What Is a Mitchell-Lama Apartment in NYC?

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What is a Mitchell-Lama apartment? We'll demystify this topic in the following video. My name is Chris at Hauseit. Hauseit is the largest For Sale By Owner and Buyer Agent Commission Rebate company, established 2014. A Mitchell-Lama apartment is government subsidized housing from moderate to middle income families in New York. There are income limits set that vary depending on family size. We'll show you this on the next screen. You can apply to buy or rent in a Mitchell-Lama building but you'll need to do so by applying directly with the managing agent at each building. Keep in mind though that there are extremely long waiting lists for a Mitchell-Lama apartment in general and sometimes an applicant can wait for a decade or more to get to the top of the list.

Also, remember that insiders usually get first dibs on apartments as they become available. So, for example, current residents who are in a 1 Bedroom or 2 Bedroom might immediately grab up a 3 Bedroom that becomes available. Therefore, if you are trying your luck with the lottery essentially, it's better to apply for a smaller apartment like a studio which will be much more likely to not be snatched up by insiders.

So, it's obvious that a Mitchell-Lama apartment is attractive to rent because of lower rent payments, but why would you want to purchase a Mitchell-Lama co-op? Well, one of the primary reasons is the ability to buy a co-op apartment in New York City for $100k or less. Sometimes, apartments can be purchased for as low as a few tens of thousands of dollars. Furthermore, monthly co-op maintenance payments are reduced because of subsidies and grants from the government. For example, tax abatements, subsidized mortgages and outright government grants are a norm for Mitchell-Lama apartments.

A good example is 353 Beach 57th Avenue in Far Rockaway, Queens which as of January only recently stopped accepting applications for 2 Bedroom units but interestingly enough if you are lucky enough to get one you could have purchased a 2 Bedroom co-op for approximately $17k. That's right, for under $20k you could have purchased a 2 bedroom apartment in New York City. And the maintenance, quite low as well because of subsidies, grants and abatements the monthly maintenance for this 2 Bedroom is only $1,100 per month.

What about privatization? If you're searching for a home you might've seen listings or buildings that were formerly a Mitchell-Lama but has since been turned private. For example, Southbridge Towers used to be a complex with multiple building with over 1,600 units that was a Mitchell-Lama. However, only recently in 2014, the complex voted to privatize. And now, units are on the market at free market rates. This could be a boon for owners who previously purchased the apartments for say a few tens of thousands of dollars which results in a hundred action in return. Considering that a 2 or 3 Bedroom could easily go for several million dollars in the New York City market.

However, is there a con to privatization? Well yes, the reason that Mitchell-Lama apartments don't almost always privatize is because maintenance payments will go up for owners who decide to stay. That's because once a Mitchell -Lama votes to go private, the building will no longer receive subsidized mortgages, tax abatements or government grants and therefore monthly maintenance costs will increase. Sometimes, Mitchell-Lama apartments who decide to go private will install a Flip Tax on owners who decide to essentially flip and sell their apartments at market value. These Flip Taxes can sometimes be higher than the norm. For example, you might see only 1% to 2% for Flip Tax in a traditional co-op, but in a Mitchell-Lama you might see a much higher Flip Tax. Let's say even 50% or some other number that's quite high. The co-op board might feel that they deserve some of the money to make up for the fact that the remaining residents are going to face a higher monthly payment as a result of going private.

So, there you have it. We hope you found this video helpful, if you did please hit like or subscribe and if you have any questions please leave a comment below. We do get back to you right away and we'll see you one the next one.

Save 2% When Buying in NYC: https://www.hauseit.com/hauseit-buyer-closing-credit-nyc/
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Hauseit LLC, Licensed Real Estate Broker
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