N.Y.
Private Housing Finance Law Section 1152
Affordable housing development loans
1.
(a) Notwithstanding the provisions of any general, special or local law, one or more private lenders and the city of New York, acting through the agency, shall have the power to participate and invest in making loans to sponsors for the construction of eligible projects. Such loans may be made exclusively for or may include such amounts as may be required for site acquisition or the refinancing of eligible projects. Each such participation loan shall be secured by a bond or note and single participating mortgage or by separate bonds or notes and mortgages upon the eligible project. Such bond or note and mortgage or bonds or notes or mortgages may contain such other terms and provisions not inconsistent with the provisions of this article as the agency may deem necessary or desirable, including, but not limited to, terms providing that the lien created by such note and mortgage, and, if applicable, any regulatory agreement executed by the sponsor and such agency or restrictive covenant approved by such agency, may be recorded in an equal or subordinate position, or subsequently made equal or subordinate, to the lien created by any private lender against such eligible project.(b)
Notwithstanding the provisions of any general, special or local law, and in addition to the power to make or contract to make participation loans granted by paragraph (a) of this subdivision, the city of New York, acting through the agency, shall have the power to make or contract to make loans or grants to any owner described in paragraph (a) of this subdivision without the participation of a private lender, on the same terms as permitted under such paragraph for a participation loan.2.
The agency may enter into an agreement with a private lender to deposit its share of a loan with the private lender to be advanced by the private lender. The portion of the loan funded by the agency may be equal to or subordinate in lien to the portion of the loan funded by the private lender and may contain such terms with respect to interest rate, if any, rate of amortization of principal, if any, and time of payment of interest and principal as determined by the agency. The agency may make provision either in the mortgage or mortgages or by separate agreement for the performance by the private lender of such services as are generally performed by a banking institution which itself holds a mortgage, including, without limitation, construction loan advances, construction supervision, initiation of foreclosure proceedings, procurement of insurance, and all other matters in connection with the financing, supervision, regulation and audit of any such loan to any such eligible project.3.
If the eligible project is to consist of one to four unit dwelling accommodations or cooperative or condominium units, the agency’s share of the loan may be converted after completion of construction into mortgages on such dwelling accommodations or condominium units or financing statements filed with respect to such cooperative shares, provided such units or such cooperative shares are purchased by persons of low income. Such mortgages and any blanket mortgage that the agency retains on any portion of, or on all of, the eligible project may provide that such mortgages and such blanket mortgage will automatically be reduced to zero over a period of continuous compliance by the mortgagor with a regulatory agreement or restrictive covenant with or approved by the agency and upon the satisfaction of any additional conditions specified therein. Notwithstanding such provision as contained in such mortgage, the loan shall be reduced to zero only if, prior to or simultaneously with delivery of such mortgage, the agency made a written determination that such reduction would be necessary to ensure the continued affordability or economic viability of the eligible project. Such written determination shall document the basis upon which the loan was determined to be eligible for evaporation. Such period of continuous compliance with such regulatory agreement or restrictive covenant shall not be less than fifteen years.4.
If the eligible project is to consist of one to four unit dwelling accommodations or cooperative or condominium units, the agency shall require that the dwelling units be offered only to bona fide purchasers who intend to occupy a unit as their principal place of residence; provided, however, that in the case of two to four unit dwelling accommodations the bona fide purchaser may occupy only a single unit as a principal place of residence. If the purchaser ceases to occupy the unit as a principal place of residence, the agency may provide for recapture of all or a portion of the agency’s share of the loan.5.
If the eligible project is a rental project, the agency’s share of the loan may be converted after completion of construction into a permanent loan with a term of forty years, provided that such period may be extended as the agency may determine is necessary to ensure the continued affordability or economic viability of the eligible project, payable in such manner as may be provided in the note and any mortgage in connection with such loan. Such note and mortgage may contain such terms and conditions as the agency may deem necessary or desirable to effectuate the purposes and provisions of this article. The sponsor or any subsequent owner or owners of such a project shall agree to rent such units only to persons of low income for such period as the agency may determine. All such units shall be subject to the emergency tenant protection act of nineteen seventy-four and the rent stabilization law of nineteen hundred sixty-nine, as amended, unless converted to a cooperative or condominium pursuant to subdivision seven of this section. Initial rentals for all rental units shall be set by the agency.6.
If the eligible project is a rental project annual profits shall be limited to an amount set by the agency for as long as the loan is outstanding. Excess profits shall be used to establish project reserves, provide capital improvements or reduce the principal amount of the agency’s loan, as determined by the agency.7.
If the eligible project is a rental project, no conversion to a cooperative or condominium shall be permitted for a period of twenty years after initial occupancy, and unless (i) the agency’s share of the loan is prepaid upon such conversion, (ii) the conversion shall be done pursuant to General Business Law § 352-EEEE (Conversions to cooperative or condominium ownership in the city of New York)section three hundred fifty-two-eeee of the general business law as a non-eviction plan, and(iii)
apartments occupied by non-purchasing tenants continue to be subject to the rent stabilization law of nineteen hundred sixty-nine as amended, until the occurrence of a vacancy.8.
A loan made pursuant to this article shall be exempt from the mortgage recording taxes imposed by article eleven of the tax law.9.
Notwithstanding the provisions of any general, special or local law or charter, the agency shall have power, without soliciting competing bids, to contract with any sponsor or to make provision in a loan for the construction or reconstruction of any site improvements located in the public right-of-way or on the eligible site which are necessary for the development of an eligible project. Such site improvements may include, but shall not be limited to, streets, sidewalks, landscaping, parks and open space, social, recreational, communal and other non-residential facilities and the outfitting thereof, lighting fixtures, and water and sewer lines, incidental or appurtenant to the construction of such eligible projects.10.
No loan shall be made pursuant to the provisions of this article unless the agency finds that:(a)
the construction of the eligible project does not directly displace current low and moderate income residents of the eligible site;(b)
the eligible project leverages private and other public investment, if any, so as to reduce the amount of assistance provided pursuant to this article to the minimal amount which is necessary for construction of the eligible project;(c)
the eligible project will be built by a private developer/builder who has agreed to limit its profit in accordance with a formula satisfactory to the agency;(d)
the eligible project will provide assistance to an area which is blighted or deteriorated or has a blighting influence on the surrounding area, or is in danger of becoming a slum or a blighted area because of neighborhood conditions indicating an inability or unwillingness of the private sector to cause the type of construction for which a loan is to be provided; and(e)
the eligible project will make home ownership or rental housing affordable to persons who cannot presently afford the housing available based upon the ordinary unaided operation of private enterprise.11.
a. The agency may make non-interest bearing advances to sponsors to defray the pre-development costs of eligible projects in accordance with the provisions of this chapter. b. No such advances shall be made unless the agency finds that:(i)
the sponsor proposes to finance the eligible project in whole or in part by a loan granted pursuant to this article or that the project, if otherwise financed, will provide housing for persons or families of low income, and that such project is otherwise consistent with the purposes of this article;(ii)
the project site is suitable, there is a need for the housing type proposed in the area to be served and the project is feasible; and(iii)
it is reasonable to anticipate that financing will be obtained and the agency makes a finding to that effect. c. No such advances may be made to a sponsor unless such sponsor enters into an agreement with the agency which provides that such sponsor shall be regulated with respect to rents, profits, dividends and disposition of its property or franchise, in accordance with the provisions of this article. d. An advance granted pursuant to this section shall be used only to defray the pre-development costs of eligible projects. For purposes of this subdivision, the term pre-development costs shall include, but shall not be limited to: the reasonable and necessary costs for planning, site preparation, developing architectural drawings and conducting engineering and environmental studies, but shall not include acquisition of land or buildings, drainage and landscaping of vacant land, construction of new buildings or the reconstruction or rehabilitation of existing buildings. e. Each such advance shall be repaid in full to the agency by the sponsor. Such repayment shall be made upon receipt by the sponsor or its successor in interest of the proceeds of its mortgage or construction loan for the eligible project, unless the agency extends the period for the repayment of such advances. In no event shall the time of repayment be extended to a date later than the date of final advance of funds pursuant to such mortgage or construction loan. Notwithstanding this paragraph, the agency may reduce such advance to zero over a period of continued compliance with the agency’s agreement with the sponsor pursuant to paragraph c of this subdivision if the agency has made a written determination that such reduction would be necessary to ensure the continued affordability or economic viability of the eligible project. Such written determination shall document the basis upon which the agency’s non-interest bearing advance was determined eligible for evaporation. f. If the agency, in its discretion, determines at any time that mortgage or construction financing for the eligible project may not be obtained, then all advances made to the sponsor pursuant to this subdivision shall become immediately due and payable upon the demand of the agency.12.
If the eligible project is a rental project, the bond or note and mortgage or bonds or notes or mortgages issued by the sponsor of any eligible project to secure a participation loan may provide that the city’s portion of such loan shall be reduced to zero commencing on the fifteenth year after the execution of such bond or note and mortgage or bonds or notes or mortgages, provided that, as of the date of any such reduction, the eligible project has been and continues to be owned and operated in a manner consistent with a regulatory agreement with the city. Notwithstanding such provision as contained in the bond or note and mortgage or bonds or notes or mortgages, the loan shall be reduced to zero only if, prior to or simultaneously with delivery of such bond or note and mortgage or bonds or notes or mortgages, the agency made a written determination that such reduction would be necessary to ensure the continued affordability or economic viability of the eligible project. Such written determination shall document the basis upon which the loan was determined to be eligible for evaporation.
Source:
Section 1152 — Affordable housing development loans, https://www.nysenate.gov/legislation/laws/PVH/1152 (updated Oct. 27, 2023; accessed Apr. 20, 2024).
