Volume 74, Number 10 | July 7 - 13, 2004

Mayor, Gerson offer plans to preserve Mitchell-Lama

By Albert Amateau

Mitchell-Lama tenants threatened with walloping rent increases because their landlords are leaving the affordable housing program got a potential lifeline at the end of last month when Mayor Bloomberg initiated a plan to encourage landlords to stay in Mitchell-Lama for another 15 years or more.

But while real estate leaders hailed the mayoral initiative, City Councilmember Alan Jay Gerson who represents Lower Manhattan and part of the Village, questioned whether it was enough to induce landlords in hot real estate neighborhoods in Manhattan to forego the big jump to market-rate rents.

Gerson has introduced Council legislation that would give tenants in Mitchell-Lama and other affordable-housing projects the right to own their buildings when they leave the subsidy programs. The two-part legislation would also establish a $1.2 billion affordable-housing preservation fund over the next 10 years to help finance tenant ownership. Gerson said the long-term cost of his plan is about a third of the mayor’s full plan to create 65,000 new units of affordable housing over the next 10 years.

The Gerson proposal is similar to the deal that West Village Houses tenants were able to arrange when their complex left Mitchell-Lama in May.

“Our proposal would extend the right of first refusal to tenants in all expiring affordable-housing programs to form their own limited-equity, non-eviction co-ops,” said Gerson. “It would affect more than 3,000 tenants in my district alone, including Lands End 2, a Section 8 program building, as well as Lands End 1, a Mitchell-Lama development,” said Gerson.

Other affordable-housing programs, including one that governs Knickerbocker Village between Catherine and Market Sts., and another that subsidizes many apartments in Gateway Plaza in Battery Park City, could also benefit from the Gerson proposal, the councilmember said.

“Our bill could also provide a safety net for Independence Plaza North if the federal government allows the vouchers to disappear,” Gerson added. The I.P.N. landlord took the 1,320-unit Tribeca complex out of Mitchell-Lama and agreed to accept federal vouchers from about 800 residents who are income-eligible. However, the Bush administration has proposed restructuring the federal housing voucher program to reduce the number of tenants covered.

Gerson contended that the first part of his proposal — guaranteeing tenants the right of first refusal to own their buildings — could be successful even without spending city money if community-based organizations, labor unions and community banks stepped in to finance tenant ownership. “It would give tenants a fighting chance to find their own finance services,” Gerson said.

The mayor’s initiative, also in two parts, is entirely voluntary. It gives landlords the opportunity to refinance and extend their Mitchell-Lama mortgages at lower interest rates and also offers low-cost repair loans for capital improvements if they remain in the program for at least another 15 years.

The initiative is available to 53 rental and 27 co-op developments in the Mitchell-Lama program covering more than 27,000 apartments, according to a statement the mayor issued at the end of June. The initiative, administered by the Housing Development Corp., is expected to cost the city about $2,700 per unit.

Joseph Strasburg, president of the Rent Stabilization Association, representing owners of rent-stabilized residential property, called the initiative “a valuable incentive to stay in the program.” Steven Spinola, president of the Real Estate Board of New York, also hailed the mayoral program.

Gerson, however, said the incentive program might work in places where real estate values are relatively low. “But in places where you have a hot real estate market like Manhattan and Brooklyn Heights, it’s not going to help,” he said.

“If the mayor’s initiative would have provided loans for the tenant purchase, we’d really be in business,” said Solomon Turkel, an aide to Gerson. “But as it stands, the mayor is only going to keep owners in programs where it would be too adventurous to go to market — low value properties mainly,” Turkel added.

Gerson said he has been discussing his tenant ownership proposal with Housing Preservation and Development Commissioner Shaun Donovan for several months. “We hope to come up with a bill with administration backing, but I intend to go forward with it with or without the administration.”


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