Relates to loans for a state-aided project owned by a limited-profit housing company and comprising in excess of five thousand rental dwelling units

Section 2 of the bill provides for an immediate effective date.

Existing law

Under Article II of the PHFL, DHCR is charged with supervising various aspects of Mitchell-Lama housing company operations.

PHFL Section 21 provides that no housing company property may be encumbered by a debt in excess of project cost. As an exception to that provision, PHFL Section 23-c allows municipally aided Mitchell-Lama housing companies to refinance their existing debt in an amount greater than project cost in return for the owner's commitment to remain in the Mitchell-Lama program for at least six years and not to increase the rent paid by the tenants for any resulting increase in indebtedness that is not attributable to project cost. Under Article V of the PHFL, PHFL Section III-b allows federally aided redevelopment companies to refinance their existing debt in an amount greater than project cost in return for the owner's commitment, among other things, to remain in the Article V program for at t least five years and not to increase the rent paid by the tenants for any resulting increase in indebtedness that is not attributable to project cost. By allowing owners to refinance their existing debt in an amount greater that project cost, these statues effectively allow owners to take out the appreciated equity in their property.

As an additional exception to PHFL Section 21, PHFL Section 22-a allows state-aided housing companies which undergo a comprehensive redevelopment plan to refinance their debt in an amount greater than project cost, provided that (a) such excess amount represents the cost of capital improvement, redevelopment or acquisition by a new owner, (b) any consequent rent increase is not unduly burdensome to the

tenants, and ( c) the company agrees to remain in the Mitchell-Lama program for at least 15 years from the date of such mortgage loan.

Justification

Article II of the PHFL, which governs Mitchell-Lama housing companies, was designed to increase the supply of affordable housing for low and moderate income New Yorkers. The statute generally restricts the amount of debt that can be secured by a development based on "project cost," except that in the case of a project undergoing a comprehensive redevelopment plan, DHCR may approve a loan in excess of project cost is attributable to capital improvements, redevelopment or acquisition by a new owner. Current law thus enables an existing owner, in connection with a comprehensive redevelopment plan, to access its appreciated equity through sale to a new owner.

This bill would enable the owner of a State-aided rental housing development comprising more than 5,000 rental dwelling units, with DHCR; approval, to access its appreciated equity while continuing to own and operate the property, without necessarily undergoing a comprehensive redevelopment plan. In return, the owner must commit to remain in the Mitchell-Lama program for a period of thirty (30) years from the date of the new mortgage loan. The bill would thus serve to preserve affordable housing by extending the period in which the development remains in the Mitchell-Lama program and by facilitating continuity of ownership by a well-qualified owner with a proven track record and familiarity with the project. Moreover, under the bill, the development's tenants would not be subject to any increase in rents to pay for any resulting increase in indebtedness that is not attributable to project cost. Finally, the owner would agree, as a condition to DHCR's approval of the refinancing loan, to fund capital reserves in conjunction with the refinancing which would be used to make improvements to the development.

Legislative history

New bill.

Fiscal implications

None.

Effective date

Immediately.