Senate Bill S444

                                BILL NUMBER:S444

TITLE OF BILL:

An act
to amend the private housing finance law, in relation to the sale of
limited-profit housing projects

PURPOSE OR GENERAL IDEA OF BILL:

This bill provides that upon sale of a limited-profit housing company
project, reserve and surplus funds must be held in escrow and dedicated
to major capital improvements.

SUMMARY OF SPECIFIC PROVISIONS:

The bill amends the Private Housing Finance Law (PHFL) by adding a new
section 36-b. That new section provides that if a limited profit housing
company incorporated under Article II of the PHFL sells a project to any
entity other than a limited-profit housing company, then all reserve and
surplus funds transferred to the new owner must be held in escrow for
the purpose of making major capital improvements to the project. The
bill further provides that the new owner may not increase rents or other
charges, based on new capital improvements, until after the reserve and
surplus funds held in escrow have been exhausted.

              

JUSTIFICATION:

The Mitchell-Lama program was established to create affordable housing
and guarantee developer profits of 6% on investments. In the event of
buyouts by owners of Mitchell-Lama developments, owners of limited
profit housing companies might transfer reserve or surplus monies to the
private sector, and those funds could - without the provisions contained
in this bill- be used in a manner contrary to the spirit and purpose of
the Mitchell-Lama program and the law creating it.

In order to ensure that monies which rightfully belong to residents in
limited profit housing companies are used to improve those buildings,
this bill would require that reserve or surplus funds be placed in an
escrow account if a housing company opts to buyout of the Mitchell-Lama
program, and limits the purpose for which the funds held in escrow may
be used.

PRIOR LEGISLATIVE HISTORY:

2006:     S.7464
2007-08:  S.3406
2009-10:  S.3850/A.1287

FISCAL IMPLICATIONS:

None.

EFFECTIVE DATE:


This act shall take effect on the first of January next succeeding the
date on which it shall have become a law.