Mitchell-Lama Losses Accelerating, Report Says

New York City’s losses of Mitchell-Lama and other subsidized private housing are accelerating at an alarming rate, according to reports released last month by the Community Service Society and city Comptroller William C. Thompson’s office.
“Since 2004, the pace at which developments leave these programs has accelerated dramatically,” said the comptroller’s report, titled “Affordable No More: An Update.” “Prior to 2004, more than 24,000 units withdrew from the program. Since 2004, more than 25,000 units have withdrawn or filed a notice to withdraw.” If all the withdrawals go through, it added, the city will have lost just under one-third of the 150,000 apartments built under the Mitchell-Lama and Limited Dividend programs.
The CSS report, “Closing the Door: Accelerating Losses of New York City Subsidized Housing,” painted an equally bleak picture. Of the about 121,000 units built or substantially rehabilitated under Mitchell-Lama and similar programs in the 1960s, 1970s, and 1980s, it said, the city lost more than 28,000, almost a quarter of them, from 1990 to 2005—and about 5,500 of those were lost last year.
“None of these subsidy programs is producing new affordable apartments any longer,” it stated. “Almost all of the units are now eligible to be removed from their subsidy programs because the original subsidy programs have expired. As a result, the size of this vital affordable housing stock has nowhere to go but down.”
These losses are likely to outstrip any gains from Mayor Bloomberg’s ten-year New Housing Marketplace Plan, both reports said. In October 2005, the Thompson report noted, a progress report from the city Department of Housing Preservation and Development said that Bloomberg’s program had provided funds for 28,500 units of affordable housing since its inception in 2002, for construction of 12,229 and preservation of 16,271. But the loss of Mitchell-Lama housing offsets those numbers: almost 29,000 units, counting those lost in the last three years and those where the owners have announced plans to take them out of the program. “While this does not diminish HPD’s efforts,” the report concluded, “the result is a projected net loss of affordable housing in New York City.”
The programs involved, including state and city Mitchell-Lama, federal Section 221(d)(3) and Section 236, and federal project-based Section 8, relied on a combination of financial incentives—tax abatements, mortgage subsidies, and rent subsidies—to get private owners to build and run affordable housing. They are considered a crucial part of the city’s housing supply because they enable working-class and poor people to live here. The median household income for Mitchell-Lama tenants is $22,500 a year, well below the $32,000 of rent-stabilized tenants and the $42,000 of all city residents. Tenants in the federal programs are much poorer, with a median income below $12,000, less than the $14,840 of public-housing tenants.
“A Mitchell-Lama tenant making $26,000 a year can afford a monthly rent of $562,” the CSS report stated. “That is not a rent a tenant could realistically expect to pay when moving into a vacant apartment.”
With housing prices skyrocketing, owners have increasingly been taking apartments out of the programs, either by not renewing contracts or by buying out their mortgages. The federal Department of Housing and Urban Development has also seized a number of buildings and taken them out of its programs, either as foreclosure on mortgage debt or for serious neglect.
The losses have been heaviest in the Mitchell-Lama program. Of the 67,000 apartments in that program in 1990, about one-third had been lost by the end of 2005. The owners of over 9,000 more have filed plans to withdraw them, which would mean the overall loss of nearly half the apartments originally in the program.
Most of the losses so far have been in Manhattan, but they are rapidly spreading to the other boroughs. The Bronx has lost five Mitchell-Lama developments comprising 1,300 apartments so far this year, and the owners of the Lafayette Boynton and Lafayette Morrison complexes, with 900 or more units each, filed plans to withdraw in January.
Buildings occupied before 1974 are covered by rent stabilization, which protects current tenants from massive rent increases when owners withdraw from the programs, but a decision last year by the state’s highest court limits that. In KSLM/Columbus Apts. v. DHCR, the state Court of Appeals held that in apartments built between 1969 and 1974 or not occupied continuously between the 1971 vacancy-decontrol law and 1974, the landlord could apply for rent increases because of “unique and peculiar circumstances.” So far, eight former Mitchell-Lama complexes, containing 2,000 apartments, have requested such increases, and the Thompson report estimates that more than 15,000 Mitchell-Lama apartments would see significant rent increases if their buildings left the program.
To remedy the problem, the Thompson report has seven main recommendations. It suggests that the state should start a program to refinance mortgages and put repairs on Mitchell-Lama buildings; put all post-1974 Mitchell-Lama buildings into rent stabilization; and ban owners who take buildings out of the program from applying for “unique and peculiar” rent increases. It urges the city to explore low-interest loans for Mitchell-Lama and Limited Dividend owners; clarify the rules for financing capital improvements; put new affordable housing in neighborhoods most likely to lose Mitchell-Lama and Limited Dividend apartments; and work with community groups and local politicians to find new homes for people displaced by the loss of subsidized housing.
The CSS study has four recommendations. It says the federal government should preserve HUD’s Mark Up to Market program, which increases Section 8 subsidies in areas with high housing costs, and that HPD and HUD should work together to rescue distressed properties. It also urges improving incentives for landlords to stay in the Mitchell-Lama program and increasing protections for tenants in buildings which leave it, either by putting their apartments under rent stabilization or having tenants or nonprofit groups buy the building.
The city enacted a law last year intended to help tenants or nonprofits buy buildings that leave subsidy programs, but landlord groups are challenging it in court.