Download: Beginner’s Guide to Mitchell-Lama Housing in New York State [docx]. See also:

Beginner’s Guide
-What is Mitchell-Lama housing?
—–Example of a Mitchell-Lama coop listing
-Getting into Mitchell-Lama
—–Applications
—–Succession
———–Definition of family
-Renting versus buying
-Living in a Mitchell-Lama unit
—–Changes in income and household composition
—–“Buy-out”
—–Renters lose
—–Buyers win
-Links and resources
—–Regulation: law and reality
—–For prospective occupants
—–On buy-outs

Beginner’s Guide to Mitchell-Lama Housing in New York State

What is Mitchell-Lama housing?

The Mitchell-Lama program helps make renting and cooperative ownership accessible to “moderate and middle income” families in New York State.  Developers get special mortgages and benefits in exchange for making apartments available according to regulations found in two places: 9 NYCRR part 1727 (another unofficial version on the NYC website here:Mitchell-Lama regulations) and Private Housing Finance Law Article 2. Mitchell-Lama occupants qualify by income and family composition, benefit from low monthly costs (tied to their income), and are restricted in their ability to sell, bequeath, transfer, and share their units.

After twenty years, the owner of the building, whether it is still the housing company or whether it is the association of coop owners, has the option of buying their building out (“buy-out”) of the Mitchell-Lama program by paying off the mortgage.  It is impossible to know very far in advance whether and when a building will privatize and the consequences of that privatization on occupants. Generally, a  Mitchell-Lama occupant who is a tenant at the time of privatization risks losing all rental protections (unless the state steps in with subsidies or other measures) while a coop owners stand to reap a tremendous financial boon. The unpredictability of the future of any Mitchell-Lama housing is a confounding factor for individuals making evaluations and decisions about Mitchell-Lama occupancy.

The New York State Division of Housing and Community Development (DHCR) is responsible for regulating and monitoring Mitchell-Lama projects. At least in 2007, the Office of the Inspector General ‘s report found that the DHCR is not doing a great job and there are many areas where how Mitchell-Lama works in theory and how it works in practice diverge, sometimes significantly.

Example of a Mitchell-Lama coop listing

(from Rochdale Village Inc, website)

Getting into Mitchell-Lama

Applications

Every Mitchell-Lama unit has a minimum and maximum income and a minimum and maximum number of occupants. For example, a two bedroom requires a household of at least three people, or a household of a brother and sister who are both adults, or a household of a parent/guardian and a child.

Currently, many Mitchell-Lama developments have all their units occupied and their waiting lists closed.

When units or spots on waiting lists open, that availability is publicized. The application requires prospective occupants to submit their financial information (and the financial information of anyone whom they would move with) to the housing company for each development to which they are applying. There is no clearinghouse or master list.
People often apply to many different developments simultaneously. If the applicant qualifies they will be offered a spot or added to the waiting list. If they are added to the waiting list and offered a spot later (sometimes up to ten years later), they must again submit qualifying financial information – although if their altered family size or income leaves them eligible for other units within that building, they may receive one of those units or be added to the appropriate spot on the waiting list.

Waiting lists are mostly but not purely based on chronological order of application. Current occupants eligible for a smaller or large apartment, veterans, people with disabilities, and local residents, get preferential status. But be warned: the Inspector General’s 2007 report found that in many cases individual Mitchell-Lama projects have been found to manipulate or even ignore their waiting lists.

Succession

Besides independently applying and qualifying for a Mitchell-Lama apartment, the only way to acquire one is through succession.

When a Mitchell-Lama occupant leaves the unit or dies, family members (accorded to the Mitchell-Lama definition below) who have been living with the occupant for at least two years and who have been properly included in prior yearly financial reports may acquire the unit through succession.

If the occupant leaves because he is evicted for cause, however, no one can succeed after him.

Definition of family

Mitchell-Lama regulation recognizes spouses, children (including adopted children and stepchildren), parents (including adoptive parents and stepparents), siblings, nieces and nephews, uncles and aunts, parent-in-laws, and children-in-laws of the occupant as relations, as well as “any other person residing with the tenant/cooperator in the apartment as a primary residence who can prove emotional and financial commitment and interdependence between such person and the tenant/cooperator.”

Renting versus buying

Some Mitchell-Lamas are coops and some are rentals.

Buying a coop requires an initial investment that is puny by New York housing standards but may be prohibitive for some (although financing is possible).

After the initial investment, there is not much difference between living in a coop versus a rental – unless and until an occupant is in residency when a “buy-out” happens. (See below).

Renters and owners pay similar monthly costs (rent versus carrying charges) and renters have as much right to stay in their unit as owners do.

Owners have no more rights than renters to dispose of their apartment. When a Mitchell-Lama owner leaves, they cannot sell their unit except back to the housing company, which buys their shares back for a redemption value calculated according to the initial purchase price and a certain proportion of amortization on the building. In other words, their money is safely stored.

If a Mitchell-Lama occupant is there for a “buy-out” however, a tenant faces significant risks while a coop owner may see tremendous profit.  (See below).

Living in a Mitchell-Lama unit

Financial reporting

Mitchell-Lama occupants must submit yearly reports to the housing company, listing list their own income and financial status and that of everyone else in their household. They must report changes in their household composition to the housing company – for example, if they marry, divorce, have a child, or a child grows up and moves out.

Changes in income and household composition

The occupant can invite a family member, per the fairly extensive Mitchell-Lama definition, to share their apartment. However, the occupant’s fees, and eligibility for their unit, may change based on the new household member’s presence and income.

Bringing in an unrelated person requires the permission of the housing company, including the submission of the prospective roommate’s financial details. There are limited reasons for which the housing company may reject the application, but those reasons include the fact that the applicant’s income or presence in the apartment would affect the occupant’s eligibility for that unit. The occupant may not accept any rent or financial compensation from anybody who is not reported.

As soon as any new person moves in and for as long as they live there, their financial information must be submitted in the yearly report. Everyone living in the unit must be included in the financial reporting, and the occupant may not accept any rent or compensation from anybody not included in the yearly report.

According to the Mitchell-Lama rules, a family member who has occupied the unit as their primary residence for at least two years may request to be added to the lease as a co-tenant or to the stock certificate as a co-owner. However, the DHC’s FAQ indicates the contrary, creating some confusion. In any case, there is little practical difference between being eligible for succession and being added to the lease/stock certificate.

If a Mitchell-Lama occupant’s household income increases, their fees will increase accordingly, up to 150% of the original rate. If the income increases beyond 150%, they no longer have the right to maintain occupancy. However, it is up to the housing company and the DHCR to determine eligibility and to remove occupants, and the 2007 Inspector General’s report found that eviction for this reason happens extremely rarely and many occupants get away with flagrant violations of Mitchell-Lama rules.

Fees may also be decreased based on negative changes in income, but only to down to a certain floor. If a Mitchell-Lama occupant does not or cannot keep up with their monthly costs, they are subject to eviction.

People with disabilities have slightly different rules for fee increases and decreases.

If the occupants’ family composition changes such that there are not enough people for their apartment or they exceed the maximum legal occupancy, they should be moved to the top of the waiting list for a smaller apartment in their building, and lose their eligibility for their current apartment when an appropriately sized new apartment is available to them. They should generally have top priority for moving to another appropriate unit within the building. Based on the 2007 report, enforcement is spotty at best.

Residency requirement

The occupant must maintain their unit as their primary residence. If they sublet or transfer their lease, they lose their right to the unit and whoever is in occupancy is subject to eviction. Unless the remaining resident can qualify for succession, the unit should go to the next person on the waiting list.

“Buy-out”

Twenty years after the grant of the original government benefit, the Mitchell-Lama development is eligible to be “bought out” by the repayment of the value of the mortgage to the government. After the buy-out, the building is no longer bound by Mitchell-Lama regulations. Owners buy-out when the housing market becomes so lucrative that they will do better financially by selling or renting the units at market rates than by maintaining the preferential mortgage terms accorded by the government.

Renters lose

In the case of a rental building, the owner is the housing company who can unilaterally decide to buy-out. There are regulations for giving notice to tenants and to the public, but as soon as the buy-out is complete the company can start charging higher rents, although tenants in Mitchell-Lama buildings built before 1974 will still be protected by rent stabilization. The rent hike is disruptive and economically very dangerous to the vulnerable tenants that the Mitchell-Lama program was meant to help. The government has responded to buy-outs (which are becoming more common as New York housing costs and land value continue to shoot up) by starting voucher and subsidy programs to help Mitchell-Lama tenants stay in their units. However, the availability of those vouchers in any specific case is not guaranteed so tenants are in a precarious situation as soon as a buy-out is on the horizon.

Buyers win

Mitchell-Lama coop owners are in a much better position. As co-owners of the building, they vote on whether to buy out. If they do buy out, they will likely pay significantly higher carrying charges to finance the buy-out and accommodate privatization. On the other hand, the coop owners will be free to sell their units on the open market for prices that dwarf their initial investment. The owners who will suffer are those who cannot afford the higher carrying fees but do not want to move out – some owners have been in their units for many decades and feel it is their home, or they may have disabilities and experience great difficulty with the process of selling and finding a new residence.  Still, unlike a renter, a coop owner who manages to hold onto their coop until a buyout will likely receive a major financial windfall – an incredibly significant return on their initial cash investment.

Links and resources

Regulation: law and reality

• Mitchell-Lama Rules: 9 NYCRR part 1727, Mitchell-Lama regulations and Private Housing Finance Law Article 2
• New York Office of the Inspector General report “An In-Depth Review of the Division of Housing and Community Renewal’s Oversight of the Mitchell-Lama Program,” including useful information about how the Mitchell-Lama housing in practice differs (often falls short of) its regulatory scheme.

For prospective occupants

• DHCR Mitchell-Lama Information, with links to public waiting list records and complaint forms
• DHCR Mitchell-Lama Information 2, with statewide list of developments with open waiting lists and current projected wait times for a unit
• NYC Affordable Housing Research Center Mitchell-Lama Information – with links to New York City area developments with open waiting lists
• NYC Department of Housing Information and Development Mitchell-Lama Information – with links to New York City area developments with immediate vacancy and open waiting lists and some information about eligibility

On buy-outs

• New York City Comptroller’s Office 2004 report “Affordable No More: New York City’s Looming Crisis in Mitchell-Lama and Limited Dividend Housing,” on how the city should respond to buy-outs.
• Mitchell-Lama Tenants Buy-Out Handbook, 2007, including a useful overview of buy-outs from a renter’s perspective and possible recourse for tenants in case of a buy-out
• A Guide For Saving Mitchell-Lama Cooperative Housing, including a useful overview of buy-outs from a coop owner’s perspective, how they work, and pros and cons