 Mitchell-Lama rental apartments left in New York City – compared to 67,000 in 1990 – according to figures from Community Service Society and Tenants & Neighbors, both affordable housing advocacy groups.
Mitchell-Lama law allows owners to “buy out” of the program, usually after 20 years or 35 years, and many developments have passed that expiration point. In today's New York real estate market, the pressure for current owners to exit Mitchell-Lama and sell the buildings is high. With no rent stabilization for post-1974 buildings and no exemption from "unique or peculiar" for pre-1974 buildings, any Mitchell-Lama building that buys out could be subject to market-rate rents.
Other developments in the ongoing fight to shore up the fragmenting Mitchell-Lama program include:
-- A March meeting between DHCR Commissioner VanAmerongen, DHCR officials and the “P.I.E.” housing coalition is likely to result in putting each step of the divison's Mitchell-Lama buyout process in one document for the first time. The meeting also opened a conduit between the state and P.I.E., a coalition of tenant associations, tenant organizers and affordable housing groups.
At the March 30 meeting, P.I.E. asked if DHCR had a written checklist for vetting a Mitchell-Lama buyout. DHCR couldn't produce an institutional document, according to Chan of Tenants & Neighbors, who was there.
"They did say they would take ideas from us" as to what should be on a checklist, Chan said, such as making sure an owner who's trying to exit the program doesn't have outstanding housing violations.
Last week, P.I.E. sent DHCR a draft of a buyout checklist, and DHCR General Counsel Gary Connor acknowledged the draft by email, according to Levy of UHAB, a member of the P.I.E. coalition. (UHAB also is City Limits' landlord.)
In an interview with City Limits, DHCR Spokesman Irizarry said "the division has committed to coming up with something that would be a checklist" similar to the criterion-by-criterion checklist suggested at the March 30 meeting.
P.I.E. -- which stands for Protections, Incentives and Enforcement -- is trying to keep Mitchell-Lama buildings in the program for as long as possible and to ensure that rents and fees stay within reach of low- and moderate-income residents. P.I.E. members at the March 30 meeting included UHAB, Legal Aid Society, Tenants & Neighbors and the Mitchell-Lama Residents Coalition.
VanAmerongen committed to meeting regularly with the coalition, according to Levy and to Susman of Central Park Gardens, who were at the March 30 session. In the interview with DHCR’s Irizarry, the spokesman said the division is "committed to continuing this dialogue."
-- Mayor Bloomberg last month signed into law City Council bills that make additional Mitchell-Lama buildings eligible for a tax benefit program. Those bills offer incentives for more developments to stay in Mitchell-Lama, since both say that when Mitchell-Lama owners take the J-51 tax benefit, they must keep their buildings in Mitchell-Lama for another 15 years.
Administered by HPD, the J-51 program gives property tax abatements to building owners who fix roofs, elevators or other major building parts.
The J-51 program “provides a way for us to preserve affordability by keeping buildings in the Mitchell-Lama program,” said Coleman, the HPD spokesman.
One bill changes the law so that Mitchell-Lama developments getting government rehabilitation loans can take part in J-51. Until now, only those Mitchell-Lama developments getting privately financed loans were eligible. Coleman didn't have an estimate of how many apartments that law will affect.
The other city law abolishes the cap for the assessed value on Mitchell-Lama cooperatives that can get J-51. Previously, it was set at $40,000 per co-op apartment. There are about 4,000 Mitchell-Lama co-ops with assessed values over $40,000, according to HPD, and those are just the Mitchell-Lama co-ops supervised by HPD. (Either HPD or DHCR can be the supervisory agency for a Mitchell-Lama building, whether co-op or rental).
-- Mayor Bloomberg vetoed it, then refused to enforce it after City Council passed it in an override. Now the State Supreme Court has struck down Local Law 79, which said that tenants in a Mitchell-Lama building had the first right of refusal if the owner tried to sell the building. City Council approved the law in 2005. But the city administration didn't carry it out because "we judged that the law was illegal," according to HPD's Coleman.
The administration also disagreed with the law from a property rights standpoint, saying any laws that hold back owners from selling their buildings interfere with those rights. "The courts are not going to let a law like that legally stand," said Coleman.
"The loss of the Mitchell-Lama housing is a concern but" preventing building sales isn't right, Coleman said.
Asked for other means of preserving of Mitchell-Lama housing, Coleman said HPD "would hope that the owner would want to take advantage of one of our programs," such as the city's expanded J-51 tax break.
As for state legislation that does what Local Law 79 aimed to do, Assemblyman Bing said "it would be something that I would look to potentially introduce, if it hasn't been done already."
Giving tenants the first right of refusal to buy their buildings "is a concept that I support," said Bing. "The ruling did bring into focus [that] the city has little, has too little control over affordable housing." That's why efforts should be made at the state level, he added.