senate Bill S3162A

2013-2014 Legislative Session

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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Archive: Last Bill Status - In Committee


  • Introduced
  • In Committee
  • On Floor Calendar
    • Passed Senate
    • Passed Assembly
  • Delivered to Governor
  • Signed/Vetoed by Governor

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Assembly Actions - Lowercase
Senate Actions - UPPERCASE
Jan 24, 2014 print number 3162a
amend and recommit to housing, construction and community development
Jan 08, 2014 referred to housing, construction and community development
Jan 31, 2013 referred to housing, construction and community development

Bill Amendments

Original
A (Active)
Original
A (Active)

Co-Sponsors

S3162 - Bill Details

See Assembly Version of this Bill:
A3864
Current Committee:
Law Section:
Private Housing Finance Law
Laws Affected:
Amd §35, Priv Hous Fin L
Versions Introduced in Previous Legislative Sessions:
2011-2012: S456, A1465
2009-2010: S3851, A11236

S3162 - Bill Texts

view summary

Provides for a transfer fee of 75% of the fair market value in dissolution or sales of a rental project or mutual company.

view sponsor memo
BILL NUMBER:S3162

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: The proposal 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 Mitc-
hell-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 PROVISIONS: This bill would impose a windfall-profit trans-
fer 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 mutu-
al 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
income New Yorkers.

At the time Article II of the Private Housing Finance Law was passed
there were insufficient units providing decent, safe and affordable
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 of 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: 2007-08: S.4610 2009-10: S.3851 2011-12:
S.456/A.1465

FISCAL IMPLICATIONS: None.

EFFECTIVE DATE: Immediately.

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

                                  3162

                       2013-2014 Regular Sessions

                            I N  S E N A T E

                            January 31, 2013
                               ___________

Introduced by Sens. KRUEGER, STAVISKY -- read twice and ordered printed,
  and  when  printed  to  be  committed  to  the  Committee  on Housing,
  Construction and Community Development

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:

  Section 1. Subdivision 2 of section 35 of the private housing  finance
law,  as  amended by chapter 229 of the laws of 1989, is amended to read
as follows:
  2. A company aided by a loan made after May  first,  nineteen  hundred
fifty-nine,  may  voluntarily  be  dissolved,  SOLD AND/OR RECONSTITUTED
without the consent of the commissioner or of the supervising agency, as
the case may be, not less than twenty years  after  the  occupancy  date
upon  the  payment  in  full  of  the remaining balance of principal and
interest due and unpaid upon the mortgage or mortgages [and], of any and
all expenses incurred in effecting such voluntary dissolution AND  OF  A
TRANSFER  FEE  EQUAL TO SEVENTY-FIVE PERCENT OF THE FAIR MARKET VALUE IN
THE CASE OF DISSOLUTION OR SALES PRICE ON THE FIRST  SALE  OF  A  RENTAL
PROJECT, OR, IN THE CASE OF A MUTUAL COMPANY SEVENTY-FIVE PERCENT OF THE
SALES  PRICE ON EACH FIRST SALE THEREAFTER FOR MARKET VALUE BY A SELLING
SHAREHOLDER. THE PROCEEDS OF THE TRANSFER FEES ARE TO  BE  PAID  INTO  A
FUND  HELD  BY THE NEW YORK CITY HOUSING DEVELOPMENT CORPORATION AND THE
NEW YORK STATE HOUSING FINANCE AGENCY FOR THE FOLLOWING PURPOSES:
  (A) TO CONTINUE TO SUBSIDIZE  THE  DEVELOPMENT  FOR  AS  LONG  AS  THE
PURCHASER 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 COMPA-
NY, WITH A NINETY-NINE YEAR LEASE;

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD01312-01-3

S. 3162                             2

  (C) FOR REPAIR LOANS AT ZERO PERCENT INTEREST TO FUND NECESSARY  CAPI-
TAL IMPROVEMENTS FOR AS LONG AS THE COMPANY REMAINS IN THE MITCHELL-LAMA
PROGRAM;
  (D)  FOR EACH YEAR THAT THE COMPANY REMAINS AS A LIMITED PROFIT COMPA-
NY, TO FORGIVE ONE-THIRTIETH OF THE PRINCIPAL OF ANY  REPAIR  LOAN  EACH
YEAR;
  (E)  FOR  THE SUBSIDIZATION OF OTHER LIMITED PROFIT HOUSING COMPANIES;
AND
  (F) FOR THE DEVELOPMENT OF OTHER AFFORDABLE HOUSING.
  S 2. This act shall take effect immediately.

Co-Sponsors

S3162A (ACTIVE) - Bill Details

See Assembly Version of this Bill:
A3864
Current Committee:
Law Section:
Private Housing Finance Law
Laws Affected:
Amd §35, Priv Hous Fin L
Versions Introduced in Previous Legislative Sessions:
2011-2012: S456, A1465
2009-2010: S3851, A11236

S3162A (ACTIVE) - Bill Texts

view summary

Provides for a transfer fee of 75% of the fair market value in dissolution or sales of a rental project or mutual company.

view sponsor memo
BILL NUMBER:S3162A

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:

The proposal 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 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.

Thu funds generated by this transfer fee would be used by HOC or the
New York State Housing Finance Agency:

a) to continue to subsidize the development for as long as the
purchaser 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 b;A!t: to serve a
public purpose to provide affordable housing to low income New
Yorkers.

At the time Article II of the Private Housing Finance Law was passed
there were insufficient units providing decent, safe and affordable
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 sonic 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 consistent 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 than 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
shareholder 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 of 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 end shareholders of limited profit housing companies have
benefited from significant subsides 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
properties 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 situation.

LEGISLATIVE HISTORY:

2007-08: S.4610
2009-10: S.3851
2011-12: S.456/A.1465

FISCAL IMPLICATIONS:

None.

EFFECTIVE DATE:

This act shall take effect on the sixtieth day.

view full text
download pdf
                    S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                 3162--A

                       2013-2014 Regular Sessions

                            I N  S E N A T E

                            January 31, 2013
                               ___________

Introduced by Sens. KRUEGER, HOYLMAN, STAVISKY -- read twice and ordered
  printed, and when printed to be committed to the Committee on Housing,
  Construction and Community Development -- recommitted to the Committee
  on  Housing, Construction and Community Development in accordance with
  Senate Rule 6, sec. 8 -- committee discharged, bill  amended,  ordered
  reprinted as amended and recommitted to said committee

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:

  Section  1. Subdivision 2 of section 35 of the private housing finance
law, as amended by chapter 229 of the laws of 1989, is amended  to  read
as follows:
  2.  A  company  aided by a loan made after May first, nineteen hundred
fifty-nine, may voluntarily  be  dissolved,  SOLD  AND/OR  RECONSTITUTED
without the consent of the commissioner or of the supervising agency, as
the  case  may  be,  not less than twenty years after the occupancy date
upon the payment in full of  the  remaining  balance  of  principal  and
interest due and unpaid upon the mortgage or mortgages [and], of any and
all  expenses  incurred in effecting such voluntary dissolution AND OF A
TRANSFER FEE EQUAL TO SEVENTY-FIVE PERCENT OF THE FAIR MARKET  VALUE  IN
THE  CASE  OF  DISSOLUTION  OR SALES PRICE ON THE FIRST SALE OF A RENTAL
PROJECT, OR, IN THE CASE OF A MUTUAL COMPANY SEVENTY-FIVE PERCENT OF THE
SALES PRICE ON EACH FIRST SALE THEREAFTER FOR MARKET VALUE BY A  SELLING
SHAREHOLDER.  THE  PROCEEDS  OF  THE TRANSFER FEES ARE TO BE PAID INTO A
FUND HELD BY THE NEW YORK CITY HOUSING DEVELOPMENT CORPORATION  AND  THE
NEW YORK STATE HOUSING FINANCE AGENCY FOR THE FOLLOWING PURPOSES:
  (A)  TO  CONTINUE  TO  SUBSIDIZE  THE  DEVELOPMENT  FOR AS LONG AS THE
PURCHASER OF A RENTAL DEVELOPMENT REMAINS IN THE MITCHELL-LAMA PROGRAM;

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD01312-03-4

S. 3162--A                          2

  (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 COMPA-
NY, WITH A NINETY-NINE YEAR LEASE;
  (C)  FOR REPAIR LOANS AT ZERO PERCENT INTEREST TO FUND NECESSARY CAPI-
TAL IMPROVEMENTS FOR AS LONG AS THE COMPANY REMAINS IN THE MITCHELL-LAMA
PROGRAM;
  (D) FOR EACH YEAR THAT THE COMPANY REMAINS AS A LIMITED PROFIT  COMPA-
NY,  TO  FORGIVE  ONE-THIRTIETH OF THE PRINCIPAL OF ANY REPAIR LOAN EACH
YEAR;
  (E) FOR THE SUBSIDIZATION OF OTHER LIMITED PROFIT  HOUSING  COMPANIES;
AND
  (F) FOR THE DEVELOPMENT OF OTHER AFFORDABLE HOUSING.
  S  2.  This  act  shall take effect on the sixtieth day after it shall
have become a law.

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