Senate Bill S5413

                                 BILL NUMBER:  S5413

 TITLE OF BILL :

An act to amend the private housing finance law, in relation to loans
for a state-aided project owned by a limited-profit housing company
and comprising in excess of 5,000 rental dwelling units


 PURPOSE :

This bill would facilitate ownership continuity and the preservation
of a State-aided project owned by a limited-profit housing company and
comprising more than 5,000 rental dwelling units, by authorizing DHCR
to approve refinancing loans above project cost in consideration for
the owner's commitment to long-term participation in the Mitchell-Lama
program.

 SUMMARY OF PROVISIONS :

Section 1 of the bill adds a new PHFL Section 22-b to provide that,
notwithstanding any provision of PHFL Article II to the contrary, DHCR
may approve a mortgage loan in excess of actual project cost to a
limited-profit housing company that owns a State-aided Project
comprising more than 5,000 rental dwelling units, provided (a) in
conjunction with such loan, the project's capital reserves shall be in
              

an amount equal to at least twenty-five percent of the amount of such
loan which exceeds the actual project cost, (b) the rents paid by the
tenants may not be increased to pay for any resulting increase in
indebtedness and that is not attributable to project cost, or that is
otherwise permitted pursuant to PHFL Section 22-a, and (c) the owner
agrees to continue to remain subject to Article 2 of the PHFL for at
least 30 years from the date of such mortgage loan.

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.