Relates to rentals and selection of tenants in projects owned by limited-profit housing companies; repeals provisions relating to continued occupancy by certain tenants in such projects.
TITLE OF BILL: An act to amend the private housing finance law, in relation to rentals and selection of tenants in projects owned by limited-profit housing companies; and to repeal subdivision 5 of section 31 of such law relating to continued occupancy by certain tenants in such projects
SUMMARY OF PROVISIONS: This bill amends sections of Article 2 of the Private Housing Finance Law to enable Mitchell-Lama developments to continue to be a resource for affordable housing by allowing the developments to broaden admissions eligibility criteria, have a reliable annual maintenance and rental increase system, and increase the existing surcharge requirements with such funds being placed in a development's capital replacement reserve.
This bill will raise the income limit for all persons and families seeking to reside in a Mitchell-Lama development to 125% of the income limits determined pursuant to Private Housing Finance Law Section 31(2)(a) and (b). In municipally-aided projects in cities with a population of one million or more, any person or family with incomes above the income limits determined pursuant to Private Housing Finance Law Section 31(2) shall, with the approval of the supervising agency, pay a surcharge in accordance with a surcharge schedule to be promulgated by such supervising agency, capped at no more than 200% of the existing rent. The bill provides that all surcharges imposed on or after the effective date of the amendments in such municipally-aided projects shall be placed in the relevant housing company's capital repair and contingency reserve unless the supervising agency approves the application of such surcharges to the relevant housing company's operating expenses.
This bill would also provide a rent increase procedure for municipally-aided Mitchell-Lama projects in cities with a population of one million or more. The rental rates would be increased annually in an amount equal to the one year renewal lease guideline promulgated by the New York City Rent Guidelines Board, no further procedures would be required to effectuate rental rate increases. However, such projects could instead notify the supervising agency in accordance with established procedures that they do not want an increase in their rental rate or are making an application for a project-specific rental rate increase. The supervising agency also has authority to determine that a particular project needs an increase in rental rate other than the Rent Guidelines Board rental rate increase. In such cases, the supervising agency can vary such rental rates on no more than an annual basis so as to secure, together with other income of such Mitchell-Lama housing company, sufficient income to meet within reasonable limits all necessary payments to be made or projected to be made of all expenses including fixed charges, sinking funds, reserves and dividends on outstanding stock as authorized by the supervising agency. Letting, subletting or assignment of leases of apartments at greater rental rates than those established in accordance with these procedures shall be unlawful. This rent increase procedure would not
apply to projects that have a mortgage loan held or insured by the federal government, are owned by the federal government, or that have an interest reduction contract pursuant to Section 236 of the National Housing Act.
Finally, the bill removes the statutory provisions that mandate, in certain circumstances, the removal of occupants in all Mitchell-Lama developments who remain above the income limits.
REASONS FOR SUPPORT: The Mitchell-Lama Program was established in 1955 to provide affordable housing to middle income New Yorkers. There have been expanded efforts to preserve the physical and financial health and affordability of Mitchell-Lama developments through various mortgage refinancing options and interest repair loans from the City of New York Department of Housing Preservation and Development (HPD) and the Housing Development Corporation. Approximately 35,000 Mitchell-Lama dwelling units have been preserved under the City of New York Mayor's New Housing Market Place Plan.
Currently, the supervising agency sets base rents and increases at Mitchell-Lama developments according to that development's budgetary needs. Unlike in other affordable housing, a Mitchell-Lama tenant is not required to pay 30% of his or her income towards rent, although there is a surcharge capped at 50% of base rent assessed against tenants earning more than the maximum allowable income. The current Mitchell-Lama Program also allows residents with two or more dependents who earn up to 125% of Housing and Urban Development (HUD) Area Median Income upon lease up to reside in a Mitchell-Lama unit.
The proposed legislation would impose regular increases in rental rates based on the one year renewal lease guideline promulgated by the New York City Rent Guidelines Board on municipally-aided projects in cities with a population of one million or more, other than those that have a mortgage loan held or insured by the federal government, are owned by the federal government, or have an interest reduction contract pursuant to Section 236 of the National Housing Act. Under current law, most rent increases only occur upon an owner's or cooperative board's request, who are often reluctant to seek such increases. Accordingly, such rent and maintenance increase requests are often delayed for many years, preventing a development from meeting monthly operating expenses. Consequently, each increase tends to be very large. By imposing regular, automatic increases, this bill seeks to ensure that occupants will experience more gradual payment increases and Mitchell-Lama housing companies will continue to meet their expenses. Furthermore, a development can still make a project-specific rent increase request, where necessary, or apply to HPD to opt out of an increase entirely if it can otherwise meet its financial needs.
The New York City Rent Guidelines Board establishes annual guidelines for rent adjustments subject to the Rent Stabilization Law of 1969 and to the Emergency Tenant Protection Act of 1974. In fulfilling its function, the New York City Rent Guidelines Board must consider: (I) the economic condition of the residential real estate industry in the affected area, including such factors as the prevailing and projected
real estate taxes, sewer and water rates, gross operating and maintenance costs (including insurance rates, governmental fees, cost of fuel and labor costs), costs and availability of financing (including effective rates of interest), and the overall supply of housing accommodations and overall vacancy rates; (2) relevant data from the current and projected cost of living indices for the affected area; and (3) such other data as may be made available to it. Mitchell-Lama developments utilize these existing analyses to ensure that their annual increases will be sufficient to meet their operating expenses.
Rent Guideline Board increases are applicable to Mitchell-Lama developments because the two categories of housing are both non-luxury multiple dwellings, which are physically similar, have the same kind of management, and the same maintenance and utilities costs. A study conducted by HPD comparing the average increase in rents for one-year rent stabilized leases and Mitchell-Lama developments over a ten year period, demonstrated rent increases in these two housing categories were approximately the same.
The proposed legislation also restructures the surcharge provisions for municipally-aided Mitchell-Lama developments in cities with a population of one million or more. The maximum surcharge for both rental and cooperative developments would be increased from 50% to 200%. This surcharge income would be dedicated to a restricted capital replacement reserve used to fund repairs and improvements to the development.
The proposed legislation also modifies the eligibility criteria for initial occupancy in all Mitchell-Lama developments by allowing anyone who earns up to 125% of HUD Area Median Income, whether they have dependents or not, to move into a Mitchell-Lama apartment. This will help Mitchell-Lama developments expand from lower income households to reach the middle income range. This would also enable middle income singles and couples to move into Mitchell-Lama housing.
Finally, the proposed legislation removes the provisions that require, in certain circumstances, the removal of occupants in all Mitchell-Lama developments who exceed the income limits. Allowing occupants who exceed the income limits to remain in occupancy benefits the Mitchell-Lama development through cross~subsidization.
Accordingly, the Mayor urges the earliest possible favorable consideration of this proposal by the Legislature.
EFFECTIVE DATE: Immediately.
STATE OF NEW YORK ________________________________________________________________________ 7723 IN SENATE June 15, 2012 ___________Introduced by Sen. YOUNG -- read twice and ordered printed, and when printed to be committed to the Committee on Rules AN ACT to amend the private housing finance law, in relation to rentals and selection of tenants in projects owned by limited-profit housing companies; and to repeal subdivision 5 of section 31 of such law relating to continued occupancy by certain tenants in such projects THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. Subdivision 1 of section 31 of the private housing finance law is amended by adding a new paragraph (a-1) to read as follows: (A-1) NOTWITHSTANDING ANY INCONSISTENT PROVISION OF ANY OTHER GENERAL, SPECIAL OR LOCAL LAW, WITH RESPECT TO MUNICIPALLY-AIDED PROJECTS IN A CITY WITH A POPULATION OF ONE MILLION OR MORE, UNLESS THE COMPANY NOTI- FIES THE SUPERVISING AGENCY IN ACCORDANCE WITH PROCEDURES ESTABLISHED BY RULE OF SUCH AGENCY THAT IT DOES NOT WANT AN INCREASE IN ITS RENTAL RATE OR IS MAKING APPLICATION FOR A PROJECT-SPECIFIC INCREASE IN ITS RENTAL RATE, THE RENTAL RATE FOR THE DWELLINGS IN ANY SUCH PROJECT SHALL BE INCREASED ANNUALLY ON JULY FIRST IN AN AMOUNT EQUAL TO THE ONE YEAR RENEWAL LEASE GUIDELINE PROMULGATED BY THE RENT GUIDELINES BOARD OF THE CITY OF NEW YORK THEN IN EFFECT, AND NO FURTHER PROCEDURES SHALL BE REQUIRED TO EFFECTUATE SUCH RENTAL RATE INCREASES. WITH RESPECT TO SUCH MUNICIPALLY-AIDED PROJECTS, WHERE THE COMPANY HAS NOTIFIED THE SUPERVIS- ING AGENCY IN ACCORDANCE WITH SUCH ESTABLISHED PROCEDURES THAT IT DOES NOT REQUIRE ANY INCREASE IN ITS RENTAL RATE OR IS MAKING APPLICATION FOR A PROJECT-SPECIFIC INCREASE IN ITS RENTAL RATE OR IF THE SUPERVISING AGENCY DETERMINES THAT SUCH PROJECT NEEDS AN INCREASE IN RENTAL RATE OTHER THAN THE ONE YEAR RENEWAL LEASE GUIDELINES PROMULGATED BY THE RENT GUIDELINES BOARD OF THE CITY OF NEW YORK, THE SUPERVISING AGENCY MAY VARY SUCH RENTAL RATE FOR SUCH PROJECT FROM SUCH GUIDELINE ON NO MORE THAN AN ANNUAL BASIS PROVIDED THAT THE ALTERNATIVE RENTAL RATE WILL SECURE, TOGETHER WITH ALL OTHER INCOME OF SUCH COMPANY, SUFFICIENT INCOME FOR IT TO MEET WITHIN REASONABLE LIMITS ALL NECESSARY PAYMENTS, TO BE MADE OR PROJECTED TO BE MADE, OF ALL EXPENSES INCLUDING FIXED CHARGES, SINKING FUNDS, RESERVES AND DIVIDENDS ON OUTSTANDING STOCK ASEXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD16062-01-2 S. 7723 2
AUTHORIZED BY THE SUPERVISING AGENCY, AND NO FURTHER PROCEDURES SHALL BE REQUIRED TO EFFECTUATE SUCH ALTERNATIVE RENTAL RATE. LETTING, SUBLETTING OR ASSIGNMENT OF LEASES OF APARTMENTS AT GREATER RENTALS THAN THOSE ESTABLISHED PURSUANT TO THIS PARAGRAPH SHALL BE UNLAWFUL. NOTWITHSTAND- ING THE FOREGOING, THE PROVISIONS OF THIS PARAGRAPH SHALL NOT APPLY TO ANY PROJECT (I) THAT IS OWNED BY THE FEDERAL GOVERNMENT; (II) FOR WHICH THE MORTGAGE LOAN OF THE COMPANY IS INSURED OR HELD BY THE FEDERAL GOVERNMENT; OR (III) THAT HAS AN INTEREST REDUCTION CONTRACT PURSUANT TO SECTION TWO HUNDRED THIRTY-SIX OF THE NATIONAL HOUSING ACT (12 U.S.C. S 1715Z-1). S 2. Paragraph (e) of subdivision 2 of section 31 of the private hous- ing finance law, as added by chapter 729 of the laws of 1974, is amended to read as follows: (e) Notwithstanding the provisions of this subdivision, PERSONS OR families
[with two or more dependents]whose probable aggregate annual income does not exceed one hundred twenty-five percent of the limita- tions as to income as determined pursuant to paragraphs (a) and (b) of this subdivision, shall also be eligible for admission to the dwelling or non-housekeeping accommodations without board of a project on the understanding that any PERSON OR family becoming eligible for admission by reason hereof shall pay, from the time of admission, a rental surcharge as provided for in subdivision three of this section, computed on the basis of the income limitations applicable to such PERSON OR family in the absence of this subdivision. In applying the provisions of subdivision three to a PERSON OR family becoming eligible by reason of this section, the maximum income prescribed by law for admission or occupancy shall for all purposes be computed without reference to this paragraph. S 3. Subdivision 3 of section 31 of the private housing finance law, as amended by chapter 778 of the laws of 1971, is amended to read as follows: 3. In the event that the income of a person or family in occupancy should increase and exceed the maximum prescribed by law for admission [or for continued occupancy, based on the latest existing rent, by more than twenty-five per centum], such person or family shall be [subject to removal from the dwelling, non-housekeeping, aged care accommodations or non-housekeeping accommodations for handicapped persons provided, howev- er, that such person or family may be]permitted to remain in occupancy [until such income exceeds the maximum prescribed by law by more than fifty per centum, if the company, with the approval of the commissioner or the supervising agency, shall determine that removal would cause hardship to such person or family. Any person or family in occupancy whose income exceeds the maximum prescribed by law]AND shall pay a rental surcharge in accordance with a schedule of surcharges to be promulgated by the company with the approval of the commissioner or the supervising agency, as the case may be, provided, however, such rental surcharge shall in no event exceed fifty per centum of the existing rent. S 4. Subdivision 3 of section 31 of the private housing finance law, as amended by section 3 of this act, is amended to read as follows: 3. In the event that the income of a person or family in occupancy should increase and exceed the maximum prescribed by law for admission, such person or family shall be permitted to remain in occupancy and shall pay a rental surcharge in accordance with a schedule of surcharges to be promulgated by the company with the approval of the commissioner or the supervising agency, as the case may be, provided, however, suchS. 7723 3
rental surcharge shall in no event exceed fifty per centum of the exist- ing rent. NOTWITHSTANDING THE PRECEDING SENTENCE, ANY SUCH PERSON OR FAMILY IN OCCUPANCY WHOSE INCOME EXCEEDS SUCH MAXIMUM IN A MUNICIPALLY- AIDED PROJECT IN A CITY WITH A POPULATION OF ONE MILLION OR MORE SHALL, WITH THE APPROVAL OF THE SUPERVISING AGENCY, PAY A RENTAL SURCHARGE IN ACCORDANCE WITH A SCHEDULE OF SURCHARGES TO BE PROMULGATED BY THE SUPER- VISING AGENCY, PROVIDED, HOWEVER, THAT SUCH RENTAL SURCHARGE SHALL IN NO EVENT EXCEED TWO HUNDRED PER CENTUM OF THE EXISTING RENT. S 5. Subdivision 4 of section 31 of the private housing finance law, as amended by chapter 743 of the laws of 1981, is amended to read as follows: 4. Twenty-five per cent of rental surcharges collected pursuant to this section on account of rentals payable prior to July first, nineteen hundred eighty-one shall be paid by the company to the municipality which has granted tax exemption pursuant to section thirty-three of this article as a credit against the grant of tax exemption, the value of such tax exemption and of such credit to be determined on an individual dwelling, non-housekeeping, aged care accommodation or non-housekeeping accommodations for handicapped persons unit basis. In the event that such tax exemption has not been granted, or in the event that a sum equal to the total of all accrued taxes as to individual dwelling, non- housekeeping, aged care accommodation or non-housekeeping accommodations for handicapped persons units where such tax exemption was granted have been paid to the municipality, the excess if any, of surcharges and all surcharges imposed after June thirtieth, nineteen hundred eighty-one shall be applied to the expenses of operation and management as approved by the commissioner or the supervising agency. NOTWITHSTANDING ANY INCONSISTENT PROVISION OF THIS ARTICLE, WITH RESPECT TO MUNICIPALLY-AID- ED PROJECTS IN A CITY WITH A POPULATION OF ONE MILLION OR MORE, ALL SURCHARGES IMPOSED ON OR AFTER THE EFFECTIVE DATE OF A CHAPTER OF THE LAWS OF TWO THOUSAND TWELVE THAT AMENDED THIS SUBDIVISION SHALL BE PLACED IN THE COMPANY'S CAPITAL REPAIR AND CONTINGENCY RESERVE FUND, AS PROVIDED FOR BY THE RULES OF THE SUPERVISING AGENCY, UNLESS SUCH AGENCY APPROVES THE APPLICATION OF SUCH SURCHARGES TO THE COMPANY'S EXPENSES OF OPERATION AND MANAGEMENT. S 6. Subdivision 5 of section 31 of the private housing finance law is REPEALED. S 7. This act shall take effect immediately; provided, however, that: (i) sections one, four and five of this act shall take effect July 1, 2013; and (ii) effective immediately, any rule or regulation necessary for the timely implementation of any provision of this act may be promulgated, any procedures, forms, or instructions necessary for such implementation may be adopted and issued, and any other acts by any governmental agency necessary for such implementation may be taken, on or after such effective date.