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A06971 Summary:

BILL NOA06971
 
SAME ASNo Same As
 
SPONSORO'Donnell
 
COSPNSR
 
MLTSPNSR
 
Amd 26-405 & 26-511, NYC Ad Cd; amd 6, Emerg Ten Prot Act of 1974; amd 4, Emerg Hous Rent Cont L
 
Provides that buildings in which more than 50% of the habitable units are not subject to rent control are ineligible to apply for major capital investment rent surcharges.
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A06971 Actions:

BILL NOA06971
 
03/28/2017referred to housing
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A06971 Memo:

NEW YORK STATE ASSEMBLY
MEMORANDUM IN SUPPORT OF LEGISLATION
submitted in accordance with Assembly Rule III, Sec 1(f)
 
BILL NUMBER: A6971
 
SPONSOR: O'Donnell
  TITLE OF BILL: An act to amend the administrative code of the city of New York, the emergency tenant protection act of 1974 and the emergency housing rent control law, in relation to building eligibility for major capital improvement rent surcharges   PURPOSE OR GENERAL IDEA OF BILL: This bill would protect affordable housing by prohibiting major capital improvement (MCI) rent adjustments for any building in which more than fifty percent of the habitable units are not subject to rent stabiliza- tion or rent control.   SUMMARY OF SPECIFIC PROVISIONS: Section 1 amends subparagraph (g) of paragraph 1 of subdivision g of section 26-405 of the administrative code of the city of New York to prohibit MCI rent adjustments for any building in which more than fifty percent of the habitable units are not subject to rent stabilization or rent control. Section 2 amends paragraph 6-a of subdivision c of section 26-511 of the administrative code of the city of New York to exclude the owner of any building in which more than fifty percent of the habitable units are not subject to rent stabilization or rent control from being granted a hard- ship application. Section 3 amends paragraph 3 of subdivision d of section 6 of section 4 of chapter 576 of the laws of 1974, constituting the emergency tenant protection act of nineteen seventy-four to state that permissible build- ings for MCIs are only those in which more than half of the habitable units are subject to rent stabilization or rent control. Section 4 amends subparagraph 7 of the second undesignated subparagraph of paragraph (a) of subdivision 4 of section 4 of chapter 274 of the laws of 1946, constituting the emergency housing rent control law to prohibit MCI rent adjustments for any building in which more than fifty percent of the habitable units are not subject to rent stabilization or rent control. Section 5 amends paragraph 5 of subdivision d of section 6 of section 4 of chapter 576 of the laws of 1974, constituting the emergency tenant protection act of nineteen seventy-four to stipulate that eligibility for alternatives to the hardship application are to extend only to buildings in which more than half of the habitable units are subject to rent stabilization or rent control. Section 6 is the effective date.   DIFFERENCE BETWEEN ORIGINAL AND AMENDED VERSION (IF APPLICABLE): N/A   JUSTIFICATION: In New York City, protecting affordable housing has grown increasingly difficult as vacant, formerly rent regulated units are rapidly being deregulated. In an effort to protect rent regulated tenants from rent increases this bill would put restrictions on a building's eligibility to apply for major capital improvements (MCIs). Currently, if a build- ing is approved for an MCI, the only people legally subject to rent increases from MCIs are rent stabilized and rent controlled tenants. The rent increases that result from MCIs are permanent even after the cost of the improvement is met, and often place a high burden on tenants living in rent regulated units. What can often occur is a situation in which the rent becomes too high for rent regulated tenants to afford, which can force them to seek more affordable housing elsewhere. Once the tenants have vacated the rent regulated unit, landlords can deregulate the unit and list it at market rate. This bill would tighten the parame- ters for buildings to apply for MCIs to protect rent stabilized and rent controlled tenants from these permanent rent increases. To provide this protection, this bill would prohibit any building which has less than fifty percent of habitable units subject to rent stabilization or rent control from receiving MCIs.   PRIOR LEGISLATIVE HISTORY: New bill.   FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS: To be determined.   EFFECTIVE DATE: This act shall take effect immediately.
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A06971 Text:



 
                STATE OF NEW YORK
        ________________________________________________________________________
 
                                          6971
 
                               2017-2018 Regular Sessions
 
                   IN ASSEMBLY
 
                                     March 28, 2017
                                       ___________
 
        Introduced  by  M.  of  A.  O'DONNELL  --  read once and referred to the
          Committee on Housing
 
        AN ACT to amend the administrative code of the city  of  New  York,  the
          emergency tenant protection act of 1974 and the emergency housing rent
          control  law,  in  relation  to building eligibility for major capital
          improvement rent surcharges

          The People of the State of New York, represented in Senate and  Assem-
        bly, do enact as follows:
 
     1    Section 1. Subparagraph (g) of paragraph 1 of subdivision g of section
     2  26-405 of the administrative code of the city of New York, as amended by
     3  section  31  of  part A of chapter 20 of the laws of 2015, is amended to
     4  read as follows:
     5    (g) There has been since July first, nineteen hundred seventy, a major
     6  capital improvement required for the operation, preservation or  mainte-
     7  nance  of  the  structure. An adjustment under this subparagraph (g) for
     8  any order of the commissioner issued after the  effective  date  of  the
     9  rent  act  of 2015 shall be in an amount sufficient to amortize the cost
    10  of the improvements pursuant to this subparagraph (g) over an eight-year
    11  period for buildings with thirty-five or fewer  units  or  a  nine  year
    12  period  for  buildings with more than [thiry-five] thirty-five units[,];
    13  provided, however, that no adjustment shall be allowed for any  building
    14  in  which more than fifty percent of the habitable units are not subject
    15  to rent stabilization or rent control, or
    16    § 2. Paragraph 6-a of subdivision c of section 26-511 of the  adminis-
    17  trative code of the city of New York, is amended to read as follows:
    18    (6-a)  provides  criteria  whereby  as  an alternative to the hardship
    19  application provided under paragraph six of this subdivision  owners  of
    20  buildings  acquired  by  the same owner or a related entity owned by the
    21  same principals three years prior to the date of application  may  apply
    22  to  the  division  for  increases  in  excess of the level of applicable
    23  guideline increases established under this law based on a finding by the
    24  commissioner that such guideline increases are not sufficient to  enable
    25  the  owner  to  maintain  an  annual gross rent income for such building
    26  which exceeds the annual operating expenses of such building  by  a  sum
 
         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.
                                                                   LBD10653-02-7

        A. 6971                             2
 
     1  equal  to  at least five percent of such gross rent. For the purposes of
     2  this paragraph, operating expenses shall consist of the actual,  reason-
     3  able,  costs  of  fuel,  labor,  utilities,  taxes, other than income or
     4  corporate  franchise taxes, fees, permits, necessary contracted services
     5  and non-capital repairs, insurance, parts and supplies, management  fees
     6  and  other  administrative costs and mortgage interest. For the purposes
     7  of this paragraph, mortgage interest shall be deemed to mean interest on
     8  a bona fide mortgage including an allocable portion of  charges  related
     9  thereto.  Criteria  to be considered in determining a bona fide mortgage
    10  other than an institutional mortgage shall  include;  condition  of  the
    11  property,  location of the property, the existing mortgage market at the
    12  time the mortgage is placed, the term of the mortgage, the  amortization
    13  rate, the principal amount of the mortgage, security and other terms and
    14  conditions  of  the  mortgage. The commissioner shall set a rental value
    15  for any unit occupied by the owner or a person related to the  owner  or
    16  unoccupied  at  the  owner's  choice for more than one month at the last
    17  regulated rent plus the minimum number of guidelines increases or, if no
    18  such regulated rent existed or is known, the commissioner shall impute a
    19  rent consistent with other rents in the building. The amount of hardship
    20  increase shall be such as may be required to maintain the  annual  gross
    21  rent  income as provided by this paragraph. The division shall not grant
    22  a hardship application under this paragraph or  paragraph  six  of  this
    23  subdivision  for  (i)  a  period of three years subsequent to granting a
    24  hardship application under the provisions of this paragraph or  (ii)  to
    25  the  owner of any building in which more than fifty percent of the habi-
    26  table units are not subject to rent stabilization or rent control.   The
    27  collection  of  any  increase  in the rent for any housing accommodation
    28  pursuant to this paragraph shall not exceed six percent in any year from
    29  the effective date of the order granting the increase over the rent  set
    30  forth  in the schedule of gross rents, with collectability of any dollar
    31  excess above said sum to be spread forward  in  similar  increments  and
    32  added  to the rent as established or set in future years. No application
    33  shall be approved unless the owner's equity  in  such  building  exceeds
    34  five  percent  of:  (i)  the arms length purchase price of the property;
    35  (ii) the cost of any capital improvements for which the  owner  has  not
    36  collected  a surcharge; (iii) any repayment of principal of any mortgage
    37  or loan used to finance the purchase of  the  property  or  any  capital
    38  improvements  for which the owner has not collected a surcharge and (iv)
    39  any increase in the equalized  assessed  value  of  the  property  which
    40  occurred  subsequent  to  the  first  valuation  of  the  property after
    41  purchase by the owner. For the purposes of this paragraph, owner's equi-
    42  ty shall mean the sum of (i) the purchase price of the property less the
    43  principal of any mortgage or loan used to finance the  purchase  of  the
    44  property,  (ii)  the cost of any capital improvement for which the owner
    45  has not collected a surcharge less the principal of any mortgage or loan
    46  used to finance said improvement, (iii) any repayment of  the  principal
    47  of  any mortgage or loan used to finance the purchase of the property or
    48  any capital  improvement  for  which  the  owner  has  not  collected  a
    49  surcharge,  and (iv) any increase in the equalized assessed value of the
    50  property which occurred subsequent to the first valuation of the proper-
    51  ty after purchase by the owner.
    52    § 3. Paragraph 3 of subdivision d of section 6 of section 4 of chapter
    53  576 of the laws of 1974, constituting the  emergency  tenant  protection
    54  act  of  nineteen  seventy-four,  as  amended by section 30 of part A of
    55  chapter 20 of the laws of 2015, is amended to read as follows:

        A. 6971                             3
 
     1    (3) there has been since January first, nineteen hundred  seventy-four
     2  a  major capital improvement required for the operation, preservation or
     3  maintenance of the structure and more than half of the  habitable  units
     4  in  the  building are subject to rent stabilization or rent control.  An
     5  adjustment  under  this  paragraph  shall  be in an amount sufficient to
     6  amortize the cost of the improvements pursuant to this paragraph over an
     7  eight-year period for a  building  with  thirty-five  or  fewer  housing
     8  accommodations,  or  a  nine-year  period  for a building with more than
     9  thirty-five housing accommodations, for any determination issued by  the
    10  division  of  housing  and community renewal after the effective date of
    11  the rent act of 2015, or
    12    § 4. Subparagraph 7 of the second undesignated subparagraph  of  para-
    13  graph  (a)  of  subdivision 4 of section 4 of chapter 274 of the laws of
    14  1946, constituting the emergency housing rent control law, as amended by
    15  section 32 of part A of chapter 20 of the laws of 2015,  is  amended  to
    16  read as follows:
    17    (7)  there has been since March first, nineteen hundred fifty, a major
    18  capital improvement required for the operation, preservation or  mainte-
    19  nance  of  the structure; which for any order of the commissioner issued
    20  after the effective date of the rent  act  of  2015  the  cost  of  such
    21  improvement  shall  be amortized over an eight-year period for buildings
    22  with thirty-five or fewer units or a nine year period for buildings with
    23  more than [thiry-five] thirty-five units[,]; provided, however, that  no
    24  adjustment  shall  be  allowed for any building in which more than fifty
    25  percent of the habitable units are not subject to rent stabilization  or
    26  rent control, or
    27    § 5. Paragraph 5 of subdivision d of section 6 of section 4 of chapter
    28  576  of  the  laws of 1974, constituting the emergency tenant protection
    29  act of nineteen seventy-four, as amended by chapter 102 of the  laws  of
    30  1984, is amended to read as follows:
    31    (5) as an alternative to the hardship application provided under para-
    32  graph four of this subdivision, owners of buildings acquired by the same
    33  owner or a related entity owned by the same principals three years prior
    34  to  the  date  of application may apply to the division for increases in
    35  excess of the level of applicable guideline increases established  under
    36  this  law  based  on  a  finding by the commissioner that such guideline
    37  increases are not sufficient to enable the owner to maintain  an  annual
    38  gross  rent  income for such building which exceeds the annual operating
    39  expenses of such building by a sum equal to at  least  five  percent  of
    40  such  gross rent provided, that more than half of the habitable units in
    41  the building are subject to rent stabilization or rent control. For  the
    42  purposes  of  this  paragraph,  operating  expenses shall consist of the
    43  actual, reasonable, costs of fuel, labor, utilities, taxes,  other  than
    44  income or corporate franchise taxes, fees, permits, necessary contracted
    45  services and non-capital repairs, insurance, parts and supplies, manage-
    46  ment  fees and other administrative costs and mortgage interest. For the
    47  purposes of this paragraph, mortgage interest shall be  deemed  to  mean
    48  interest  on  a  bona  fide  mortgage  including an allocable portion of
    49  charges related thereto.   Criteria to be considered  in  determining  a
    50  bona  fide  mortgage other than an institutional mortgage shall include;
    51  condition of the property, location of the property, the existing  mort-
    52  gage  market  at  the time the mortgage is placed, the term of the mort-
    53  gage, the amortization rate, the principal amount of the mortgage, secu-
    54  rity and other terms and conditions of the  mortgage.  The  commissioner
    55  shall  set a rental value for any unit occupied by the owner or a person
    56  related to the owner or unoccupied at the owner's choice for  more  than

        A. 6971                             4
 
     1  one  month  at the last regulated rent plus the minimum number of guide-
     2  lines increases or, if no such regulated rent existed or is  known,  the
     3  commissioner  shall  impute  a  rent  consistent with other rents in the
     4  building.  The  amount  of  hardship  increase  shall  be such as may be
     5  required to maintain the annual gross rent income as  provided  by  this
     6  paragraph.  The  division  shall  not grant a hardship application under
     7  this paragraph or paragraph four of this subdivision  for  a  period  of
     8  three  years  subsequent  to  granting  a hardship application under the
     9  provisions of this paragraph. The collection of any increase in the rent
    10  for any housing accommodation  pursuant  to  this  paragraph  shall  not
    11  exceed  six  percent  in  any  year from the effective date of the order
    12  granting the increase over the rent set forth in the schedule  of  gross
    13  rents,  with  collectability  of  any dollar excess above said sum to be
    14  spread forward in similar increments and added to  the  rent  as  estab-
    15  lished  or  set in future years. No application shall be approved unless
    16  the owner's equity in such building exceeds five  percent  of:  (i)  the
    17  arms length purchase price of the property; (ii) the cost of any capital
    18  improvements  for  which  the owner has not collected a surcharge; (iii)
    19  any repayment of principal of any mortgage or loan used to  finance  the
    20  purchase of the property or any capital improvements for which the owner
    21  has  not  collected  a surcharge; and (iv) any increase in the equalized
    22  assessed value of the property which occurred subsequent  to  the  first
    23  valuation  of the property after purchase by the owner. For the purposes
    24  of this paragraph, owner's equity shall mean the sum of (i) the purchase
    25  price of the property less the principal of any mortgage or loan used to
    26  finance the purchase of the property,  (ii)  the  cost  of  any  capital
    27  improvement  for  which the owner has not collected a surcharge less the
    28  principal of any mortgage or loan  used  to  finance  said  improvement,
    29  (iii)  any  repayment  of  the principal of any mortgage or loan used to
    30  finance the purchase of the property  or  any  capital  improvement  for
    31  which  the owner has not collected a surcharge, and (iv) any increase in
    32  the equalized assessed value of the property which  occurred  subsequent
    33  to the first valuation of the property after purchase by the owner.
    34    §  6.  This act shall take effect immediately; provided, however, that
    35  the amendments to section 26-405 of the city rent and rehabilitation law
    36  made by section one of this act shall remain in full  force  and  effect
    37  only  as  long  as  the  public  emergency  requiring the regulation and
    38  control of residential rents and evictions  continues,  as  provided  in
    39  subdivision  3  of section 1 of the local emergency housing rent control
    40  act; and provided, further, that the amendments  to  section  26-511  of
    41  chapter 4 of title 26 of the administrative code of the city of New York
    42  made  by  section  two of this act shall expire on the same date as such
    43  law expires and shall not affect the expiration of such law as  provided
    44  under section 26-520 of such law; and provided, further, that the amend-
    45  ments  to  section  6 of the emergency tenant protection act of nineteen
    46  seventy-four made by sections three and five of this act shall expire on
    47  the same date as such act expires and shall not affect the expiration of
    48  such act as provided in section 17 of chapter 576 of the laws  of  1974;
    49  and provided, further, that the amendments to section 4 of the emergency
    50  housing  rent  control law made by section four of this act shall expire
    51  on the same date as such law expires and shall not affect the expiration
    52  of such law as provided in subdivision 2 of section 1 of chapter 274  of
    53  the laws of 1946.
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