Provides that upon sale or other conveyance of a limited-profit housing company project to an entity other than a new limited-profit housing company, reserve and surplus funds must be held in escrow by the new owner and dedicated solely to defraying the costs of major capital improvements; provides that no rental may be increased to cover the cost of a major capital improvement until such reserve and surplus funds have been exhausted.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A1787
SPONSOR: Rosenthal TITLE OF BILL:
An act to amend the private housing finance law, in relation to the sale
of limited-profit housing projects
PURPOSE OR GENERAL IDEA OF BILL:
The purpose of this bill is to require any proceeds from the sale of a
Mitchell-Lama project to be used solely for major capital improvements
(MCIs).
SUMMARY OF PROVISIONS:
Section one of this bill adds a new section 36-b to the Private Housing
Finance Law, which would provide that, upon the sale or other conveyance
of a Mitchell-Lama project by an owner, all reserve and surplus funds be
transferred and held in an escrow account. Such funds shall be solely
for MCIs to the project. This bill would also prohibit the new owner
from charging a rent increase unless and until all funds have been
expended.
JUSTIFICATION:
The Mitchell-Lama program was established to create affordable housing
and guarantee developer profits of 6% on their investment. The specter
of buyouts by owners of Mitchell-Lama developments has raised the possi-
bility that owners of limited profit housing companies might transfer
reserve or surplus monies to the private sector. This outcome would be
contrary to the spirit of the Mitchell-Lama law and would leave many of
these housing companies in dire financial straits. In order to ensure
that monies which rightfully belong to residents in limited profit hous-
ing companies are used to improve said buildings, this bill would
require that reserve or surplus funds be placed in an escrow account if
a housing company opts to buy out of the Mitchell Lama program.
To ensure that these funds are used to improve, renovate, and rehabili-
tate the housing from which monies were generated, this bill would
prohibit release of these funds for any purpose other than MCIs
(improvements that would not be the basis for rent increases). The
supervising agency may levy a charge of 2% of the fund, with a $10,000
cap, to cover administrative expenses.
PRIOR LEGISLATIVE HISTORY:
2023-24: A.4724 - Referred to Housing; S.1734 - Referred to Housing
2021-22: A.3675 - Referring to Housing; S.1337 - Referred to Housing
2019-20 A.4178 Referred to Housing
2017-18: A.5798 - Referred to Housing; S.3181 Referred to Housing
2016: A.1712 - Referred to Housing 2015: A.1712 - Referred to Housing
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:
None.
EFFECTIVE DATE:
This act shall take effect on the first of January next succeeding the
date on which it shall have become a law.
STATE OF NEW YORK
________________________________________________________________________
1787
2025-2026 Regular Sessions
IN ASSEMBLY
January 14, 2025
___________
Introduced by M. of A. ROSENTHAL -- read once and referred to the
Committee on Housing
AN ACT to amend the private housing finance law, in relation to the sale
of limited-profit housing projects
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. The private housing finance law is amended by adding a new
2 section 36-b to read as follows:
3 § 36-b. Sale or other conveyance of project. Notwithstanding any
4 inconsistent provision of law, upon the sale or other conveyance of a
5 project by a company to any entity other than a company, the following
6 requirements shall apply.
7 1. All reserve and surplus funds transferred by the company to the new
8 owner must be held by such new owner in escrow accounts and may be used
9 by such new owner solely for the purpose of making major capital
10 improvements to the project.
11 2. No rental or other charge may be increased by the new owner to
12 defray the cost of any major capital improvement unless and until all of
13 such reserve and surplus funds have been expended to defray the cost of
14 major capital improvements.
15 § 2. This act shall take effect on the first of January next succeed-
16 ing the date on which it shall have become a law.
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD04618-01-5
