By Brian J. Pape, AIA
In the April 2017 issue of WestView News, I introduced West Village Houses (WVH) as a local example of affordable housing under the Mitchell-Lama Housing Program. This month, I explore the plans and policies, which impacted WVH under the Bloomberg administration as well as the future of this housing development.
Mitchell-Lama developments are City-sponsored housing for moderate- and middle-income households—a program signed into law in 1955. When the landlord of the West Village Houses (WVH), the Island Capital Group, signaled in 2002 that it might choose to opt out of the Mitchell-Lama Housing Program (per the state statute, owners may buy out of Mitchell-Lama after 20 years by paying off any government mortgages), a delegation of tenants headed to the City’s Housing Preservation & Development Department (HPD).
Working with both landlords and tenants, the Bloomberg administration devised a tenant-sponsored, non-eviction co-op conversion plan that allowed tenants who didn’t wish to buy to remain in their apartments as protected rents. While original non-purchasing tenants may have been allowed to stay on as renters when the cooperative was first created, all apartments which become vacant must be sold to income-eligible purchasers. Additionally, all new individual co-op owners are subject to ongoing income certifications, which apply to persons and families whose household incomes do not exceed 165% of the area median income (AMI).
Under the agreement, the landlord sells the 420-unit complex to the Housing Development Fund Corporation (HDFC) cooperative at a discount from market value and makes other concessions. An internal subsidy plan was also established, funded in part by a 25% “flip tax” which is a fee (a percentage of profit) paid to the co-op by someone selling his/her unit.
The Bloomberg administration’s contribution to the agreement was crucial and Shaun Donovan, who was appointed HPD Commissioner in April 2004, played a key role. The City forgave a portion of the debt it held—about $19 million in accrued interest—and deferred a principal mortgage of $12 million, interest-free for 30 years. Property taxes were frozen for 12 years.
The plan went into effect on March 9, 2006, and residents had 90 days to buy at the insider prices. A one-bedroom apartment on West Street, for example, was allocated an initial sales price of $152,810, and a three-bedroom on a higher floor was offered for $267,614. An indication of the original investors’ apartment market value can be found in the units recently listed—a one-bedroom for $695,000 and a three-bedroom duplex for $1.75 million.
Next March, the property taxes will “unfreeze” thereby adding quite a major expense for unit owners! According to one owner, the new tax added onto the maintenance fees could double expenses, making it too costly for many who bought their apartments in 2006, including older people on fixed incomes. Now what?
Several options are being explored. The notion of selling this complex to a developer is not a new one, but it is not plausible without significant zoning changes, major support of cooperative shareholders, and city, state, and federal governments. To avoid losing the “affordability edge” at WVH, residents are conferring with HPD officials. An HPD representative made a preliminary presentation about WVH on April 20, 2017 at St. Veronica’s Church. Next, we will explore those options and recent developments in more depth.