Thursday, June 04, 2020

The incumbent mayor of the City of New York has devoted much attention to the provision of affordable housing for the city’s middle class. But long before he arrived on the scene, New York State had enacted the Mitchell-Lama program to provide affordable housing for the middle class via rentals and cooperative apartments. Today, fewer than 100,000 of these units exist; some of the original developments have opted out of the program and some of the remaining units are beset by problems. But the biggest problem of all is that there simply are not enough of these units to meet the enormous demand for them.

In 1955, New York State Senator MacNeil Mitchell and Assemblyman Alfred Lama co-sponsored the law that created the program. This enabled developers to build approximately 105,000 apartments in 269 buildings in the 1950s and 1960s. Participating builders received tax breaks and low-interest mortgages. The buildings were constructed on sites that were located in rundown parts of the city. Today, approximately 97,000 apartments remain in the program.

To qualify for a Mitchell-Lama unit, an individual or family must fall into certain restricted income categories and meet a prescribed formula that correlates income, family size and the size of the unit. For example, a single person cannot qualify for a three-bedroom unit; a family with two children cannot qualify for a one-bedroom apartment, and so on. However, once having qualified and moved into an apartment, it is not unlikely that a person’s or a family’s income could rise. In that case, the person or family will not be evicted but will pay a surcharge that is customarily no more than 50 percent of the monthly rental or co-op maintenance amount. Generally speaking, an applicant’s income is based on the last two years of income tax returns. Income must fall below the median income of the area or seven times the annual rent, which includes utilities. Prospective tenants should consult the website of the Department of Housing Preservation and Development for the specific income levels and for other requirements.

Having signed on to the waiting list, be prepared to wait! It could take years, and by the time you are invited to submit your documentation your income and family size might well have changed.  Periodically, buildings close their waiting lists and reopen them as needed; sometimes, lists for different sizes of apartments are opened or closed within the same development. When a list opens, it must be advertised in local newspapers and will also appear on the website of the Department of Housing Preservation and Development. Buildings hold lotteries for people to get onto the waiting lists. Applicants may apply to more than one development but only once per development and for only one number of bedrooms. Applicants apply by mailing a postcard to each building in which they have an interest. Smaller apartments have shorter waiting periods, but once in a smaller apartment it is easier to move to a larger apartment if your family size increases. Veterans go to the top of waiting lists. Family members have succession rights—if the original cooperator leaves then family members may remain if they meet the requirements.

Mitchell-Lama co-op apartments are limited equity co-ops. That is, the buyer pays an “equity value” that is returned to him or her when he or she vacates the apartment. This differs from co-ops that are sold on the open market where the owner of the co-op stock shares has the opportunity to make a profit or to sustain a loss, depending upon market conditions and the decisions of the co-op board. In a Mitchell-Lama co-op, the board does not act as gatekeeper—instead, a government agency checks the financial and other bona fides of the applicants and does not deny acceptance based upon other factors that co-op boards operating on the open market may use.

Right now, there are some problems. It has been found that many Mitchell-Lama developments do not follow the order of applicants on the waiting lists, so more transparency is needed. Housing Preservation and Development has regrettably discontinued its training program for co-op board members who make decisions about management and finances, so that program must be reinstated. Shareholders have complained about undemocratic election processes centering upon the use of proxies that are used to keep the same boards in authority year after year. Half of New York State’s rental Mitchell-Lama apartments have exited the program; about 7 percent of co-ops have also done so and more have expressed interest in privatizing. Some older buildings are in disrepair, sometimes because rent increases have not kept up with operating costs; HPD takes a long time to respond to violations and does not have enough inspectors. Sudden increases in rents and maintenance fees caused by the need to make emergency and other repairs occur, but it is alleged that not all increases are legally justified.

But help is on the way. Although the program for new buildings has ended, New York City has announced that it will invest $250,000,000 to prevent subsidized Mitchell-Lama developments from being converted into market-rate housing. This initiative will include keeping over 15,000 apartments affordable over the next eight years by helping landlords repair their Mitchell-Lama buildings.   

During the past 30 years, approximately 20,000 of these apartments have become privatized. For co-ops, this can only happen via a super-majority vote of shareholders and only after the co-op has paid off its mortgage and a prescribed number of years have passed since the building was constructed. Exiting the program means that existing shareholders can then sell their apartments on the open market when they vacate instead of simply receiving back the very low amount of money for which they purchased their apartments. Landlords who own Mitchell-Lama rental buildings, having paid off the mortgage and once 20 years have gone by, can likewise extricate their properties from the program. The landlords can then receive open market rents, giving them a shot at making needed repairs and making a profit for themselves.

Currently, there has been some talk of resurrecting the program, maintaining in good repair the current buildings that remain as Mitchell-Lama developments, and of convincing shareholders not to opt out of the program as was successfully accomplished at one development in Brooklyn.

By Vivian J. Oleen




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