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Yet the decline in Mitchell-Lama buyouts is a salve to affordable housing activists who have been trying to stanch the bleeding of the five-decade-old program. Mitchell-Lama buildings occupied prior to 1974 go under rent stabilization laws, while tenants in post-1974 buildings can obtain an agreement governing how quickly rents can rise post-Mitchell-Lama. For example, tenants in Mitchell-Lama rentals that receive federal Section 8 assistance can get individual subsidies from the Department of Housing and Urban Development. To be sure, a buyout doesn’t translate into higher rents for all residents in every Mitchell-Lama building. In addition to luxury-level rents, residents in co-ops that exit Mitchell-Lama can face skyrocketing monthly maintenance fees. Securing landlord concessions, such as the rent agreements for buildings occupied after 1974, can require protracted and expensive legal battles waged by tenants. “The credit crunch has made it harder to finance a buyout,” says Tom Waters, housing policy analyst at Community Service Society (CSS).īuyouts usually spell trouble for Mitchell-Lama tenants – whose annual median income is about $22,500 – because most owners take advantage of the Mitchell-Lama “sunset” provision in order to raise rents to standard market rates. But, just as financing for more exotic kinds of estate deals has slowed, housing advocates suggest, so has the market for Mitchell-Lama buildings. That’s why exiting, or “buying out,” of Mitchell-Lama can require building owners to secure tens of millions of dollars in loans. To exit the program, a building owner must prepay his government-held mortgage and begin to pay far higher property taxes to New York City. But so far in 2008 – with just a month and a half left until the new year begins – fewer than 300 have lost their Mitchell-Lama protections, a dramatic dive in the number of conversions. In recent years, more than 3,500 apartments annually have left the program’s protections.
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Since credit has dried up, the slower economy appears to have halted the financing and completion of Mitchell-Lama buyouts. Now lower-income tenants and housing advocates are finally getting a breather, at least in relation to this signature affordable housing initiative of New York state. The boundless confidence and easy credit fueling property deals also encouraged owners of Mitchell-Lama buildings to finance an exit from the program when they could, in pursuit of tenants able to pay market-rate rents. Among the winners and losers in the city’s now departed real estate boom, the Mitchell-Lama state affordable housing program in recent years came up as a loser.