FOR IMMEDIATE RELEASE: April 13, 2007
Schumer, Speaker Silver, Assemblyman Lopez To Starrett Buyer: We Will Not Allow You To Slip Out Of Mitchell Lama
Starrett City Seller Could Drop Out of Mitchell Lama if He Doesn't get the Exorbitant Price He is Asking - New $1.4 Billion Price Would Require the Eviction of Tenants and the Change of Starrett City's Character
Schumer Demands that HUD Reject New Bistricer Proposal and Send Buyer and Seller Back to Drawing Board with New Lower Price
Silver, Lopez Unveil State Legislation
With the impending sale of Starrett City putting thousands of Mitchell-Lama tenants in jeopardy, today, Senator Charles E. Schumer, New York Assembly Speaker Sheldon Silver and Assembly Housing Committee Chairman Vito J. Lopez announced a new campaign to protect this vital affordable housing. Schumer called on the U.S. Department of Housing and Urban Development (HUD) to formally reject Clipper Equity's latest proposal to buy Starrett City, citing the undue financial burden it would place on the federal government and the lack of protections it would offer for tenants in the middle class development.
Schumer, Silver and Lopez also announced plans to push passage of Assembly bill A. 795, legislation that would place all units covered under Starrett City's Mitchell Lama agreement into rent stabilization. In addition, Lopez and Silver unveiled their plan to introduce a state bill specifically designed to protect Mitchell Lama tenants at Starrett City and similarly situated locations. "I have looked at the numbers every which way and there is no way that you can pay $1.4 billion for Starrett City and keep it affordable without asking for massive government subsidies," said Senator Schumer. "The market alone didn't create Starrett City and the owners should not reap the rewards that come with an infusion of government money, while jettisoning this critical stock of affordable housing. That's why I am asking HUD to reject this latest offer."
"Our City continues to struggle with a shortage of affordable housing that threatens hundreds, if not thousands, of tenants," said Assembly Speaker Sheldon Silver. "We must act now to protect our affordable housing stock, or this City will become too expensive for the firefighters, police officers, teachers, nurses and so many other valued members of our workforce upon whom we depend. While we all appreciate the 'tenets' of capitalism, it is the 'tenants' that must remain our number one priority. Now that we have a governor who is committed to preserving affordable housing, we will finally have the partnership we need to stem the tide of Mitchell-Lama buyouts."
"For years I've been committed to preserving Mitchell Lama housing across New York and today the need for affordable housing is more dire than ever," said Assemblyman Vito J. Lopez, Chairman of the Assembly Housing Committee. "This legislation will do just that by ensuring tenants are protected after owners buy out of the program both at Starrett City across the five boroughs." Approximately 90% of the units at Starrett City are subsidized through a pastiche of federal subsidies, including a Section 8 Housing Assistance Program contract (HAP), a Rental Assistance Program (RAP) contract and the Interest Reduction Program (IRP). The remaining 10% of Starrett City's apartments -- nearly 700 units of critically important affordable housing -- are only subsidized through the State's Mitchell Lama program and are the most at risk of leaving the affordable housing stock.
Clipper Equity, after being selected as the purchaser of Starrett City, promptly announced its intentions to leave the Mitchell Lama program. Since then, none of the group's affordability proposals have provided iron-clad assurances that it will remain in the program, leaving thousands of tenants vulnerable to soaring rents. Making matters even worse for tenants is the potential for the current seller to opt out of the Mitchell Lama program if his exorbitant asking price isn't met. This leaves Mitchell Lama tenants at Starrett City in peril whether the current sale goes through or not. To protect the long-term affordability of Starrett City, Schumer today called on Secretary Alphonso Jackson at HUD to formally reject Clipper Equity's latest proposal to buy Starrett City. In his letter to Jackson, Schumer wrote: "I believe it is critical that HUD urge Clipper Equity to sit down with the seller, Starrett City Associates, and renegotiate a sale price that will allow the needs of tenants to be put first. If a mutually agreed upon price cannot be reached, the bidding process should be re-opened to other prospective purchasers. " Under their new plan, the buyer is proposing 5,000+ units to be subsidized using enhanced section 8 vouchers. These vouchers would cost the federal government at least $10 million dollars more by the second year of the deal, and the subsidies would escalate from there. Once a tenant with a voucher leaves their apartment - it would go right to the market-rate rent. With at least 200 tenants leaving Starrett every year, after just a few years a large portion of the development would no longer be affordable.
Schumer also joined Lopez and Silver in championing Assembly Bill 795, sponsored by Lopez, which would assist tenants living in Mitchell Lama housing by protecting their units under the Emergency Tenant Protection Act (ETPA). ETPA, often known as the rent stabilization program, disallows owners from charging market rate rents by limiting rent increases to those mandated by the rent guidelines board. Tenants living in Mitchell Lama units constructed before 1974 are eligible for ETPA upon buyout, unlike units that are built after 1974 such as Starrett City. New York City's Department of Housing Preservation and Development estimates that under this bill as many as 19,000 tenants could be eligible for rent protection if the owners chose to opt out of the Mitchell Lama program. The legislation, supported by the City of New York, also provides incentives for the owners of Mitchell Lama units to remain in the program. These incentives include removing the 6% per annum cap on profits and by granting the developments the ability to charge annually, as opposed to periodic, rent increases.
Lopez and Silver also unveiled a new plan to introduce a state bill specifically designed to protect Mitchell Lama tenants at Starrett City and similarly situated locations. In the event that the owner makes clear his intention to buy-out of the Mitchell-Lama program, Speaker Silver and Chairman Lopez will take quick, decisive action to protect tenants at Starrett City.
With 5,881 units, Starrett City is the largest HUD-funded affordable housing development in the United States. 2442 of the units are subsidized through the Federal Rental Assistance Program (RAP). In this program, the Department of Housing and Urban Development negotiates long term leases for tenants, paying the difference to the owner between what tenants can afford and the market rate rent for that unit. The RAP contract at Starrett City expires in 2016.
An additional 1000+ units are kept affordable through the project-based Section 8 program. In the 1980's, then Congressman Schumer introduced legislation that attached section 8 vouchers directly to housing units, keeping them affordable after tenants vacated their apartments. Now a standard program, this project-based Section 8 legislation was amongst the first of its kind when it was introduced at Starrett City. Eligible tenants pay 30% of their income towards rent, with HUD making up the difference to what they determine is fair market rent for the unit.
1611 of the units are further underwritten by Section 236 rent concessions. This is funded through Interest Reduction Payments (IRP) administered by HUD that reduces the interest on their mortgage down to 1%. These tenants generally have incomes ranging from $40,000 - $60,000, making them ineligible for RAP or Section 8
Beginning in February of this year, Schumer, the Democratic Chairman of the Senate Housing Subcommittee, has criticized the bidding process around Starrett City. Concerned that certain bidders were forbidden to talk to the federal government about the deal and that Clipper Equity would fail to maintain the developments' affordability, Schumer played an instrumental role in blocking the Starrett City deal after calling on HUD to reject it.
Schumer has also pointed out that federal funds sustained the project and built up the owners' equity, in effect making the federal government a full partner in the project that ought to have a say in any sale.