Mitchell-Lama Housing Program

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 purpose was the development and building of affordable housing, both rental and co-operatively owned, for middle-income residents.^[1] Under this program, local jurisdictions took land - often ousting the poor people living on it - ^[2] by eminent domain and provided it to developers for extremely little money -- 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. 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, such as New York State Division of Housing and Community Renewal (DHCR), that subsidized the mortgage supervises the building's financing and function as long as it is in the Mitchell-Lama program.^[1]

Success

According to the New York State Division of Housing and Community Renewal^[3], "A total of 269 Mitchell-Lama developments with over 105,000 apartments 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.

Buy out

Landlords 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.^[4] Between 1990 and 2005, Mitchell-Lama housing has lost "22,688 units, over a third (34 percent) of its stock".^[5] 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.

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 major capital improvements and landlord hardship. In addition, landlords assert 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 has enacted regulations stating that just leaving Mitchell-Lama is not a "unique or peculiar circumstance." Building owners are challenging that policy in court. ^[4]

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 in who do not qualify for enhanced vouchers -- including all tenant in post-1973 buildings that were not federally subsidized -- face losing their homes if they cannot pay the increased rents. This is particularly true 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.

Housing Cooperatives

After a certain period of years, owners of Mitchell-Lama limited equity housing cooperatives 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 taxes 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.) Such demutualization thus simultaneously diminishes the stock of affordable housing in a given area and increases tax revenue.

Policy

Legislation

Tenant groups have asked politicians to prevent the loss of this affordable housing, to which end some politicians have proposed bills ^[6] 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. To date, those bills have not been considered by the NYS Senate's housing committee, headed currently by Pedro Espada.

However, 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."^[7] Other bills call for a one-year moratorium on all privatization ("buy-outs"). See ^[8] for a complete list.

The Law, the Lawsuit, and Tenant Groups

In November 2007, the State's Division of Housing & Community Renewal (DHCR) 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. ^[9] Several landlords are challenging that policy in court, asserting that it contradicts a court decision, KSLM-Columbus Apts. v. NYS DHCR,^[10] and a lower court's reference to DHCR policy letters.^[11]

Many Mitchell-Lama tenants have joined together^[4] to try to save their homes and affordable housing. Among other things, they propose legislation and work to elect pro-tenant politicians.^[12]

Organizations like Tenants & Neighbors^[7], the Mitchell Lama Residents Coalition^[13] and the Urban Homesteading Assistance Board ^[14] 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 P.I.E. Mitchell-Lama Campaign is working to educate tenants^[15] and preserve Mitchell-Lama housing.

References

• Affordable no more: New York City's Looming Crisis in Michell-Lama and Limited Dividend Housing
• 2004 Annual Report - Mitchell-Lama Housing Companies in New York State