Senate Bill S6412

                                 BILL NUMBER:  S6412

 TITLE OF BILL :

An act to amend the private housing finance law, in relation to
cooperative or condominium, homesteading and rental contracts under
the low-income housing trust fund program; and to repeal sections 49
and 51 of such law relating to the monies of the New York state
housing finance agency

 PURPOSE OF THE BILL :

This bill would grant: (i) repeal the provision of the New York State
Housing Finance Agency's ("HFA") statute that authorizes the State of
New York to effect redemptions of HFA bonds under certain
circumstances, (ii) repeal the provision of HFA's statute that
requires the approval of the Commissioner of Taxation and Finance in
order for HFA to contract with the holders of any of its notes or
bonds, as to the custody, collection, securing, investment, and
payment of any monies of the agency, of any monies held in trust or
otherwise for the payment of notes or bonds, and to carry out such
contract, and (iii) amend the provision found in the legislation
governing HFA's subsidiary, the Housing Trust Fund Corporation, to
remove the 30 year loan term maximum and substitute 50 years, and
change the maximum loan or grant amount per dwelling unit from
$125,000 to $250,000.
              

 SUMMARY OF PROVISIONS :

HFA

Section 1 of the bill would repeal Private Housing Finance Law § 49 to
remove the authority for New York State to effect redemptions of HFA
bonds under certain circumstances.

Section 2 of the bill would repeal Private Housing Finance Law § 51 to
remove the requirement that the Commissioner of Taxation and Finance
approve HFA's contracts with the holders of any of its notes or bonds,
as to the custody, collection, securing, investment, and payment of
any monies of the agency, of any monies held in trust or otherwise for
the payment of notes or bonds, and to carry out such contract.

 HTFC :

Section 3 of the bill would amend Private Housing Finance Law § 1102
to remove the 30 year loan term maximum and substitute 50 years, and
change the maximum loan or grant amount per dwelling unit from
$125,000 to $250,000.

Section 4 of the bill would provide for an immediate effective date.

 JUSTIFICATION :

HFA:

a. Right of redemption

Despite the fact that the State has never invoked its redemption
right, the provision continues to have an adverse impact on HFA. Any
redemption rights granted to a bond issuer, such as HFA in connection
with its own bonds, and to the State under this provision are of
crucial importance to the buyers of those bonds.

Prospective bond purchasers in many cases base their bond buying
decisions on the likelihood that their bonds will be redeemed prior to
their scheduled maturity. As a result, HFA, and all bond issuers, are
required to detail the specific redemption rights in their bond
offering documents.

b. Approval of resolution by Taxation and Finance

The provision in the HFA statute that requires that prior to HFA
executing a bond resolution in connection with the issuance of any of
its bonds it obtain the written approval thereof of the New York State
Commissioner of Taxation and Finance was inserted into the HFA statute
in 1961, when HFA was originally created. Ever since its inception,
HFA has been required to obtain this approval for all of its bond
resolutions.

This bill would repeal the requirement to eliminate an extraordinary
administrative burden for HFA's bond issues. When the provision was
inserted, certain monies of HFA were (as they still are today)
disbursed by the Commissioner. But the monies over which Taxation and
Finance had (and has) control were non-bond moneys. Section 51's
approval requirement also applies, however, to funds obtained by HFA
through bond issues, which the Commissioner of Taxation and Finance
has never disbursed.

 HTFC

Under current law, HTFC is authorized to enter into contracts with
eligible applicants for the furnishing by such applicants of housing
for persons of low income, provided that each such contract, among
other things, provides that: (i) no payments, grants or loans under
such contracts shall exceed a total of one hundred twenty-five
thousand dollars per dwelling unit (the "Per Unit Cost Provision"),
and (ii) that the length of any loan (the "Term Loan Restriction")
shall not exceed thirty years. This bill would make the following
changes:

a. Per unit cost provision:

Land and construction costs continue to rise across the State,
increasing the cost of all development projects, including affordable
housing. While HCR has implemented cost containment measures, the Per
Unit Cost Provision in the HTFC statute has not been revised since
2008, when the Per Unit Cost Provision was increased from $75,000 to
$125,000. The Per Unit Cost Provision had originally been set at
$55,000 and was increased in 2004 to $75,000. It has now been eight
(8) years since the last change, and in order to keep pace with the
market's increase and continue HCR's effort to provide a range of
affordable housing across the State, the per unit maximum must be
increased.

To increase production in order to help meet the critical need for
affordable housing across the State, HCR will increasingly rely on its
tax-exempt bond program. As way of background, HCR has two primary
means to finance affordable housing - either through the federal Low
Income Housing Tax Credit ("LIHTC 9%") program which is allocated to
the State at a level that has been fixed for years. This program
historically has a 4 to 5 times demand to supply ratio. HCR can meet
increased demand through its other primary means, the issuance of
tax-exempt bonds. The tax-exempt bond program allows projects to
benefit from as of right 4% low income housing tax credits, but these
credits do not bring as much equity to a project as the allocated 9%
LIHTC. As a result, some projects will require higher subordinate
funding on a per unit basis.

b. Term Loan Restriction Provision:

There are several factors that underlie the need to extend the term of
HTFC's subordinate loan programs. These include the following:
a) Matching the term of the subordinate loan to the first mortgage.
First mortgage products can be longer than 30 years, most often 35.
In some cases projects may not be able to benefit from such programs
as a result of the Term Loan Restriction Provision. Longer first
mortgage terms are sometimes beneficial to the project and help reduce
state resources needed for the project.

(b) Assuring value exceeds the amount of subordinate debt. In
distressed markets the projected value of the property in 30 years may
not exceed the value of the subordinate financing, which causes
technical problems with the financing of projects. The ability to
extend the mortgage term is one strategy to deal with this issue.

(c) Extending regulatory periods. The ability to have longer
subordinate financing term supports the State's goal of creating and
preserving affordable housing as HCR can require longer regulatory
periods to accompany the longer financing term.

(d) To assure the supportive housing requirement for a continuation of
use for 40 years. The limitation of 30 years on the subordinate debt
makes this requirement problematic.

 PRIOR LEGISLATIVE HISTORY :

None.

 FISCAL IMPLICATIONS :

None.

 EFFECTIVE DATE :
Immediate.