What are Mitchell-Lama Apartments?

The PropertyClub Team
May 25th 2019
Explore everything there is to know about Mitchell-Lama Housing. Currently, about 45,000 apartments in New York City are subject to Mitchell-Lama regulation. Named after New York State Senator, MacNeil Mitchell, and Assemblyman Alfred Lama, Mitchell Lama is a housing program designed to create and maintain affordable housing to middle-income individuals in New York. The apartments under the Mitchell-Lama program includes cooperative apartments ("co-ops") and rentals.

The history of Mitchell-Lama

The Mitchell Lama bill was initially created in 1955 and is no longer active.  Nevertheless, this housing plan created income-restricted rentals and limited equity co-ops in some of the most desirable New York City neighborhoods, where, affordable apartments were virtually nonexistent. (i.e., Chelsea, Upper East Side, Upper West Side, etc.) For an income-restricted rental under Mitchell-Lama, the monthly rent is directly tied to the tenant(s) income. As for co-op apartments, the purchaser typically must invest somewhere between $5,000 and $25,000, which is a steal for a New York City Apartment. However, when the shareholder sells the property, he/she is only entitled to the amount they paid, plus any capital assessments, and maybe some or all of their mortgage amortization (depending on the building's rules and restrictions). In other words, in exchange for affordable housing, the shareholder will not receive the fair market value for the apartment, no matter what the value of the apartment is when they sell it.

Overview of Mitchell-Lama developments

To encourage construction of Mitchell-Lama developments, builders were given tax-breaks and low-interest mortgages in exchange for implementing the program. When the program was active, developers constructed a little over 100,000 apartments spread throughout the five boroughs of New York City. Given its long history, Mitchell-Lama developments can be supervised by either the NYC Housing and Preservation Department (HPD) or the NYS Division of Housing and Community Renewal.

Over the years, some building owners have elected to go through the complex process of buying out the mortgages in the entire building, exiting and dissolving the Mitchell-Lama program for their building, to convert the units to market-rate apartments. If the owner of a Mitchell-Lama rental property chooses no longer to be subject to Mitchell-Lama regulation and exits the programs, the rental premises automatically become subject to the Rent Stabilization Law and Code.

The Price of Mitchell Lama apartments

Since Mitchell-Lama apartments are income-restricted housing, the market value of the apartment or the neighborhood does not control the prices of the co-op or rental. Additionally, because of the tax benefits it receives, the monthly maintenance cost for Mitchell-Lama co-op apartments are always much lower than market value.

The Requirements to Apply for a Mitchell-Lama Apartment

To qualify as a prospect on the waiting list for a Mitchell-Lama apartment depends on three eligibility requirements: income level, family size, and apartment size. The number of people occupying the apartment must match the number of bedrooms in the apartment. Moreover, your income cannot surpass a certain amount. Income limits for Mitchell-Lama co-op apartments can go up to $149K, while rental restrictions can go up to $95K on the high end. Nevertheless, each Mitchell-Lama development can set its own limits.

If you're currently living in a Mitchell-Lama apartment and your household income eventually exceed the maximum income limit, you will be required to pay a surcharge to keep your residence.

Applying for a Mitchell-Lama Apartment

There is no master list for Mitchell-Lama apartments. Each Mitchell-Lama development requires you to apply separately, but you can definitely apply for multiple developments at once.  Some Mitchell-Lama Apartments have an open waiting list, while other buildings have closed list. If and when a building opens up their waiting list, they are required to announce this in the media. If you see a list you want to be on; you can apply through the HPD website. However, this list is just to be entered into a lottery, to be added to the building's waiting list.

After you have applied, you can check the status of each application through Mitchell-Lama Connect. Once registered in the system, you can view the waiting list number and date the last application was approved for each Mitchell-Lama development.

Once you’re on the Mitchell-Lama waiting list

Once on a waiting list, be prepared to wait. Typically, it takes anywhere from a couple of years, up to 15 years before an apartment becomes available. When an apartment opens up and assuming that you still meet the income/family size requirements, you can proceed or wait for the next available apartment. However, typically if you reject the second place, you go back to the bottom of the waiting list, or you may be removed from the waiting list altogether.