Testimony: Ensuring the Future of Mitchell-Lama

Thank you for the opportunity to offer comments at today’s New York State Assembly hearing on the physical and financial challenges facing Mitchell-Lama developments in New York State. Our names are Oksana Mironova, Iziah Thompson, and Samuel Stein and we are senior policy analysts at the Community Service Society (CSS), a leading nonprofit organization that promotes economic opportunity. We use research, advocacy, and direct services to champion a more equitable New York and to address the effects of the state’s housing affordability crisis.

We have been strong proponents of the Michell-Lama program for decades, tracking the loss of Mitchell-Lama rentals throughout the 1990s and 2000s, and outlining a path for the program’s stabilization and expansion. In 2020, we worked with housing advocates in New York State and beyond to formulate a social housing vision, rooted in programs like Mitchell-Lama, which today makes up a substantial portion of the city’s legacy social housing.

With a rapidly aging building stock, Mitchell-Lama rental and coops face a myriad of financial challenges. To ensure the developments’ safety and stability—and to protect the model’s status as one of the most innovative U.S. housing initiatives—we outline a series of recommendations below.

How was Mitchell-Lama financed?

Passed into law in 1955, the Mitchell-Lama program (officially, The Limited-profit Housing Companies Law) created about 67,000 rentals and 69,000 coops in New York City from 1955 to 1981, plus many more around New York State. Rooted in 1920s local, labor-led housing experiments, the program served as a model for Great Society-era federal housing initiatives.

The program provided three types of development subsidies:

• Below-market mortgages, with rates as low as 1 percent.
• Deep tax abatements, which set real estate taxes at 10% of the operating expenses, reducing tax burdens by up to 90 percent.
• Discounted public land, often acquired through federal “slum” clearance and urban renewal.

The original Limited-profit Housing Companies law mandated permanent affordability and was primarily used by unions to develop cooperatives. However, in 1959, the newly elected Governor Rockefeller wanted to use the law to incentivize private investment in rental buildings. His administration added a 20-year buyout provision to the law, lowered the owner equity requirement by half (to 5 percent), and created the New York State Housing Finance Agency, which funneled public investment into private rental housing. With these changes, the pace of new Mitchell-Lama rental development overtook the coops.

In the newly built rentals, rents were supposed to be based on operations costs, with a 6 percent profit cap. However, despite all the subsidies, the cost of running Mitchell-Lama buildings ended up being higher than expected (because of rising inflation and other global factors).

Mitchell-Lama rents grew beyond the thresholds outlined in the law. But because the height of Mitchell-Lama development corresponded with unprecedented housing investment by the federal government, the state and city were able to layer additional federal subsidies into these projects. Most Mitchell-Lama rentals today are funded in part by federal subsidies like Section 221d3 and Section 236 mortgage and rental assistance, as well as project-based Section 8 and Section 8 vouchers.

The addition of federal subsidies made Mitchell-Lama rental accessible to low-income tenants. Mitchell-Lama cooperatives remained targeted to moderate- and middle- income people, particularly union workers.

Like many other midcentury socially oriented efforts, Mitchell-Lama was killed by Reagan’s radical defunding of federal housing programs. New York City’s last Mitchell-Lama development, Winthrop Gardens, was completed in 1981.

Where do things stand now?

Governor Rockefeller’s buy-out provision proved to be a poison pill for Mitchell-Lama longevity. New York City’s multifamily buildings became a highly desirable asset class for real estate investors, who targeted buildings with expiring subsidies for privatization. Throughout the 2000s and 2010s, CSS tracked the loss of Mitchell-Lama rentals. A third of the nearly 67,000 units opted out of the program by 2005. In the post-foreclosure crisis market, half of the program’s rental stock was lost, bringing the Mitchell-Lama rental unit count to 31,000 by 2018.

The losses were not as stark among Mitchell-Lama cooperatives. Among the nearly 69,000 cooperative apartments, about 5,000 were lost by 2018. Even though privatization has the potential to generate substantial windfalls for Mitchell-Lama cooperators, the limited-equity cooperative structure served as a more effective form of protection from an aggressive speculative market than the private developer subsidy model.

Even though developments have continued to privatize, with rentals outpacing cooperatives, the loss of Mitchell-Lama units has slowed down, for two primary reasons:

Mitchell-Lama rentals: Subsidized tenants successfully organized against predatory equity tactics throughout the 2000s, centering the local government’s role in the preservation of subsidized rental developments, including Mitchell Lamas. Mayor de Blasio’s affordable housing preservation strategy centered on ensuring that large mid-century complexes (including Mitchell-Lamas, project-based Section 8 developments, and even some rent stabilized complexes like Stuy-Town) stay affordable. While this approach depended on the transfer of billions of public dollars to the same predatory equity landlords that the tenants protested, it also preserved thousands of Mitchell-Lama rental units that would have otherwise been lost.

Mitchell-Lama coops: Assemblymember Rosenthal’s and State Senator Kavanagh’s Mitchell-Lama Reform Bill of 2021 (A.7272/S.6412) passed with support from Mitchell-Lama United, a cooperator/tenant advocacy group. The omnibus bill enacted a range of good governance and privatization protection measures, including the elimination of proxy voting, an increased threshold for privatization to a vote in support by 80 percent of shareholders, and a five-year moratorium on privatization efforts after a failed effort.

Current need: Funding for preservation & capital repairs

Mitchell-Lama buildings range from 43 to 69 years in age. The larger ones, including many of the coops built by the labor-affiliated United Housing Federation, are campus-style, tower-in-the-park developments with extensive grounds, dozens of elevators, and even their own electricity generating plants. The smaller Mitchell-Lamas, including the one in which I live, still have hundreds of apartments.

Even the most well-maintained buildings require periodic capital investments, and we know that maintenance and management vary wildly across Mitchell-Lamas. A 2024 New York State Comptroller audit of three city-supervised Mitchell-Lamas—including a Queens and a Brooklyn Mitchell-Lama cooperative, as well as a Staten Island rental—found extensive hazardous violations across the three developments. The unsafe conditions were a result of years of deferred maintenance: the Staten Island rental, for example, has not had an on-site property manager for years.

While the audit did not differentiate between coop and rental Mitchell Lamas, the root causes for deferred maintenance varies between the two categories. Many Mitchell-Lama rentals have had multiple unscrupulous landlords—especially in the lead up and aftermath of the foreclosure crisis—who have cut operating costs and piled on unsustainable debt, all with the goal of fully privatizing the property, hiking up rents, and displacing long-term residents. Some Mitchell-Lama rentals, like Spring Greek Towers (formerly Starrett City), were stabilized by massive public investment, while others, like Tracey Towers, continue to buckle under an extractive private owner. However, even buildings that have been stabilized under responsible ownership may continue to face physical issues, a repercussion of long-term disinvestment.

In some Mitchell-Lama cooperatives, Boards of Directors have deferred maintenance and big capital projects to accelerate the drive toward privatization. In others, Boards that have mismanaged or even embezzled the coop’s funds. By making privatization more difficult to achieve, the 2021 Mitchell-Lama Reform bill has helped to partially address the first issue; tighter agency oversight (see next subsection) can help with the latter. The broader issue in Mitchell-Lama cooperatives is that running an aging development is simply expensive. My well-maintained building with a reasonable debt load, for example, just had a nearly 20 percent carrying charge increase to pay for needed building system upgrades.

Both the city and the state have, in recent years, recognized the value of Mitchell-Lama developments and have provided preservation funding. New York State’s FY23-27 budget includes $120 million to preserve and improve Mitchell-Lama properties throughout the State. New York City Housing Development Corporation (HDC) provides capital repair loans to Mitchell-Lamas in exchange for longer periods of affordability.

Unfortunately, it often takes too long for Mitchell-Lamas to access set-aside funding. For example, after years of dangerous conditions, tenant organizing, and local electeds involvement, Tracey Towers finally received $10M for elevator replacement just a couple of days ago. In my cooperative, the Board of Directors has spent the past year approaching multiple HCR-mandated private consultants for help with an HCR capital loan application, without success. In both cases, agency understaffing creates a major obstacle to getting money out the door.

Further, the scale of deferred maintenance across all Mitchell-Lama developments surpasses the $120M committed by the State. The New York City Council’s City for All housing plan (a part of its agreement on the Zoning for Housing Opportunity citywide zoning text amendment), includes new investment in Mitchell-Lama. If the plan is approved by the City Council on December 5th, it will include funding for Mitchell-Lama preservation and a new City-State Mitchell-Lama Action Group, which will work to stabilize Mitchell-Lama developments. Since $1B of $5B in City for All commitments is coming from the state, it will be important for the NYS Assembly to ensure that the “new” Mitchell-Lama investments are not simply a reshuffling of the existing $120M already set aside for Mitchel-Lama preservation.

The new version of the J-51 tax abatement, also currently under the City Council’s consideration, has the potential to help stabilized Mitchell-Lamas.^[1]  The bill would provide funding for general capital improvements and help developments comply with LL97, a new city law that caps building emissions. The city’s J-51 bill adheres to a state-imposed June 2026 deadline for construction. Since the abatement has not yet been approved and construction timelines are measured in years, 2026 is not a realistic deadline.

Current need: Agency oversight

The NYS Comptroller’s 2024 audit sited the lack of agency oversight as one of the reasons for financial mismanagement in city-sponsored Mitchell-Lamas. In 2019, the city promised to provide additional Mitchell-Lama oversight, following a Department of Investigation (DOI) inquiry into corruption and bribery at three city-sponsored cooperatives. At the time, the HPD spokesperson promised that “…HPD has revamped the organizational structure of the team that oversees these developments and made comprehensive updates to our policies and procedures in accordance with the Department of Investigation recommendations.”

Since 2019, the city’s housing agencies have experienced hiring freezes, cutbacks, and other measures that curtail their ability to function, all under Mayor Adams’ austerity regime. The city’s agencies cannot oversee Mitchell-Lama developments without proper staffing.

Anecdotally, state-sponsored Mitchell-Lama cooperatives and rentals seem to be better managed and have better oversight under their supervisory agency, HCR. However, they have also come under less scrutiny than their city-sponsored counterparts.

Current need: Direct resident assistance

The 2024 NYS Comptroller audit found $3.7 million in rent/carrying charge arrears across the three developments it surveyed. In Mitchell-Lama rentals, unscrupulous landlords have been able to leverage high operating costs—a result of deferred maintenance and unsustainable debt loads—to hike up rents. For example, in 2023, the landlord for Bedford Gardens, a Mitchell-Lama rental in Brooklyn, attempted to hike up rents in the development by 80% over three years. Testimony by NYC Comptroller Brad Lander, noted that “the Kraus Organization has a decades-long history of proposing egregious rent increases, self-dealing, and property tax delinquency.”

Unlike in unsubsidized rentals, rent increases in Mitchell-Lamas have to be approved by its city- or state-supervising agency. It is important for both HPD and HCR to continue to push back on unrealistic rent hikes like the one proposed for Bedford Gardens, especially those that are rooted in bad landlord behavior. Ideally, both agencies should also develop pathways for the transfer of mismanaged Mitchell-Lama rentals to responsible owners (see last section of this testimony).

Even responsibly managed Mitchell-Lama rentals and cooperatives face unsustainable rent and carrying charge increases because of high operating costs. Many low- and fixed-income Mitchell-Lama tenants are eligible for city, state, and federal benefits like SCRIE/DRIE and various forms of rental assistance. Unfortunately, we do not have data on relative benefit coverage across Mitchell-Lama developments. A range of social-service nonprofits, including settlement houses and senior-oriented organizations, provide ad hoc assistance to Mitchell-Lama residents.

In the coming years, the city and the state should work on formalizing benefits assistance in Mitchell-Lamas, including a pathway for addressing accumulating rent/carrying charge arrears for low-income Mitchell-Lama tenants that does not end in eviction and homelessness.

Current Need: Transparency & Data

Because of non-concentric agency oversight and layers of city, state, and federal funding, it is difficult to enumerate issues facing Mitchell-Lama residents and developments, especially those outside of New York City. We don’t have a clear accounting of total deferred maintenance across all properties, the amount of rent/carrying charge arrears owed, and even a clear count of rentals and coops that have exited the program.

There is a finite number of coops and rentals that were built under the Mitchell-Lama program. The city and state should work together (perhaps under the soon to be formed City-State Mitchell-Lama Action Group), to assess the full Mitchell-Lama portfolio, its needs, and potential threats.

Current need: Technical Assistance

Governance issues in Mitchell-Lama cooperatives have come under scrutiny, including brazen corruption at Brooklyn’s Luna Park and intra-development strife at Bronx’s Amalgamated. Some of these issues are undoubtedly linked to poor agency oversight, while others have to with a lack of governance training and education. Direct democracy is a heavy burden and there is limited support for Mitchell-Lama cooperator leadership development. Organizations like UHAB and Cooperators United for Mitchell Lama provide ad hoc support to Mitchell-Lama Boards, but they are under-resourced.

Mitchell-Lama renters have strong tenure protections and unique rights, including the right to access a development’s financials and the ability to formally challenge rent increases. However, many tenants do not have the capacity to exercise those rights. The ability to preserve Mitchell-Lama rentals often rests on the tenants’ organizing strength: well-organized Mitchell-Lama tenants associations win repairs and push back unscrupulous landlords.

There is a dire need for additional technical assistance for both Mitchell-Lama rentals and cooperatives.

Future opportunity: Social housing investment

Mitchell Lama is a model social housing program, and a legacy social housing stock that provides housing for hundreds of thousands of New Yorkers. Since the last Mitchell-Lama development was built in 1981, there have been many visions for a Mitchell-Lama 2.0. The most promising is the Social Housing Development Authority (Cleare/Gallagher; S8494/A9088), a broader program that would extend the state’s capacity to directly build and to facilitate development of permanently affordable housing.

In addition to expanding state capacity for new development, SHDA would be able to support the renovation of existing legacy social housing, including Mitchell-Lamas. It would also create a pathway for the transfer of poorly managed Mitchell-Lama rentals to responsible owners, including nonprofits, community land trusts, or the tenants themselves.

Thank you again for the opportunity to offer our comments. For more information or if you have any questions, please contact Oksana Mironova at omironova@cssny.org.

Notes

1. This new version of J51 has significant guardrails in place to protect rent stabilized tenants from pass through rent increases, a major issue with previous versions of the abatement.

Issues Covered

Affordable Housing