NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A1715
SPONSOR: Rosenthal TITLE OF BILL:
An act to amend the private housing finance law, in relation to windfall
profits on the dissolution or first sale of rental companies and the
dissolution and/or reconstitution of mutual companies
PURPOSE:
This bill provides for a transfer fee of 75% of the fair market value in
dissolution or sales of a rental project or mutual company. This bill is
intended to forestall the further loss of Mitchell-Lama affordable
rental and co-op units or to compensate for that loss by making funds
available by a windfall profit transfer fee for affordable housing
purposes.
SUMMARY OF SPECIFIC PROVISIONS:
This bill would impose a windfall-profit transfer fee of 75% on the
dissolution or first sale of any limited profit rental housing company.
In the case of a limited profit mutual company, the 75% windfall-profit
transfer fee would be payable on the first sale by each shareholder
after dissolution and/or reconstitution of the mutual company.
The funds generated by this transfer fee would be used by HDC or the New
York State Housing Finance Agency:
(a) to continue to subsidize the development for as long as the purchas-
er of a rental development remains in the Mitchell-Lama program;
(b) for the City or State to purchase the land and to lease the land to
the tenants and convert the project to a limited profit mutual company,
with a 99-year lease;
(c) for repair loans at 0% interest for as long as the company remains
in the Mitchell-Lama program to fund necessary capital improvements;
(d) for each year that the company remains as a limited profit company,
to forgive. 1/30 of the principal of any repair loan each year;
(e) for the subsidization of other limited profit housing companies;
and, sixth, for the development of other affordable housing.
JUSTIFICATION:
Mitchell-Lama affordable rental and co-op units were built to serve a
public purpose to provide affordable housing to low-in- come New York-
ers. At the time Article II of the Private Housing Finance Law was
passed there were insufficient units providing decent, safe and afforda-
ble housing. This situation is even more acute today since the value of
real estate and, consequently, average rents and purchase prices for
co-ops have risen to levels which are unaffordable to most New Yorkers.
Those who cannot afford to pay privatized rents, unless they receive
further government subsidies, have been and will continue to be evicted
from the housing they have occupied unless this accelerating trend is
reversed. This emergency legislation is intended to counter this trend.
Although the Mitchell-Lama legislation provided that owners and co-op
shareholders could "buy out" of the program after a certain number of
years, it is totally inconsistent with public policy to permit them to
"buy out" and render the housing unaffordable without paying back to the
government a large portion of the profits they reap. The government has
been a co-investor with them, frequently having assembled the land,
always given having real estate tax exemptions, and often having further
subsidized the development though rent subsidies to the tenants. The
windfall profit transfer fee is intended to recapture some of increase
in value, to which the government contributed so heavily, to maintain
the viability of these units as affordable housing or to provide funds
to supply affordable housing alternatives. This legislation is consist-
ent with subsidies under Medicaid which must be repaid when funds are
available to the recipient of this government aid.
In the case of Mitchell-Lama rentals and co-ops, all have received New
York City real estate tax exemptions since the inception of the program.
New York City taxpayers, some with very little income themselves, have
subsidized this housing to ensure its affordability. In a number of
cases additional federal, state and local subsidies have also been
provided. It is estimated that 90% of tenants at Starrett City receive
such additional subsidies which are then paid to the landlord to ensure
the financial integrity of the project. If these Mitchell-Lama rentals
are sold or allowed to privatize without paying out a significant
portion of the increase in value to the government, eligible tenants
facing Monumental increases in rent frequently will be evicted or must
be further subsidized, with the money from these additional subsidies
going to the owners. As a consequence, too much of the federal Section 8
money allocated to New York City is going to further subsidize these
tenants and, ultimately, their landlords. This leaves insufficient
federal subsidy money available to other low income New Yorkers. Funds
from the transfer fee will ameliorate this situation.
In the case of co-ops, the situation is similar. For example, a share-
holder who paid $5,000 for a three bedroom apartment in a Mitchell-Lama
co-op in 1972 and who has been subsidized by the New York City taxpayers
for thirty-five years in the form pf real estate tax exemption, low cost
government financing and very low maintenance charges, can now sell that
apartment for $1,000,000 reaping a profit of $993,000 for just having
been subsidized. Under this legislation, shareholders, if they voted to
privatize the project and make the purchase price unaffordable to their
fellow New Yorkers, would only receive $250,000 and the government would
receive $750,000 to either subsidize those in the project who could not
afford privatized carrying charges or to provide affordable housing
alternatives.
Developers and shareholders of limited profit housing companies have
benefited from significant subsidies in the form of cheap land acquisi-
tion, tax exemption, below market rate financing, and, in some cases,
federal subsidies to insure the viability of the project. In light of
the fact that it is government subsidies that have brought these proper-
ties to the point where they now command astronomical prices, it is
unconscionable to permit owners who have-taken little risk to extract
every penny of profit out of these developments and not give back a
significant amount to assist those who live in these developments and
others in need of affordable housing. This bill would correct this situ-
ation.
LEGISLATIVE HISTORY:
2023-24: A.592 - Referred to Housing; S.135 - Referred to Housing,
Construction and Community Development
2021-22: A.1836 - Referred to Housing; 5.493 - Referred to Housing,
Construction and Community Development
2019-20: A.932 - Referred to Housing; S.1917 - Referred to Housing,
Construction and Community Development
2017-18: A.4441 - Referred to Housing; S.3184 - Referred to Housing,
Construction and Community Development
2015-16: A.846 - Referred to Housing; S.2799 - Referred to Housing,
Construction and Community Development
2013-14: A.3864 - Referred to Housing; S.3162-A - Referred to Referred
to Housing, Construction and Community Development
2011-12: A.1465 - Referred to Housing; S.456 - Referred to Housing,
Construction and Community Development
2009-10: A.11236 - Referred to Housing; S.3851 - Referred to Housing,
Construction and Community Development
FISCAL IMPLICATIONS:
None to the State.
EFFECTIVE DATE:
This bill shall take effect immediately.
STATE OF NEW YORK
________________________________________________________________________
1715
2025-2026 Regular Sessions
IN ASSEMBLY
January 14, 2025
___________
Introduced by M. of A. ROSENTHAL -- read once and referred to the
Committee on Housing
AN ACT to amend the private housing finance law, in relation to windfall
profits on the dissolution or first sale of rental companies and the
dissolution and/or reconstitution of mutual companies
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. Subdivision 2 of section 35 of the private housing finance
2 law, as amended by chapter 229 of the laws of 1989, is amended to read
3 as follows:
4 2. A company aided by a loan made after May first, nineteen hundred
5 fifty-nine, may voluntarily be dissolved, sold and/or reconstituted
6 without the consent of the commissioner or of the supervising agency, as
7 the case may be, not less than twenty years after the occupancy date
8 upon the payment in full of the remaining balance of principal and
9 interest due and unpaid upon the mortgage or mortgages [and], of any and
10 all expenses incurred in effecting such voluntary dissolution and of a
11 transfer fee equal to seventy-five percent of the fair market value in
12 the case of dissolution or sales price on the first sale of a rental
13 project, or, in the case of a mutual company seventy-five percent of the
14 sales price on each first sale thereafter for market value by a selling
15 shareholder. The proceeds of the transfer fees are to be paid into a
16 fund held by the New York city housing development corporation and the
17 New York state housing finance agency for the following purposes:
18 (a) to continue to subsidize the development for as long as the
19 purchaser of a rental development remains in the Mitchell-Lama program;
20 (b) for the city or state to purchase the land and to lease the land
21 to the tenants and convert the project to a limited profit mutual compa-
22 ny, with a ninety-nine year lease;
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD01716-01-5
A. 1715 2
1 (c) for repair loans at zero percent interest to fund necessary capi-
2 tal improvements for as long as the company remains in the Mitchell-Lama
3 program;
4 (d) for each year that the company remains as a limited profit compa-
5 ny, to forgive one-thirtieth of the principal of any repair loan each
6 year;
7 (e) for the subsidization of other limited profit housing companies;
8 and
9 (f) for the development of other affordable housing.
10 § 2. This act shall take effect on the sixtieth day after it shall
11 have become a law.
