Ruling eases taxes on Mitchell-Lama units going private

Owners of some of the city’s subsidized apartments will find it easier to make their way out of one of the city’s most widely-used affordable housing programs, due to the implications of a new court ruling.

The state Court of Appeals said yesterday that owners at a Coney Island apartment complex don’t have to foot a $21 million tax bill that the city levied on them in 2007, when they took their buildings out of the Mitchell-Lama program.

The 1,600 owners of Trump Village 3 coops successfully argued that they were being penalized twice for taking their units private — once when they left Mitchell-Lama in 2007, and once when they sold off their units, according to the New York Daily News.

The appeals court nullified the first tax, rejecting the city’s argument that it is an essential part of keeping properties in the program. Stroock & Stroock & Lavan’s Daniel Ross, who represented the owners, said that the ruling would have wide-reaching implications for the city’s other 70,000 Mitchell-Lama units.

“It will allow other Mitchell-Lama coops (that want out of the program) to make future plans with much greater certainty,” Ross told the newspaper.

The Mitchell-Lama program gives builders tax breaks and low interest loans to construct affordable apartments. After 20 years, or when loans are paid off, residents can leave the program and sell their units.

“There is no question it is in the city’s best interest for these major developments to remain affordable,” a spokesperson for Mayor Bill De Blasio said. “Preserving our existing stock of affordable housing is a huge component of our housing plan.”

A 1,650-unit Mitchell-Lama building in the South Street Seaport area went private in November. [NYDN] – Tess Hofmann