Relates to the right of tenant association to have the first option to purchase a housing unit

Summary of specific provisions

The Private Housing Finance Law is amended by adding a new article a-A, Section 38. Terms are defined including "right of first refusal" which means the right of a tenant association or a qualified entity to purchase a Mitchell-Lama, Limited Dividend or a federally subsidized property, such as a Project-based section B building.

This measure would require all owners of Mitchell-Lama, Limited Dividend and federally subsidized housing developments who plan to privatize their buildings to provide advance notification to all tenants and the State Division of Housing and Community Renewal (DRCR). Such notice shall be-made no less than twelve months prior to, the owner taking any action, and contain specific information.related to the-property and its ownership.

The bill provides for the tenant or tenants' association to notify the owner in writing of their intent to exercise their right of first refusal within 60 days. In relation to value of the property, the DRCR shall convene an advisory panel to determine the appraised value of the housing, and promulgate rules for the timely determination of the appraised value.

This bill also requires that any owner who receives a bona-fide offer for a property to provide the terms and conditions of the offer to the tenants' association, or each individual tenant, within 15 days. In the event the prospective purchaser agrees to maintain the housing as affordable, the owner does not need to notify tenants.

If the tenants choose not to exercise their right of first refusal, they shall have the right to remain in their prospective dwelling units for six months from the date of the conversion or until their leases expire, whichever is longer. With the agreement of the tenant or tenants, the new owner may relocate tenant(s) to comparable units with comparable rents in accordance with procedures established by the DHCR.

An owner in violation of this article is liable for a civil penalty of five thousand dollars pea month per dwelling with total civil penalties not to exceed $100,000 per dwelling unit. This legislation shall not affect existing agreements or the purchase by a governmental entity utilizing the powers of eminent domain, bankruptcy proceedings, or the judicially supervised sale or transfer of the property. Judicial review is available for persons aggrieved by an appraisal determination.

Justification

New York State is facing an affordable housing crisis that is widespread and diverse. Few problems facing our state are crit- ical than New York's severe shortage of safe, decent, affordable homes. During much of the last century, New York state has been a national leader in the creation of affordable housing and protection of tenants rights.

In the 1950s, the state enacted the extremely successful Mitchell-Lama program which created more than 150,000 homes across New York that were affordable to middle income families. The Mitchell-Lama housing program was created in 1955, with new developments continuing to be built into the mid-1970's under a mix of state, local and federal funding. Low interest loans covering up to 95% of all development costs were made available to developers. The developments came with 20-, 30- or 40-year affordability requirements, after which those developments could be privatized. New York State also has a large number of federally subsi- dized developments which house hundreds of thousands of low-income, elderly, and disabled residents across the state. Mitchell-Lama, Limited Dividend and federally subsidized rental units are found throughout New York State, including in New York City, Buffalo, Albany, Rochester, Syracuse, Westchester and Nassau Counties.

In recent years, there has been a significant loss of Mitchell-Lama rental units. 65,000 units across the state have already been lost and dozens of additional developments have already initiated the buyout process. New York City, in particular, is facing a particularly grave loss of rental units more than 40 of its Mitchell-Lama rental units. have been privatized since 1990, New York State has also already lost over 10,000 units of federally subsidized project based Section 8 homes.

Currently, tenants of Mitchell-Lama, Limited Dividend and federally subsidized rental buildings have few protections if an owner decides to opt out of the subsidy program. While many tenants living in a federally subsidized buildings that have privatized are eligible for enhanced Section 8 vouchers, these vouchers require a lengthy application process and are not guaranteed. Family size and housing quality standards can often make a tenant ineligible to remain in his or her home and force the use of a standard voucher that has a reduced value when not used in the original building.

Faced with an increasing crisis of privatizations and opts-outs in most of its communities, New York City passed Local Law 79 in 2003; which granted Mitchell-Lama and Section 8 tenants a "right-of-first-refusal." However, it was struck down in April 2007 by the New York State Supreme Court in the court's decision, the judge issued a clear directive to the State Legislature. The judge wrote that not only does the Legislature have the authority to enact such a measure, it also has the duty to provide this protection to tenants. Whether it be by creating a right of first refusal or by extending rent stabilization, the State Legislature may well have the ability to protect low and middle-income residents of Mitchell-Lama buildings, as it has done in the past. In failing to do so, or to permit the City of the New York to do so the State Legislature

has failed the residents of the City of New York. The recent sales and proposed sales of major assisted rental housing complexes it this City and the likely devastating impact of those sales on low and moderate-in- come residents of New York may and should function as a wake-up call for the need for immediate action by the State. By providing for a right of first refusal, New York State will have the necessary statutory frame- work needed to preserve affordable and subsidized housing. Several other states, including Rhode Island, Maine, Texas and Illinois, have adopted right of first refusal and right to purchase laws. New York State should once again become a national leader, as it once was, in providing for progressive housing laws and tenant protections.

Prior legislative history

A8820/S.5948 of 2007 A861/S3852 of 2009

Fiscal implications

None to State

Effective date

This bill shall become effective immediately.