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 2-A, Section 33. 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 or a Project Based section 8 Program property. This measure would require notification by the owner to each tenant and to the division that the owner will act to convert the assisted rental housing. 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.

This bill requires that an owner who receives an offer to purchase the property must provide, within 15 days, the terms and conditions of the offer to the tenant's association or each individual tenant. In the event the prospective Purchaser agrees to maintain the housing as affordable, the owner does not need to notify tenants.

In relation to value of the property, the division will convene an advisory panel to determine the appraised value of the housing, and promulgate rules for the timely determination of the appraised value. The bill provides for the tenant or tenant's association to notify the owner of their intent to exercise their right of first refusal.

When a conversion occurs the current tenant(s) shall remain in their prospective dwelling units for six months from the date of the conversion or until the tenant's lease expires. With agreement of the tenant or tenants the new owner shall relocate tenant(s) to comparable units with comparable rents in accordance to procedures established by the division.

An owner in violation of this article is liable for a civil penalty of five thousand dollars per month per dwelling with total civil penalties not to exceed $100,000 per dwelling unit. This legislation shall not effect 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 more critical than New York's severe shortage of safe, decent, and affordable homes. During much of the last century, New York state was

a national leader in the creation of affordable housing and the 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 un to 950 of all development costs were made available to developers. The developments came with 20-, 30- or 40-year life-spans, after which these developments could be privatized. The landlords would give up tax incentives in favor of market rate rents. New York state also has a large number of project-based Section 8 units which house hundreds of thousands of low-income tenants across the state. The federal Section 8 rent subsidy program was created by the U.S. Congress in 1974, and requires low-income tenants to pay 30 percent of their income for rent, and additional monies are paid to the landlord by the government. Mitchell-Lama and Section 8 affordable housing units are found throughout New York State, including New York city, Buffalo, Albany, Rochester, Syracuse, Westchester and Nassau counties.

There has been a huge loss of Mitchell-Lama stock, where over 55,000 units across the state have already been lost and there are potentially dozens of units that have either initiated or begun the buyout process. New York city, in particular, is facing a heavy loss of its rental units where over 40% of the overall stock has exited the program since 1990. New York State has also already lost over 10,000 units of project-based section 8. Tenants have few protections if an owner decides to opt out. While a building leaving a program will convert to enhanced or sticky vouchers, tenants must apply for these vouchers which are not automatic or guaranteed. Family size and housing quality standards exist that can make a tenant ineligible to remain in their home and, force the use of a standard voucher that has a reduced value when not used in the building.

Faced with an increasing crisis of buyouts and opt-outs in most of its communities, in 2005, New York city passed Local Law 79, which protected Mitchell-Lama and Section 8 tenants' "right-of-first-refusal". However, that law did not withstand court challenges from the Real Estate Board of New York, and was struck down in April 2007 on the basis that the city has no jurisdiction over State law. In the state Supreme Court's decision, the Court issued a clear directive to the state Legislature. 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 in this City and the likely devastat- ing impact of those sales on low and moderate-income 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 framework needed to preserve affordable 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.

Fiscal implications

None.

Effective date

This act shall take effect on the thirtieth day after it shall have become law.