Annual Report 2010Annual Report 2010

Preserving Mitchell-Lama Housing: Protecting City Investment Over the Long Term

By law, Mitchell-Lama developments are protected by regulatory agreements that lock in affordability for at least 20 years after initial occupancy. But that does not mean that they are immune from market or development pressures—owners can opt to pre-pay their mortgage and remove the development from the program. Between 1990 and 2008, nearly 16,200 of a total of 65,889 units of City-sponsored Mitchell-Lama housing were lost. In 2004 HDC and HPD, recognizing these pressures, created the Mitchell-Lama Restructuring Program and Mitchell-Lama Repair Loan Program to address both physical and financial stresses on these projects, while extending affordability. Since then HDC has refinanced 41 projects with 20,270 units.

Since the financial crash of the fall of 2008, HDC continues to offer such refinancing of financially vulnerable or distressed Mitchell-Lama developments. In the two cases that follow, HDC worked to lengthen the useful lives of these aging buildings, adding years of affordability, and returning these assets to the program and ensuring long-term regulatory compliance.

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The Mitchell-Lama program, named for its sponsors, NY State Senator MacNeil Mitchell and State Assembly Member Alfred Lama, came into being in 1955 as the need for affordable housing for the middle class reached booming proportions. Over the years, a total of 269 City or State sponsored Mitchell-Lama developments with more than 105,000 apartments were built in the five boroughs, creating communities with affordable housing for millions of New Yorkers. Mitchell-Lama developments remain a vital to long-term stability for neighborhoods and families. But in recent years, these diverse pools of middle-income housing have come under increasing pressure to privatize. By law, Mitchell-Lama units, whether co-op or rental, are protected by regulatory agreements that lock in affordability for at least 20 years after initial occupancy. But that does not mean that they are immune from market of development pressures—owners can opt to pre-pay their mortgage and remove the development from the program. Between 1990 and 2008, nearly 16,200 of a total of 65,889 units of City-sponsored Mitchell-Lama housing were lost. In 2005 alone, seven developments with 3,019 units left the City program; 2006 saw even more developments leaving the program—14, with 2,876 units. Unable to compete aggressively in the hot housing market,

HDC was often forced to watch with increasing alarm from the sidelines as these affordable units went market-rate.

Then the economics changed. The fall 2008 financial crash precipitated hard fiscal reality in some of developments that bought out at the peak of the over-heated market. Owners hoping to charge more for units, whether rental or co-op found that their imagined profit margins where whittled to nothing, and even falling into negative returns in some cases. Unable to pay their lenders, they were forced to retrench and take the loss. This was bad for them, but better news for the City’s affordable housing preservation efforts. HDC found that by offering to refinance financially vulnerable or distressed Mitchell-Lama developments, that it could not only lengthen the useful lives of these aging buildings but also buy back years of affordability, basically returning these assets to the program and ensuring long-term regulatory compliance.


Tivoli Towers

Tivoli Towers, a Mitchell-Lama building constructed in 1974, has functioned as a mini-village within Crown Heights. As happens in many Mitchell-Lamas, the population has remained constant and is aging in place. People know their neighbors and their families. “We all know each other, and we all look out

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for each other,” says Delphine Fawundu-Buford, a lifelong resident who has made a short documentary about life at the building. It is extraordinarily stable: a notable number of residents moved in right at the beginning, raised families and are now retired.

Preserving this building is important. Throughout the 1970s and early 1980s Crown Heights weathered crime, vacancy and then later the turbulence of an economic boom, the stable population of Tivoli was a bastion in a neighborhood. Built as a residence for working class New Yorkers, it allowed a working middle class to remain in Crown Heights, providing a critical toehold for recovery.

But eventually the building itself was poised in the middle of a major crisis: by 2008, after the original owners no longer oversaw operations and management of the building, none of the three elevators worked properly, sometimes not at all. The crumbling concrete and exposed iron rebar were signs of structural issues; the apartments themselves needed upgrades in appliances and bathroom fixtures. Along with the physical needs of the building was an even more pressing issue, which was the Mitchell-Lama status of the building itself. A new owner bought the building in 2005, and began to take steps to convert Tivoli to an open market building, much to the consternation of the existing tenants, many

of whom qualify as low-income and are on fixed incomes. The residents organized, public officials rallied and a protracted struggle ensued. When the dust settled, the owner agreed to keep the building in the Mitchell-Lama program until 2040 after HDC stepped in and provided approximately $40 million in financing that will pay for the upgrades the building. By early 2011, one of the three elevators has been restored to good working order, and Fawundu-Buford reports that repairs are under way. “It’s a good feeling,” she says.


Luna Park

You can see the ocean from Luna Park. And no wonder. It’s smack in the middle of Coney Island—one of New York City’s most famous addresses. Built in 1971, Luna Park consists of five towers that hold a total of 1,575 units. Luna Park is a Mitchell-Lama cooperative building, established to make home ownership a possibility for working class New Yorkers. In the relatively safe neighborhood, where the Atlantic Ocean is one block away, Luna Park has provided secure and long term housing.

It is said that Coney Island was originally called Narrioch, the land with no shadows, as it is in sunlight all day long. The sunbather’s paradise it has long been indispensible to New Yorkers as an inexpensive family recreation

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spot. Even in its infancy as a resort destination for wealthy New Yorkers in the 1840s, the resident farmers and even those churches on the road to Coney Island felt that the Sunday traffic and hot meals were a disgrace on the Sabbath. By 1900, travel to Coney Island had decreased from a day long journey via stagecoach and ferry to a mere 30 minutes by train, Coney Island boomed, the beaches filled to capacity with city dwellers looking for relief from heat. Over the years, Coney Island became known for its side-shows, serving as a venue for the display of the bizarre, the shocking and the just-plain-weird. It filled the role as a sort of Pleasure Island, a playground for hucksters and misadventure.

Coney Island’s long decline started after the Second World War, with the advent of air conditioning and the opening of even larger public beaches accessible by car in Long Island. In the 1970s, real estate conditions in the neighborhood were such that the Luna Park development—which shares its name with the famous amusement park—could be built in what was once upon a time pricey prime real estate. It is a pleasant place to live—though the buildings are far from fancy, there is ample land for many trees and landscaping, playgrounds and parking; and the New York Aquarium and the Coney Island boardwalk are only a block away. Though the city provides some subsidies

to Luna Park, it is run just like any other co-op, with a tenant run board of directors. Working with HPD and the Luna Park Co-op Board, HDC helped finance for $67 million in upgrades to Luna Park. The forty-year-old complex of buildings needs extensive refurbishment, including new facades, new roofs and windows to address damage done by salty air and wind.

After a few decades of stagnant-to-declining conditions, Coney Island is again headed for a rebirth. The intention this time is soundly on the side of family friendly. Just as Times Square transformed itself into a (mostly) “G” rated destination for tourists and residents, the new Coney Island will be filled with fun activities, restaurants and, for the first time, major retail. An even bigger transition is to build the new Coney Island so that it can be open year round. Some rides, shops and restaurants will be indoors, and sited so that blustery winds will not deter winter visitors.The Coney Island Development Corporation (CIDC) has begun a multi-phase plan that has already kicked off—this past spring, CIDC celebrated the opening of a new 3.1-acre amusement park featuring 19 traditional and cutting-edge state-of-the-art rides.

As the community’s fortunes rise again, Luna Park’s status as a Mitchell-Lama resident-owned coop assures that the residents will be a part of the community’s growth.

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