State court takes aim at Mitchell-Lama homebuyers

Volume One, Issue 32, April 27 - May 3, 2007

By Albert Amateau

State Supreme Court Justice Marilyn Shafer on April 24 struck down the Tenant Empowerment Act passed by the City Council in 2005 to give Mitchell-Lama residents the first crack at buying their homes when their landlords choose to leave the program.

The council passed the act, sponsored by Councilmember Alan Gerson along with Councilmember Christine Quinn before she became Speaker, over Mayor Bloomberg’s veto. The Real Estate Board of New York filed suit last year to block the law on the grounds that the city did not have the right to alter state law that allows owners the right to buy out of Mitchell-Lama middle-income housing program after 20 years.

Shafter acknowledged that the city is likely to lose tens of thousands of affordable housing over the next few years as more Mitchell-Lama owners complete their mandatory 20 years in the program. But she said she reluctantly agreed that the city did not have the right to enact the bill.

Nevertheless, Bloomberg last week signed two bills into law to encourage Mitchell-Lama owners to remain in the affordable housing program. The new measures would expand the city’s J-51 tax breaks on major rehabilitation project in Mitchell-Lama developments.

J-51 currently provides real estate tax benefits to landlords who rehabilitate or replace major building-side systems with privately financed loans. Intro 203, which Bloomberg signed April 16, extends the tax break to projects that are financed by low-cost government loans if the landlords agree to remain in the Mitchell-Lama program for another 15 years.

J-51 currently bans co-ops whose assessed valuation exceeds $40,000 per apartment from taking advantage of the tax breaks when doing major rehab projects. Intro 204, which became law last week, removes the ban and extends the potential tax breaks for rehab projects to the 4,300 Mitchell-Lama apartments whose current assessed valuation exceeds $40,000. In exchange for dropping the assessed valuation limit, co-ops must agree to remain in the Mitchell-Lama programs for another 15 years.