Senate Bill S7723

2011-2012 Legislative Session

Relates to rentals and selection of tenants in projects owned by limited-profit housing companies; repealer

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Archive: Last Bill Status - In Senate Committee Rules Committee

Introduced
- In Committee Assembly
- In Committee Senate
- On Floor Calendar Assembly
- On Floor Calendar Senate
- Passed Assembly
- Passed Senate
Delivered to Governor
Signed By Governor

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Date of Action	Assembly Actions - Lowercase Senate Actions - UPPERCASE
Jun 15, 2012	referred to rules

2011-S7723 (ACTIVE) - Details

Current Committee:: Senate Rules
Law Section:: Private Housing Finance Law
Laws Affected:: Amd §31, rpld sub 5, Priv Hous Fin L

2011-S7723 (ACTIVE) - Summary

Relates to rentals and selection of tenants in projects owned by limited-profit housing companies; repeals provisions relating to continued occupancy by certain tenants in such projects.

2011-S7723 (ACTIVE) - Sponsor Memo

                                BILL NUMBER:S7723

TITLE OF BILL:
An act
to amend the private housing finance law, in relation to rentals and
selection of tenants in projects owned by limited-profit housing
companies; and to repeal subdivision 5 of section 31 of such law
relating to continued occupancy by certain tenants in such projects

SUMMARY OF PROVISIONS:
This bill amends sections of Article 2 of the
Private Housing Finance Law to enable Mitchell-Lama developments to
continue to be a resource for affordable housing by allowing the
developments to broaden admissions eligibility criteria, have a
reliable annual maintenance and rental increase system, and increase
the existing surcharge requirements with such funds being placed in a
development's capital replacement reserve.

This bill will raise the income limit for all persons and families
seeking to reside in a Mitchell-Lama development to 125% of the
income limits determined pursuant to Private Housing Finance Law
Section 31(2)(a) and (b). In municipally-aided projects in cities
with a population of one million or more, any person or family with
incomes above the income limits determined pursuant to Private
Housing Finance Law Section 31(2) shall, with the approval of the
supervising agency, pay a surcharge in accordance with a surcharge

schedule to be promulgated by such supervising agency, capped at no
more than 200% of the existing rent. The bill provides that all
surcharges imposed on or after the effective date of the amendments
in such municipally-aided projects shall be placed in the relevant
housing company's capital repair and contingency reserve unless the
supervising agency approves the application of such surcharges to the
relevant housing company's operating expenses.

This bill would also provide a rent increase procedure for
municipally-aided Mitchell-Lama projects in cities with a population
of one million or more. The rental rates would be increased annually
in an amount equal to the one year renewal lease guideline
promulgated by the New York City Rent Guidelines Board, no further
procedures would be required to effectuate rental rate increases.
However, such projects could instead notify the supervising agency in
accordance with established procedures that they do not want an
increase in their rental rate or are making an application for a
project-specific rental rate increase. The supervising agency also
has authority to determine that a particular project needs an
increase in rental rate other than the Rent Guidelines Board rental
rate increase. In such cases, the supervising agency can vary such
rental rates on no more than an annual basis so as to secure,
together with other income of such Mitchell-Lama housing company,
sufficient income to meet within reasonable limits all necessary
payments to be made or projected to be made of all expenses including
fixed charges, sinking funds, reserves and dividends on outstanding
stock as authorized by the supervising agency.
Letting, subletting or assignment of leases of apartments at greater
rental rates than those established in accordance with these
procedures shall be unlawful. This rent increase procedure would not


apply to projects that have a mortgage loan held or insured by the
federal government, are owned by the federal
government, or that have an interest reduction contract pursuant to
Section 236 of the National Housing Act.

Finally, the bill removes the statutory provisions that mandate, in
certain circumstances, the removal of occupants in all Mitchell-Lama
developments who remain above the income limits.

REASONS FOR SUPPORT:
The Mitchell-Lama Program was
established in 1955
to provide affordable housing to middle income New Yorkers. There
have been expanded efforts to preserve the physical and financial
health and affordability of Mitchell-Lama developments through
various mortgage refinancing options and interest repair loans from
the City of New York Department of Housing Preservation and
Development (HPD) and the Housing Development Corporation.
Approximately 35,000 Mitchell-Lama dwelling units have been preserved
under the City of New York Mayor's New Housing Market Place Plan.

Currently, the supervising agency sets base rents and increases at
Mitchell-Lama developments according to that development's budgetary
needs. Unlike in other affordable housing, a Mitchell-Lama tenant is
not required to pay 30% of his or her income towards rent, although
there is a surcharge capped at 50% of base rent assessed against
tenants earning more than the maximum allowable income. The current
Mitchell-Lama Program also allows residents with two or more
dependents who earn up to 125% of Housing and Urban Development (HUD)
Area Median Income upon lease up to reside in a Mitchell-Lama unit.

The proposed legislation would impose regular increases in rental
rates based on the one year renewal lease guideline promulgated by
the New York City Rent Guidelines Board on municipally-aided projects
in cities with a population of one million or more, other than those
that have a mortgage loan held or insured by the federal government,
are owned by the federal government, or have an interest reduction
contract pursuant to Section 236 of the National Housing Act. Under
current law, most rent increases only occur upon an owner's or
cooperative board's request, who are often reluctant to seek such
increases. Accordingly, such rent and maintenance increase requests
are often delayed for many years, preventing a development from
meeting monthly operating expenses. Consequently, each increase tends
to be very large. By imposing regular, automatic increases, this bill
seeks to ensure that occupants will experience more gradual payment
increases and Mitchell-Lama housing companies will continue to meet
their expenses. Furthermore, a development can still make a
project-specific rent increase request, where necessary, or apply to
HPD to opt out of an increase entirely if it can otherwise meet its
financial needs.

The New York City Rent Guidelines Board establishes annual guidelines
for rent adjustments subject to the Rent Stabilization Law of 1969
and to the Emergency Tenant Protection Act of 1974. In fulfilling its
function, the New York City Rent Guidelines Board must consider: (I)
the economic condition of the residential real estate industry in the
affected area, including such factors as the prevailing and projected


real estate taxes, sewer and water rates, gross operating and
maintenance costs (including insurance rates, governmental fees, cost
of fuel and labor costs), costs and availability of financing
(including effective rates of interest), and the overall supply of
housing accommodations and overall vacancy rates; (2) relevant data
from the current and projected cost of living indices for the
affected area; and (3) such other data as may be made available to
it. Mitchell-Lama developments utilize these existing analyses to
ensure that their annual increases will be sufficient to meet their
operating expenses.

Rent Guideline Board increases are applicable to Mitchell-Lama
developments because the two categories of housing are both
non-luxury multiple dwellings, which are physically similar, have the
same kind of management, and the same maintenance and utilities
costs. A study conducted by HPD comparing the average increase in
rents for one-year rent stabilized leases and Mitchell-Lama
developments over a ten year period, demonstrated rent increases in
these two housing categories were approximately the same.

The proposed legislation also restructures the surcharge provisions
for municipally-aided Mitchell-Lama developments in cities with a
population of one million or more. The maximum surcharge for both
rental and cooperative developments would be increased from 50% to
200%. This surcharge income would be
dedicated to a restricted capital replacement reserve used to fund
repairs and improvements to the development.

The proposed legislation also modifies the eligibility criteria for
initial occupancy in all Mitchell-Lama developments by allowing
anyone who earns up to 125% of HUD Area Median Income, whether they
have dependents or not, to move into a Mitchell-Lama apartment. This
will help Mitchell-Lama developments expand from lower income
households to reach the middle income range. This would also enable
middle income singles and couples to move into Mitchell-Lama housing.

Finally, the proposed legislation removes the provisions that require,
in certain circumstances, the removal of occupants in all Mitchell-Lama
developments who exceed the income limits. Allowing occupants
who exceed the income limits to remain in occupancy benefits the
Mitchell-Lama development through cross~subsidization.

Accordingly, the Mayor urges the earliest possible favorable
consideration of this proposal by the Legislature.

EFFECTIVE DATE:
Immediately.

2011-S7723 (ACTIVE) - Bill Text download pdf

                            
                    S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                  7723

                            I N  S E N A T E

                              June 15, 2012
                               ___________

Introduced  by  Sen.  YOUNG  -- read twice and ordered printed, and when
  printed to be committed to the Committee on Rules

AN ACT to amend the private housing finance law, in relation to  rentals
  and  selection  of tenants in projects owned by limited-profit housing
  companies; and to repeal subdivision 5  of  section  31  of  such  law
  relating to continued occupancy by certain tenants in such projects

  THE  PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:

  Section 1. Subdivision 1 of section 31 of the private housing  finance
law is amended by adding a new paragraph (a-1) to read as follows:
  (A-1) NOTWITHSTANDING ANY INCONSISTENT PROVISION OF ANY OTHER GENERAL,
SPECIAL  OR  LOCAL  LAW, WITH RESPECT TO MUNICIPALLY-AIDED PROJECTS IN A
CITY WITH A POPULATION OF ONE MILLION OR MORE, UNLESS THE COMPANY  NOTI-
FIES THE SUPERVISING AGENCY IN ACCORDANCE WITH PROCEDURES ESTABLISHED BY
RULE OF SUCH AGENCY THAT IT DOES NOT WANT AN INCREASE IN ITS RENTAL RATE
OR  IS  MAKING APPLICATION FOR A PROJECT-SPECIFIC INCREASE IN ITS RENTAL
RATE, THE RENTAL RATE FOR THE DWELLINGS IN ANY  SUCH  PROJECT  SHALL  BE
INCREASED  ANNUALLY  ON  JULY  FIRST  IN AN AMOUNT EQUAL TO THE ONE YEAR
RENEWAL LEASE GUIDELINE PROMULGATED BY THE RENT GUIDELINES BOARD OF  THE
CITY  OF  NEW  YORK  THEN  IN EFFECT, AND NO FURTHER PROCEDURES SHALL BE
REQUIRED TO EFFECTUATE SUCH RENTAL RATE INCREASES.  WITH RESPECT TO SUCH
MUNICIPALLY-AIDED PROJECTS, WHERE THE COMPANY HAS NOTIFIED THE SUPERVIS-
ING AGENCY IN ACCORDANCE WITH SUCH ESTABLISHED PROCEDURES THAT  IT  DOES
NOT REQUIRE ANY INCREASE IN ITS RENTAL RATE OR IS MAKING APPLICATION FOR
A  PROJECT-SPECIFIC  INCREASE  IN  ITS RENTAL RATE OR IF THE SUPERVISING
AGENCY DETERMINES THAT SUCH PROJECT NEEDS AN  INCREASE  IN  RENTAL  RATE
OTHER THAN THE ONE YEAR RENEWAL LEASE GUIDELINES PROMULGATED BY THE RENT
GUIDELINES  BOARD  OF  THE  CITY OF NEW YORK, THE SUPERVISING AGENCY MAY
VARY SUCH RENTAL RATE FOR SUCH PROJECT FROM SUCH GUIDELINE  ON  NO  MORE
THAN  AN  ANNUAL  BASIS  PROVIDED  THAT THE ALTERNATIVE RENTAL RATE WILL
SECURE, TOGETHER WITH ALL  OTHER  INCOME  OF  SUCH  COMPANY,  SUFFICIENT
INCOME  FOR  IT TO MEET WITHIN REASONABLE LIMITS ALL NECESSARY PAYMENTS,
TO BE MADE OR PROJECTED TO BE MADE,  OF  ALL  EXPENSES  INCLUDING  FIXED
CHARGES,  SINKING  FUNDS, RESERVES AND DIVIDENDS ON OUTSTANDING STOCK AS

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.

                                                           LBD16062-01-2

S. 7723                             2

AUTHORIZED BY THE SUPERVISING AGENCY, AND NO FURTHER PROCEDURES SHALL BE
REQUIRED TO EFFECTUATE SUCH ALTERNATIVE RENTAL RATE. LETTING, SUBLETTING
OR ASSIGNMENT OF LEASES OF APARTMENTS  AT  GREATER  RENTALS  THAN  THOSE
ESTABLISHED PURSUANT TO THIS PARAGRAPH SHALL BE UNLAWFUL.  NOTWITHSTAND-
ING  THE  FOREGOING, THE PROVISIONS OF THIS PARAGRAPH SHALL NOT APPLY TO
ANY PROJECT (I) THAT IS OWNED BY THE FEDERAL GOVERNMENT; (II) FOR  WHICH
THE  MORTGAGE  LOAN  OF  THE  COMPANY  IS INSURED OR HELD BY THE FEDERAL
GOVERNMENT; OR (III) THAT HAS AN INTEREST REDUCTION CONTRACT PURSUANT TO
SECTION TWO HUNDRED THIRTY-SIX OF THE NATIONAL HOUSING ACT (12 U.S.C.  S
1715Z-1).
  S 2. Paragraph (e) of subdivision 2 of section 31 of the private hous-
ing finance law, as added by chapter 729 of the laws of 1974, is amended
to read as follows:
  (e)  Notwithstanding  the  provisions  of this subdivision, PERSONS OR
families [with two or more dependents] whose probable  aggregate  annual
income  does  not  exceed one hundred twenty-five percent of the limita-
tions as to income as determined pursuant to paragraphs (a) and  (b)  of
this  subdivision,  shall also be eligible for admission to the dwelling
or non-housekeeping accommodations without board of  a  project  on  the
understanding  that any PERSON OR family becoming eligible for admission
by reason hereof shall  pay,  from  the  time  of  admission,  a  rental
surcharge as provided for in subdivision three of this section, computed
on  the  basis  of  the  income limitations applicable to such PERSON OR
family in the absence of this subdivision. In applying the provisions of
subdivision three to a PERSON OR family becoming eligible by  reason  of
this  section,  the  maximum  income  prescribed by law for admission or
occupancy shall for all purposes be computed without reference  to  this
paragraph.
  S  3.  Subdivision 3 of section 31 of the private housing finance law,
as amended by chapter 778 of the laws of 1971, is  amended  to  read  as
follows:
  3.  In  the  event  that the income of a person or family in occupancy
should increase and exceed the maximum prescribed by law  for  admission
[or  for continued occupancy, based on the latest existing rent, by more
than twenty-five per centum], such person or family shall be [subject to
removal from the dwelling, non-housekeeping, aged care accommodations or
non-housekeeping accommodations for handicapped persons provided, howev-
er, that such person or family may be] permitted to remain in  occupancy
[until  such  income  exceeds the maximum prescribed by law by more than
fifty per centum, if the company, with the approval of the  commissioner
or  the  supervising  agency,  shall  determine that removal would cause
hardship to such person or family. Any person  or  family  in  occupancy
whose  income  exceeds  the  maximum  prescribed by law] AND shall pay a
rental surcharge in accordance with  a  schedule  of  surcharges  to  be
promulgated  by the company with the approval of the commissioner or the
supervising agency, as the case may be, provided, however,  such  rental
surcharge  shall  in  no  event  exceed fifty per centum of the existing
rent.
  S 4. Subdivision 3 of section 31 of the private housing  finance  law,
as amended by section 3 of this act, is amended to read as follows:
  3.  In  the  event  that the income of a person or family in occupancy
should increase and exceed the maximum prescribed by law for  admission,
such  person  or  family  shall  be permitted to remain in occupancy and
shall pay a rental surcharge in accordance with a schedule of surcharges
to be promulgated by the company with the approval of  the  commissioner
or  the  supervising agency, as the case may be, provided, however, such

S. 7723                             3

rental surcharge shall in no event exceed fifty per centum of the exist-
ing rent.  NOTWITHSTANDING THE PRECEDING SENTENCE, ANY  SUCH  PERSON  OR
FAMILY  IN OCCUPANCY WHOSE INCOME EXCEEDS SUCH MAXIMUM IN A MUNICIPALLY-
AIDED  PROJECT IN A CITY WITH A POPULATION OF ONE MILLION OR MORE SHALL,
WITH THE APPROVAL OF THE SUPERVISING AGENCY, PAY A RENTAL  SURCHARGE  IN
ACCORDANCE WITH A SCHEDULE OF SURCHARGES TO BE PROMULGATED BY THE SUPER-
VISING AGENCY, PROVIDED, HOWEVER, THAT SUCH RENTAL SURCHARGE SHALL IN NO
EVENT EXCEED TWO HUNDRED PER CENTUM OF THE EXISTING RENT.
  S  5.  Subdivision 4 of section 31 of the private housing finance law,
as amended by chapter 743 of the laws of 1981, is  amended  to  read  as
follows:
  4.  Twenty-five  per  cent  of rental surcharges collected pursuant to
this section on account of rentals payable prior to July first, nineteen
hundred eighty-one shall be paid by  the  company  to  the  municipality
which has granted tax exemption pursuant to section thirty-three of this
article  as  a  credit  against the grant of tax exemption, the value of
such tax exemption and of such credit to be determined on an  individual
dwelling,  non-housekeeping, aged care accommodation or non-housekeeping
accommodations for handicapped persons unit basis.  In  the  event  that
such  tax  exemption  has  not  been granted, or in the event that a sum
equal to the total of all accrued taxes as to individual dwelling,  non-
housekeeping, aged care accommodation or non-housekeeping accommodations
for  handicapped persons units where such tax exemption was granted have
been paid to the municipality, the excess if any, of surcharges and  all
surcharges  imposed  after  June  thirtieth, nineteen hundred eighty-one
shall be applied to the expenses of operation and management as approved
by the commissioner  or  the  supervising  agency.  NOTWITHSTANDING  ANY
INCONSISTENT PROVISION OF THIS ARTICLE, WITH RESPECT TO MUNICIPALLY-AID-
ED  PROJECTS  IN  A  CITY  WITH A POPULATION OF ONE MILLION OR MORE, ALL
SURCHARGES IMPOSED ON OR AFTER THE EFFECTIVE DATE OF A  CHAPTER  OF  THE
LAWS  OF  TWO  THOUSAND  TWELVE  THAT  AMENDED THIS SUBDIVISION SHALL BE
PLACED IN THE COMPANY'S CAPITAL REPAIR AND CONTINGENCY RESERVE FUND,  AS
PROVIDED  FOR BY THE RULES OF THE SUPERVISING AGENCY, UNLESS SUCH AGENCY
APPROVES THE APPLICATION OF SUCH SURCHARGES TO THE COMPANY'S EXPENSES OF
OPERATION AND MANAGEMENT.
  S 6. Subdivision 5 of section 31 of the private housing finance law is
REPEALED.
  S 7. This act shall take effect immediately; provided, however,  that:
(i)  sections  one,  four and five of this act shall take effect July 1,
2013; and (ii) effective immediately, any rule or  regulation  necessary
for  the  timely  implementation  of  any  provision  of this act may be
promulgated, any procedures, forms, or instructions necessary  for  such
implementation  may  be  adopted  and  issued, and any other acts by any
governmental agency necessary for such implementation may be  taken,  on
or after such effective date.

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Senate Bill S7723

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Archive: Last Bill Status - In Senate Committee Rules Committee

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2011-S7723 (ACTIVE) - Details

2011-S7723 (ACTIVE) - Summary

2011-S7723 (ACTIVE) - Sponsor Memo

2011-S7723 (ACTIVE) - Bill Text download pdf

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Sponsored By

Catharine Young

Archive: Last Bill Status - In Senate Committee Rules Committee

Actions

2011-S7723 (ACTIVE) - Details

2011-S7723 (ACTIVE) - Summary

2011-S7723 (ACTIVE) - Sponsor Memo

2011-S7723 (ACTIVE) - Bill Text download pdf

Comments