Friday, November 10, 2017

Saving Mitchell-Lama - Village Voice article

Steve Wishnia's article in the Village Voice: Saving Mitchell-Lama, notes that Mayor de Blasio's plans to save ML will help keep Mitchell-Lama co-ops affordable, but don't do much for the renters.  

The city’s reinvestment program is likely to focus on co-ops, which the mayor’s office estimates are two-thirds of the 45,000 Mitchell-Lama apartments overseen by the city Department of Housing Preservation and Development. It is much harder for co-ops to leave Mitchell-Lama, as HPD regulations require two-thirds of the total residents to vote in favor of withdrawing in two separate referenda. The city believes that the program will help preserve Mitchell-Lama apartments as affordable housing, by keeping the buildings financially solvent enough to prevent them from deteriorating.
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In the mid-2000s real estate boom, some landlords made a business of buying up Mitchell-Lama rental complexes to convert them to luxury housing. Most notoriously, Laurence Gluck’s Stellar Management purchased Riverton Houses in Harlem, Independence Plaza North in Tribeca, and several Upper West Side complexes. Sedgwick House was taken out of the program in 2008, after it was sold to a new owner whom a housing organizer later described as a “predatory equity” landlord. According to figures from Cooperators United for Mitchell-Lama, about 51 percent of the rental apartments built under the program have left, versus only 9 percent of the co-ops.
Mitchell-Lama rental apartments built before the state’s 1974 rent-stabilization law are required to stay rent-stabilized after they’re taken out of the program. Once tenants move out or die, the landlord can use the usual methods to raise rents on vacant apartments and eventually deregulate them.

During the 2000s real estate boom, however, some owners leaving Mitchell-Lama were too impatient to wait for their tenants to leave. Instead, they took advantage of a little-used clause in the law that lets them raise rents more than would normally be allowed if there are “unique or peculiar” circumstances — claiming that simply leaving the program qualified as such a circumstance. After Stellar took Central Park Gardens on the Upper West Side out of Mitchell-Lama, it used that argument to try to raise the rent on one apartment from $496 to $3,015, and on another from $1,000 to $5,275. After six years of litigation, a state appeals court closed the loophole in 2010.
Tenants in buildings opened after 1974 have no protections when they leave the program. But residents of Independence Plaza North, a 1,340-apartment complex opened in 1976, were able to exert enough political pressure after Stellar took it out of the program in 2004 to negotiate a “model” agreement, says Edmund Rosner, who was at the time a vice president of the tenants’ association. Under a deal brokered by then–City Council Speaker Gifford Miller, annual rent increases for tenants not eligible for federal Section 8 subsidies were limited to slightly more than those normally allowed for rent-stabilized apartments.
“Incentives are fine, but you need more than that” to keep landlords in the program, says Rosner. “The bottom line is that government has a role to play, and that is to force the landlords to do the right thing.”

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