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A01715 Summary:

BILL NOA01715
 
SAME ASSAME AS S00560
 
SPONSORRosenthal
 
COSPNSRReyes
 
MLTSPNSR
 
Amd §35, Priv Hous Fin L
 
Provides for a transfer fee of 75% of the fair market value in dissolution or sales of a rental project or mutual company.
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A01715 Actions:

BILL NOA01715
 
01/14/2025referred to housing
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A01715 Memo:

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.
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A01715 Text:



 
                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.
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