“For example, if there’s a construction project going on, then the government agencies get involved and oversee the bidding process with the goal of ensuring that it’s fair and that the board selects a qualified bidder,” Robinson says. And while some Mitchell-Lama boards complain about the constraints of regulatory oversight, that oversight can be a blessing. Mitchell-Lamas don’t pay real property taxes, and they have access to loans and grants that are unavailable to market-rate co-ops, notes Karol Robinson, a lawyer with Norris McLaughlin & Marcus. On the other hand, there are advantages to staying in the program. “During my time at the AG’s office, when I was involved with several Mitchell-Lamas that privatized, we would get numerous letters from shareholders demanding the ability to tap into their equity, that this was something they were entitled to,” Buckley says. Buckley, an attorney at Stroock & Stroock & Lavan, and a former chief of the state Attorney General’s bureau that oversees the privatization process. Once out of Mitchell-Lama, they may institute a flip tax on sales and use the funds to boost their reserves.Ĭurrently, 20 city-sponsored Mitchell-Lama co-ops are eligible to privatize into a market-rate cooperative or condominium, according to Erica F. Co-ops facing major repair or improvement costs may also favor privatization as a way of raising the necessary funds. Today’s soaring real estate values have made the prospect of privatizing particularly tempting, since under Mitchell-Lama, shareholders don’t gain any appreciation on their equity when they sell. In a city with a shrinking supply of affordable housing, the trend is troubling. But in recent years, according to a report from the Community Service Society of New York, about half of the Mitchell-Lama rentals have converted to market rate, along with 7 percent of the co-ops. Since 1955, the state’s Mitchell-Lama housing program has subsidized the development of some 135,000 affordable housing units in the city, including about 69,000 co-ops.
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