Res. No. 438
Resolution calling on the New York State legislature to pass, and the Governor to sign, legislation disallowing tax exemptions for Article II to XI conversions and establishing related protections to preserve the Mitchell-Lama program
By Council Members Brewer and Louis
Whereas, According to the “2024 Annual Report of Mitchell-Lama Housing Companies in New York State” published by the NYS Division of Housing and Community Renewal (“DHCR”), the Mitchell-Lama program, established in 1955 under Article II of the New York State (“NYS” or “State”) Private Housing Finance Law (“PHFL”) to provide affordable housing to low- and moderate-income families, currently includes 92 developments (containing 44,392 units) supervised by the New York City (“NYC” or “City”) Department of Housing Preservation and Development (“HPD”) and 117 developments (containing 57,529 units) supervised by the NYS Homes and Community Renewal (“HCR”); and
Whereas, The Mitchell-Lama program provides public financing, including long-term, low-interest loans and tax abatements to cover development costs and in exchange, developments must maintain affordability for a period ranging from 20 to 40 years according to HCR and HPD regulations; and
Whereas, Mitchell-Lama cooperatives operate with affordability requirements that include (1) a not-for-profit sales formula limiting shareholders to recover their original investment without profit upon sale, (2) income restrictions ensuring new residents meet affordability criteria, and (3) using a waiting list for new tenant selection; and
Whereas, The not-for-profit sales formula aims to keep Mitchell-Lama cooperative units deeply affordable in perpetuity, making Mitchell-Lama cooperatives a critical element in addressing the City’s housing affordability crisis; and
Whereas, The Housing Development Fund Companies (“HDFC”) program, created under Article XI of the PHFL, differs from the Mitchell-Lama program in that it is designed to allow “limited profit” upon resale of shares, resulting in higher share prices than the not-for-profit Mitchell-Lama cooperative program; and
Whereas, According to Cooperators United for Mitchell-Lama (“CU4ML”), an advocacy group representing Mitchell-Lama cooperators, Article XI cooperatives typically targeted small deteriorating rental buildings, which were also much smaller on average, whereas Article II, Mitchell-Lama developments were generally larger affordable housing complexes; and
Whereas, HPD, in conjunction with the NYC Housing Development Corporation (“HDC”), developed the Article II to Article XI conversion program to encourage the conversion of Mitchell-Lama cooperatives to HDFCs, which according to CU4ML results in large increases in cooperative share prices, making units less affordable, and reducing the State’s affordable housing stock; and
Whereas, According to the PHFL, as amended by Chapter 749 of the Laws of 2021, Mitchell-Lama cooperatives seeking dissolution or reconstitution as a market rate cooperative must meet an 80 percent voting threshold of all dwelling units, and developments are prohibited from holding back-to-back dissolution votes within 5 years of a failed attempt; and
Whereas, Despite these requirements for Mitchell-Lama exits, the Article II to Article XI conversion program allows Mitchell-Lama cooperatives to reconstitute as HDFCs through a different process that requires only a 66 and two thirds percent voting threshold, compared to the 80 percent required for traditional dissolution or reconstitution as a market rate cooperative; and
Whereas, HPD’s and HDC’s Article II to Article XI conversion plan allows outgoing Mitchell-Lama shareholders to receive windfall profits from the sale of their apartments, profits that come from decades of public funding including tax exemptions and low-cost financing, creating a financial incentive to vote for conversion that undermines the public purpose of the Mitchell-Lama Program; and
Whereas, Continuing to provide tax exemptions to developments that convert from Mitchell-Lama to Article XI inappropriately uses public subsidies to support units with significantly higher prices instead of maintaining deeply affordable housing; and
Whereas, The Martin Act (New York General Business Law Article 23-A) is the State’s securities law that requires full disclosure and transparency in real estate offerings, including cooperative conversions, and provides important protections for shareholders during the conversion process; and
Whereas, CU4ML has raised concerns that Article II to XI conversions are subject to unusual exceptions under the Martin Act, including an accelerated process that reduces opportunities for shareholder participation and feedback; and
Whereas, Eliminating tax exemptions alone would be insufficient to preserve the Mitchell-Lama program without also addressing the 66 and two thirds percent voting threshold that makes conversions too easy to achieve and the expedited Martin Act procedures that deny shareholders adequate review time; and
Whereas, These 3 measures work together to preserve Mitchell-Lama: eliminating tax exemptions for Article II to XI conversions removes incentives to convert, raising the voting threshold to 80 percent ensures broad resident support for any type of exit, and full compliance with Martin Act guarantees residents have adequate information and time to make an informed decision; and
Whereas, Preserving Mitchell-Lama housing in its current form is critical due to the City’s affordable housing crisis, since these developments provide affordable homes for working class families, essential workers, and fixed income seniors who would otherwise be priced out of the City; now, therefore, be it
Resolved, That the New York City Council calls on the New York State legislature to pass, and the Governor to sign, legislation disallowing tax exemptions for Article II to XI conversions and establishing related protections to preserve the Mitchell-Lama program.
JLC
LS #17494
8/22/2025