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This entry was published on 2014-09-22
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SECTION 1152
Affordable housing development loans
Private Housing Finance (PVH) CHAPTER 44-B, ARTICLE 22
§ 1152. Affordable housing development loans. 1. Notwithstanding the
provisions of any general, special or local law, one or more private
lenders and the city of New York, acting through the agency shall have
the power to participate and invest in making loans to sponsors for the
construction of eligible projects. Such loans may include such amounts
as may be required for site acquisition. Each such participation loan
shall be secured by a bond or note and single participating mortgage or
by separate bonds or notes and mortgages upon the eligible project. Such
bond or note and mortgage or bonds or notes or mortgages may contain
such other terms and provisions not inconsistent with the provisions of
this article as the agency may deem necessary or desirable.

2. The portion of such loan funded by the agency shall not exceed an
amount equal to sixty percent of the actual total development cost of an
eligible project. The agency may enter into an agreement with a private
lender to deposit its share of a loan with the private lender to be
advanced by the private lender. The portion of the loan funded by the
agency may be equal to or subordinate in lien to the portion of the loan
funded by the private lender and may contain such terms with respect to
interest rate, if any, rate of amortization of principal, if any, and
time of payment of interest and principal as determined by the agency.
The agency may make provision either in the mortgage or mortgages or by
separate agreement for the performance by the private lender of such
services as are generally performed by a banking institution which
itself holds a mortgage, including, without limitation, construction
loan advances, construction supervision, initiation of foreclosure
proceedings, procurement of insurance, and all other matters in
connection with the financing, supervision, regulation and audit of any
such loan to any such eligible project.

3. If a portion of the loan is to be utilized for acquisition of an
eligible site such portion shall in no event exceed fifteen percent of
the total amount of such loan or the appraised value of the site,
whichever is the lesser.

4. If the eligible project is to consist of one to four unit dwelling
accommodations or cooperative or condominium units, the agency's share
of the loan may be converted after completion of construction into
mortgages on such dwelling accommodations or condominium units or
financing statements filed with respect to such cooperative shares,
provided such units or such cooperative shares are purchased by persons
of eligible income. Such mortgages may provide that they will
automatically be reduced to zero over a period of continuous
owner-occupancy of the housing accommodations assisted by such loan.
Notwithstanding such provision as contained in such mortgage, the loan
shall be reduced to zero only if, prior to or simultaneously with
delivery of such mortgage, the agency made a written determination that
such reduction would be necessary to ensure the continued affordability
or economic viability of the eligible project. Such written
determination shall document the basis upon which the loan was
determined to be eligible for evaporation. Such period of continuous
owner-occupancy shall not be less than fifteen years.

5. If the eligible project is to consist of one to four unit dwelling
accommodations or cooperative or condominium units, the agency shall
require that the dwelling units be offered only to bona fide purchasers
who intend to occupy a unit as their principal place of residence;
provided, however, that in the case of two to four unit dwelling
accommodations the bona fide purchaser may occupy only a single unit as
a principal place of residence. If the purchaser ceases to occupy the
unit as a principal place of residence, the agency may provide for
recapture of all or a portion of the agency's share of the loan.

6. If the eligible project is a rental project, the agency's share of
the loan may be converted after completion of construction into a
non-interest bearing, non-amortizing thirty year loan payable at the end
of its term, provided that such loan shall be also payable out of
profits upon any sale or refinancing of the project prior to the end of
such thirty year period. The sponsor or any subsequent owner or owners
of such a project shall agree to rent such units only to persons of
eligible income for such thirty year period and shall agree that all
units shall be subject to the rent stabilization law of nineteen hundred
sixty-nine, as amended for a period of thirty years after initial
occupancy, unless converted to a cooperative or condominium pursuant to
subdivision eight of this section. At the end of such period each unit
shall continue to be subject to such law thereafter until the first
vacancy occurs at which time the unit shall be decontrolled. Initial
rentals for all rental units shall be set by the agency.

7. If the eligible project is a rental project annual profits shall be
limited to an amount set by the agency for as long as the loan is
outstanding. Excess profits shall be used to establish project reserves,
provide capital improvements or reduce the principal amount of the
agency's loan, as determined by the agency.

8. If the eligible project is a rental project, no conversion to a
cooperative or condominium shall be permitted for a period of twenty
years after initial occupancy, and unless (i) the agency's share of the
loan is prepaid upon such conversion, (ii) the conversion shall be done
pursuant to section three hundred fifty-two-eeee of the general business
law as a non-eviction plan, and (iii) apartments occupied by
non-purchasing tenants continue to be subject to the rent stabilization
law of nineteen hundred sixty-nine as amended, until the occurrence of a
vacancy.

9. A loan made pursuant to this article shall be exempt from the
mortgage recording taxes imposed by article eleven of the tax law.

10. Notwithstanding the provisions of any general, special or local
law or charter, the agency shall have power, without soliciting
competing bids, to contract with any sponsor or to make provision in a
loan for the construction or reconstruction of any site improvements
located in the public right-of-way which are necessary for the
development of an eligible project. Such site improvements may include,
but shall not be limited to, streets, sidewalks, lighting fixtures, and
water and sewer lines.

11. No loan shall be made pursuant to the provisions of this article
unless the agency finds that: (a) the construction of the eligible
project does not directly displace current low and moderate income
residents of the eligible site; (b) the eligible project leverages
private and other public investment, if any, so as to reduce the amount
of assistance provided pursuant to this article to the minimal amount
which is necessary for construction of the eligible project; (c) the
eligible project will be built by a private developer/builder who has
agreed to limit its profit in accordance with a formula satisfactory to
the agency; (d) the eligible project will provide assistance to an area
which is blighted or deteriorated or has a blighting influence on the
surrounding area, or is in danger of becoming a slum or a blighted area
because of neighborhood conditions indicating an inability or
unwillingness of the private sector to cause the type of construction
for which a loan is to be provided; and (e) the eligible project will
make home ownership or rental housing affordable to persons who cannot
presently afford the housing available based upon the ordinary unaided
operation of private enterprise.

12. a. The agency may make non-interest bearing advances to sponsors
to defray the pre-development costs of eligible projects in accordance
with the provisions of this chapter.

b. No such advances shall be made unless the agency finds that: (i)
the sponsor proposes to finance the eligible project in whole or in part
by a loan granted pursuant to this article or that the project, if
otherwise financed, will provide housing for persons or families of low
income, and that such project is otherwise consistent with the purposes
of this article; (ii) the project site is suitable, there is a need for
the housing type proposed in the area to be served and the project is
feasible; and (iii) it is reasonable to anticipate that financing will
be obtained and the agency makes a finding to that effect.

c. No such advances may be made to a sponsor unless such sponsor
enters into an agreement with the agency which provides that such
sponsor shall be regulated with respect to rents, profits, dividends and
disposition of its property or franchise, in accordance with the
provisions of this article.

d. An advance granted pursuant to this section shall be used only to
defray the pre-development costs of eligible projects. For purposes of
this subdivision, the term pre-development costs shall include, but
shall not be limited to: the reasonable and necessary costs for
planning, site preparation, developing architectural drawings and
conducting engineering and environmental studies, but shall not include
acquisition of land or buildings, drainage and landscaping of vacant
land, construction of new buildings or the reconstruction or
rehabilitation of existing buildings.

e. Each such advance shall be repaid in full to the agency by the
sponsor. Such repayment shall be made upon receipt by the sponsor or its
successor in interest of the proceeds of its mortgage or construction
loan for the eligible project, unless the agency extends the period for
the repayment of such advances. In no event shall the time of repayment
be extended to a date later than the date of final advance of funds
pursuant to such mortgage or construction loan. Notwithstanding this
paragraph, the agency may reduce such advance to zero over a period of
continued compliance with the agency's agreement with the sponsor
pursuant to paragraph c of this subdivision if the agency has made a
written determination that such reduction would be necessary to ensure
the continued affordability or economic viability of the eligible
project. Such written determination shall document the basis upon which
the agency's non-interest bearing advance was determined eligible for
evaporation.

f. If the agency, in its discretion, determines at any time that
mortgage or construction financing for the eligible project may not be
obtained, then all advances made to the sponsor pursuant to this
subdivision shall become immediately due and payable upon the demand of
the agency.

13. If the eligible project is a rental project, the bond or note and
mortgage or bonds or notes or mortgages issued by the sponsor of any
eligible project to secure a participation loan may provide that the
city's portion of such loan shall be reduced to zero commencing on the
fifteenth year after the execution of such bond or note and mortgage or
bonds or notes or mortgages, provided that, as of the date of any such
reduction, the eligible project has been and continues to be owned and
operated in a manner consistent with a regulatory agreement with the
city. Notwithstanding such provision as contained in the bond or note
and mortgage or bonds or notes or mortgages, the loan shall be reduced
to zero only if, prior to or simultaneously with delivery of such bond
or note and mortgage or bonds or notes or mortgages, the agency made a
written determination that such reduction would be necessary to ensure
the continued affordability or economic viability of the eligible
project. Such written determination shall document the basis upon which
the loan was determined to be eligible for evaporation.