A Second Life for Mitchell-Lama?

MacNeil Mitchell was the Yale-educated scion of a Connecticut family steeped in public service, who represented Manhattan's tony silk-stocking district as a Republican in the state Senate. Alfred Lama was born in Italy, emigrated to New York at age 5, and rose to represent Brownsville as a Democrat in the state Assembly.

Both men have been dead for nearly two decades. The product of their legislative partnership 60 years ago, the Mitchell-Lama housing program, survives, having created 66,000 units of rental housing and 69,000 coop apartments.

But the program is ailing. Nearly 40,000 apartments have exited the program in the past 10 years. Real-estate experts have warned that the pull of market-rate prices and the push of expensive repair needs threaten to strip away thousands more apartments in the next decade.

But a new report suggests a second life is possible for Mitchell-Lama if, like the program's very name, it embraces contradictions—namely, the need to serve both low-income people, who have the gravest housing need, and middle-income people who help keep neighborhoods economically diverse 

“A new Mitchell-Lama program should fix the old program’s major flaw—the limited time period of its affordability protections—while building on its success as part of a policy system that delivered real benefits to families at a range of income levels, all of them poorly served by the private housing market,” reads the report, “Reinventing the Mitchell-Lama Housing Program,” by Tom Waters and Vic Bach, policy analysts at the Community Service Society of New York (CSS).

To do that, Waters and Bach argue, the frequent calls for a “new Mitchell-Lama program” will have to wrestle with the mistakes made the first time around, the delicate politics of income and growing concerns about gentrification and displacement.

Change and consequence

Mitchell and Lama's program was launched in 1955, offering low-cost financing and property tax abatements to developers who agreed to cap their profits and submit rent increases for approval.

But it underwent significant changes only four years later, when Gov. Nelson Rockefeller set out to lure more private investors interested in building rental housing to a program that, until then, had been dominated by unions creating coops for their members. One change Rockefeller championed was a provision that allowed units to leave the Mitchell-Lama program after a number of years. Those conversion clauses are why the program has withered in this century.

Mitchell-Lama was initially targeted toward middle-income households making $6,000 to $10,000 a year in 1950s dollars—roughly $45,000 to $75,000 in today's money, according to the CSS report. But the income targets were mere guidelines: Rents were based on the costs of financing and operating the building. By 2011, more than one in four Mitchell-Lama households had incomes higher than the program intended.

But an infusion of new state and federal subsidies in the 1960s also permitted Mitchell-Lama to serve people with lower incomes than the authors had planned for. In 2011, more than half of Mitchell-Lama households pulled in less than the initial guidelines. In fact, only 19 percent of Mitchell-Lama residents were in the target income band.

While that mix was not intended when the program was created, Waters and Bach write, “This income diversity is in fact an important part of the program’s success and should be replicated in future programs.”

What “middle class” means

Yet that isn't what most people talk about when they call for a new Mitchell-Lama program. When the state Senate's Independent Democratic Conference unveiled its Mitchell-Lama 2020 plan in early 2014, it was aimed at households in the strictly middle-class band between $75,000 to $100,000 of annual income.

The rationale for that focus is the idea that middle-class families are caught between programs for the poor, like public housing and Section 8, and a private market that increasingly caters to the rich. But while middle-class New York is certainly feeling the housing squeeze, lower-income New Yorkers are under the greatest pressure, because housing programs for the poor can't keep up with rising need.

“It is not middle groups that face the worst housing hardships in New York City. Instead it is the lowest-income households who face the worst burdens by far—even after the benefits of public housing and other subsidies are taken into account,” the CSS report notes. The overall median rent burden of low-income New Yorkers is 42 percent, well above the 30 percent affordability threshold.

What's more, former Mayor Michael Bloomberg's affordable housing plan devoted a fair share of housing to middle-income New Yorkers, and Mayor Bill de Blasio's initiative also directs a large share of housing resources to moderate and middle-income families. De Blasio's plan “also includes 16,000 apartments targeted to households with much lower incomes, but that number must be increased substantially in order to truly address the city’s most severe housing needs,” the report argues.

The new Mitchell-Lama math

The secret behind Mitchell-Lama's success was its combination of low-cost land, low-cost financing and subsidies. But the CSS report notes that nowadays, when constructing a new apartment can cost $200,000 to $300,000, it will take more public investment to achieve the same results: “Unfortunately, more than Mitchell-Lama resources are needed to produce Mitchell-Lama results under today’s conditions.”

The report recommends that a new Mitchell-Lama program focus on households like those in the band making $31,000 to $46,000 a year for a family of three, while being flexible enough to accommodate lower and higher incomes, just like the original program.

In order to avoid the Achilles' Heel of the current program—the expiring affordability provisions—housing agencies could maintain ownership of the land used for Mitchell-Lama construction and give developers a 99-year lease with strict affordability restrictions, or employ a Community Land Trust that would allow communities and tenants to decide how best to use the land once initial affordability periods are up. Of course, public-owned land is less abundant now than it was during the days of abundant tax foreclosures, but the report notes that “the city and state governments, together with many public authorities, still have land that could be turned to housing purposes.”

Since owners do need to recapitalize buildings after 20 or 30 years to do repairs and improvements, government could either maintain a right to purchase the buildings or an equity stake in them so that if a Mitchell-Lama owner does go market-rate, a portion of the proceeds can go to fund new affordable housing.

Ambition possible

To create 1,000 new Mitchell-Lama units a year, the report says, would require some $155 million in grants, $85 million in subsidized mortgages, the direct provision of land, tax breaks, and $2 million in annual operating subsidies.

“That would represent a considerable investment of public resources to be sure,” the report notes, “but it would result in a permanent housing resource that would help the city respond to some of its most urgent needs. The current low interest rates and slack economy mean that there is truly no time like the present to undertake this important work.”

The CSS report clearly puts most of the onus for any new Mitchell-Lama momentum on the state rather that the city, and this year's budget process provides mixed evidence on the likelihood of that happening: the Cuomo administration did fund several housing programs generously, though not nearly as much as advocates hoped. That's especially true in the case of half a billion of the $5.4 billion in bank settlements received by the state that advocates thought ought to be devoted to supportive housing and other housing initiatives.

But the settlement money continues to roll in. Interest rates, the CSS report notes, are at historic lows. There's a new willingness to think about leveraging land held by existing public assets, like public housing, libraries and schools, to accommodate housing. Perhaps what's needed more than money or land is for modern versions of MacNeil Mitchell and Alfred Lama to step forward.