The Handbook of Municipal Bonds

CASE STUDY 18

Preserving Housing Affordability with Taxable Municipals

Emily A. Youssouf Managing Director JPMorgan Public Finance

 

 

 

Bond financing can be used to preserve the affordability of housing developments built with government assistance that face expiring affordability requirements, averting political turmoil that can result when previously below-market residents are displaced by wealthier households. Through innovative bond financing, the New York City Housing Development Corporation was able to preserve the affordability and physical structure of more than 14,500 apartments where continued affordability for the current residents was threatened.

In 1955, the New York State legislature passed the Limited Profit Housing Companies Law, legislation aimed at creating affordable rental and cooperative housing by providing developers with tax abatements, land, and low-interest mortgages. In exchange, the law required limitation on profits, income limits on tenants, and supervision by New York State. The law, sponsored by State Senator MacNeil Mitchell of Manhattan and Assemblyman Alfred Lama of Brooklyn, has been known ever since simply as Mitchell-Lama.

Most developments built under the Mitchell-Lama program were eligible to “buy out” of the program after 20 years by prepaying their government-sponsored mortgage debt. There were originally 105,000 apartments in 269 developments built under the Mitchell-Lama program,⁷⁹⁷ and the mortgages were held by city and state agencies. ...