S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                   2707
 
                        2025-2026 Regular Sessions
 
                           I N  A S S E M B L Y
 
                             January 22, 2025
                                ___________
 
 Introduced by M. of A. TAYLOR -- read once and referred to the Committee
   on Housing
 
 AN ACT to amend the private housing finance law, in relation to enacting
   the  housing development fund company self-determination, preservation
   and affordability act
 
   THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
 BLY, DO ENACT AS FOLLOWS:
 
   Section  1.  Short  title. This act shall be known and may be cited as
 the "housing development fund company  self-determination,  preservation
 and affordability act".
   §  2.  Legislative findings and declarations. 1. In 1966, the Legisla-
 ture enacted Article 11 of the private housing finance law.  Article  11
 authorized  the  development  of  rental and cooperative housing that is
 subject to certain income restrictions. The  type  of  income-restricted
 housing is referred to as housing development fund companies (HDFCs).
   2.  Beginning  in the early 1980s, New York city adopted the HDFC form
 of housing cooperative as a means to divest itself of -- and  revitalize
 --  its  tax-foreclosed multi-family housing stock. At the time the city
 was experiencing large-scale abandonment of its private low and  middle-
 income  multi-family  housing stock. In response to this housing crisis,
 the city determined to turn over the ownership and  management  of  many
 city-owned  tax-foreclosed multifamily buildings to the existing tenants
 in the form of HDFC co-ops.
   3. Previously, the city sold at auction nearly all of  its  tax-forec-
 losed  multi-family property to private investors - and that traditional
 approach to disposing of tax foreclosed property had led to an  acceler-
 ating  cycle  of  housing disinvestment and abandonment. The city's HDFC
 initiative was in the city's own interests: it enabled the city to avoid
 the counterproductive private auction process and to return  the  build-
 ings to the tax rolls.
 
  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.
                                                            LBD02813-01-5
 A. 2707                             2
              

 
   4.  Over the past four decades the city's HDFC initiative proved to be
 one of New York's most enduring housing success stories. Tens  of  thou-
 sands  of resident-shareholders of HDFCs played an important role in the
 stabilization and preservation of New York city's  multi-family  housing
 stock  in the period following the city's fiscal crisis of the 1970s and
 1980s. The city's large-scale creation of HDFC co-ops was a major policy
 innovation and was an important part of the city's response to the hous-
 ing crisis of that era. Today, there are over 1,100 HDFC co-ops  in  New
 York city.
   5.  All  government  and  community  stakeholders  benefitted from the
 large-scale creation of HDFCs. The city benefitted by reducing its enor-
 mous portfolio of tax-foreclosed apartment buildings at a time when  the
 buildings  were  a  substantial  burden  to  the city and when there was
 little in the way of a private market for these  properties.  The  resi-
 dents  benefitted  by the preservation and upgrading of their own build-
 ings and by becoming homeowners for the first time. And the  surrounding
 communities  benefitted  by  the  stabilization of the neighborhood, the
 upgrading of housing and by the transformation  of  a  rental  community
 into a homeowning community.
   6.  When  the  city  imposed regulatory controls on the city-sponsored
 HDFCs, the  regulatory  controls  placed  on  HDFCs  were  time-limited.
 Consequently,  the  HDFCs  that were created in the 1980s and 1990s have
 regulatory controls that already have expired or will soon  expire.  For
 this  class  of  HDFCs, there is a great deal of uncertainty as to their
 legal status and their financial future.
   7. This legislation clarifies the legal status of HDFCs  with  expired
 regulatory  controls  in a way that protects and promotes their autonomy
 and self-governance while strengthening the inducements for these  HDFCs
 to voluntarily agree to continue to operate as affordable housing.
   8.  An  important feature of city-sponsored HDFCs is the city's use of
 its authority to enter into a  "regulatory  agreement"  with  the  HDFC.
 Under  section  576 of the private housing finance law, either the state
 or the municipal "supervisory agency" (i.e., HPD) may enter into a regu-
 latory agreement with an HDFC if the agency advances public funds to the
 HDFC. Under such section of the private housing finance law, every  HDFC
 regulatory agreement must provide that:
   (1)  Households  must  meet  income  eligibility guidelines, which are
 defined by statute as six times the annual rent plus six percent of  the
 shareholder's  "original  investment"  in  the  HDFC. See paragraph b of
 subdivision 1 of section 576 of the private housing finance law.
   (2) Profits must be used only for capital improvements  or  to  reduce
 rent/maintenance.  Dividends  cannot be paid to owners. See paragraphs c
 and d of subdivision 1 of section 576 of  the  private  housing  finance
 law.
   (3)  The  property may not be sold or transferred without HPD approval
 for so long as the regulatory agreement remains in effect and/or  unless
 and  until any funds or mortgages owed to the city are paid in full. See
 paragraph e of subdivision 1 of  section  576  of  the  private  housing
 finance law.
   (4)  The HDFC may not be dissolved without HPD approval for so long as
 the regulatory agreement remains in effect and/or unless and  until  any
 funds or mortgages owed to the city are paid in full. See paragraph e of
 subdivision 1 of section 576 of the private housing finance law.
   9.  Thus, under section 576 of the private housing finance law certain
 key restrictions remains in effect only for  so  long  as  a  regulatory
 agreement  remains  in  effect. Put differently, the city's authority to
 A. 2707                             3
 
 impose section 576 restrictions (including restrictions  on  dissolution
 of HDFCs and on the sale and disposition of HDFC property) is limited to
 only those HDFCs that are subject to a regulatory agreement and does not
 extend to HDFCs in which a regulatory agreement or mortgage is no longer
 in effect.
   10.  The  city applied its section 576 authority to HDFCs in two ways:
 i.e. (1) some of the terms of the  section  576  "regulatory  agreement"
 were  incorporated  into various HDFC incorporation documents and in the
 deed conveying title to the property; and (2) a regulatory agreement was
 incorporated into mortgage documents when the city made loans  to  HDFCs
 to  finance  capital  improvements. In each case the city imposed resale
 restrictions that had a fixed term. At the inception of the HDFC program
 in the early 1980s, city-sponsored resale restrictions  imposed  by  the
 sale  documents  expired in ten years. By the late 1980s, city-sponsored
 resale restrictions imposed by the sale  documents  ran  for  25  years.
 Furthermore, resale restrictions that were made a part of city-sponsored
 rehabilitation  loans  to  HDFCs  ran  for the life of the loan -- i.e.,
 usually 15 to 25 years.
   11. Thus, the city used section 576 of the private housing finance law
 as a means to impose additional terms and conditions  (including  resale
 restrictions)  on  the  operation of the HDFC for a fixed term following
 the establishment of the housing cooperative or during  the  life  of  a
 city-sponsored  loan  to the HDFC. For the vast majority of HDFCs, these
 restrictions have expired.
   12. There are presently over 1,100 HDFCs in New York  city  containing
 approximately  25,000  apartments.  Of  these  HDFCs,  approximately  20
 percent are subject to regulatory agreements. A  substantial  number  of
 non-regulated HDFCs date from the 1980s and 1990s. These older HDFCs are
 no  longer subject to city resale restrictions that expired after either
 ten years or 25 years following the incorporation of the HDFCs.
   13. For as long  as  a  particular  city-imposed  resale  restrictions
 remained  in  effect,  an  HDFC is subject to a detailed scheme of regu-
 lations imposed by the city pursuant to section 576 of the private hous-
 ing finance law. In general, HPD resale restrictions govern such  impor-
 tant  issues  of  HDFC  governance as income limitations for purchasers,
 succession rights, sublet rights, flip taxes, HPD consent as a precondi-
 tion to the sale of an HDFC building and HPD consent to the  dissolution
 of  an  HDFC.  Upon the expiration of the city-imposed restrictions, the
 HDFC is no longer subject to these externally imposed regulations.
   14. An HDFC with  expired  regulatory  controls  nevertheless  remains
 subject  to  Article 11 of the private housing finance law as well as to
 various governing documents, such as its certificate  of  incorporation,
 deed  restrictions,  proprietary lease and by-laws. Most importantly, an
 HDFC is required to provide housing for  "persons  of  low  income,"  as
 defined  in  paragraph  a of subdivision 3 of section 573 of the private
 housing finance law. However, once an HDFC regulatory agreement or other
 HPD-imposed income restriction has expired, nothing in the private hous-
 ing finance law expressly precludes these HDFC co-ops from converting to
 a non-HDFC co-op by reincorporating as a conventional co-op (and thereby
 opting out of  the  remaining  statutory  restrictions  imposed  by  the
 private  housing  finance law). That circumstance raised the possibility
 that some HDFCs may opt-out of the HDFC statute and  become  market-rate
 housing  -  which  would  represent  a  loss  to the city's inventory of
 affordable housing stock.
   15. A city-established HDFC is eligible  to  receive  a  partial  real
 estate  tax exemption granted by the city pursuant to section 577 of the
 A. 2707                             4
 
 private housing finance law. Pursuant to this  authority,  the  city  in
 1989  enacted a partial tax exemption for most city-sponsored HDFCs. The
 tax exemption is generally referred to as the "Division  of  Alternative
 Management Programs" tax exemption, or "DAMP tax exemption".
   16. The tax exemption runs for forty years and will expire in 2029.  A
 condition  of the DAMP tax exemption is that the HDFC remain an HDFC for
 the duration of the tax exemption. Hence, an HDFC that opt-outs  of  the
 HDFC statute and become market-rate housing would be required to forfeit
 the DAMP tax exemption.
   17.  The city in 2017 proposed local legislation that would revoke the
 DAMP tax exemption from any HDFC that declined to sign a new  regulatory
 agreement  with HPD. The proposed new regulatory agreement would contain
 many provisions that would largely deprive HDFCs of autonomy  and  self-
 determination, including the imposition of external fiscal monitors paid
 for  by  HDFC income, new restriction on apartment sales and subletting,
 and limitations on the assets and other  real  property  owned  by  HDFC
 shareholders. By 2019 the city abandoned the proposed legislation in the
 face  of widespread opposition by HDFC community groups and other stake-
 holders.
   18. Also in 2017, the city proposed new state legislation  that  would
 re-regulate HDFCs and that would change the law to ensure that all HDFCs
 remain subject to affordability controls in perpetuity. See S2543 (2017)
 (proposed  amendment  to  the private housing finance law). As stated in
 the city's memorandum in support of S2543:
   "(T)here is a great need for an amendment to clarify that  the  corpo-
 rate  purpose of an HDFC -- to provide affordable housing to persons and
 families of low income -- is perpetual in duration.  Absent  the  checks
 and  balances  provided  by  the  (proposed amendment to private housing
 finance law, which would subject HDFCs for the time to the  requirements
 of  the  not-for-profit  corporation  law), there may be a great loss of
 affordable housing."
   19. Thus, the city expressly acknowledged that,  under  existing  law,
 HDFCs with expired regulatory agreements have the option of remaining as
 an HDFC or, in the alternative, the option of converting to another form
 of   housing  cooperative  without  affordability  controls.  S2453  was
 intended to eliminate the  second  option.  Ultimately,  S2453  was  not
 enacted and the statutory law governing HDFCs remains unchanged.
   20.  Contrary  to  the  city's  2017  statement, the New York Attorney
 General issued an opinion in 2015 to the effect that  HDFC  cooperatives
 could  never  opt-out  of  the  PHFL  and  that they were subject to the
 perpetual regulation of the HPD  Commissioner.  See  New  York  Attorney
 General,  "Guidance  on Housing Development Fund Corporations Seeking to
 Transfer or Sell Property for, or Otherwise Convert Property to  Market-
 Rate Use" (hereafter "Guidance"). HPD joined in the Guidance. The Attor-
 ney  General  reached  this conclusion based on their determination that
 the statutory term "amendment" - as used in subdivision 5 of section 573
 of the private housing finance law - encompassed and implied the commis-
 sioner's additional authority to consent to the dissolution of an  HDFC.
 The Attorney General's Guidance is incorrect as a matter of law, in that
 it  misconstrues  the  plain text of the HDFC statute as well as ignores
 the distinct treatment of the concepts of "amendment" and  "dissolution"
 in  other New York corporate law settings, including the business corpo-
 ration law.
   21. Consistent with the city's 2017 statement, HDFCs always  have  had
 the  right under the private housing finance law -- and continue to have
 the right under the private housing finance law -- to dissolve and rein-
 A. 2707                             5
 
 corporate under the business corporation law or  other  applicable  law,
 provided  that  the  housing  development fund company: (1) was formerly
 subject to a regulatory agreement  but  such  regulatory  agreement  has
 expired  and/or  was formerly subject to contractual restrictions imple-
 menting the requirements of section 576 of the private  housing  finance
 law  but  that  such  contractual restrictions have expired; and (2) had
 formerly received a tax exemption under section 577 of the private hous-
 ing finance law but such tax exemption either has expired or  is  other-
 wise no longer being received.
   22.  This  legislation  squarely  addresses the legal uncertainty that
 threatens the future of many city-sponsored  HDFCs.  More  particularly,
 this  legislation has three overriding goals: (1) to protect and promote
 the self-determination of HDFC co-ops; (2) to provide strong  incentives
 for  HDFC  co-ops with expired controls to agree to remain as affordable
 housing; and (3) to ensure that the HDFC co-ops that agree to remain  as
 affordable housing are in sound condition and are economically self-suf-
 ficient. These three overriding objectives are complementary.
   23.  The  current  HDFC  tax  exemption  for most city-sponsored HDFCs
 co-ops is scheduled to expire in 2029. Already,  many  financial  insti-
 tutions  have  indicated  a  reluctance to lend to HDFCs in light of the
 financial uncertainty associated with the scheduled  expiration  of  the
 HDFC  tax  exemption in five years. This legislation will eliminate this
 uncertainty by providing a permanent tax incentive for HDFCs.
   24. Currently, HDFC co-ops receive a partial tax exemption - known  as
 "the  DAMP tax benefit". The DAMP tax benefit takes the form of a cap on
 assessed valuation per dwelling unit - currently $12,542. As  previously
 noted, this legislation removes the sunsetting of the DAMP tax exemption
 and  makes  the  tax  exemption  permanent. Furthermore, the legislation
 allows HDFC co-ops to receive the greater of the DAMP tax  exemption  or
 twice the tax abatement that most market-rate co-ops presently currently
 receive under section 467-a of the real property tax law (but which HDFC
 co-ops  presently are ineligible to receive). This increased tax benefit
 to HDFCs is a recognition that income-restricted HDFC co-ops  are  enti-
 tled  to  greater  benefits  than market-rate co-ops. This increased tax
 benefit is a vital means to promote and  protect  housing  affordability
 and  to  provide  financial  stability  to  HDFCs.  The  benefit also is
 intended as an inducement for current HDFC co-ops (with expired  regula-
 tory  controls)  to make a long-term commitment to remain as income-res-
 tricted HDFCs - rather than exercising their right to  reincorporate  as
 another  form  of  housing  cooperative  that  is  not subject to income
 restrictions.
   25. This legislation also establishes a mechanism to ensure that HDFCs
 that receive the tax benefit comply with the new affordability  require-
 ments. As a condition of the continuing receipt of the tax benefit, each
 HDFC  is  required  to  file an annual certification stating that it has
 complied with the  affordability  requirements.  HPD  is  authorized  to
 review  and  audit  the  sales  records  of  the HDFC in order to ensure
 compliance with these requirements. Furthermore, HPD has  the  right  to
 suspend  or revoke the tax exemption and tax abatement if HPD determines
 that HDFC has willfully not complied  with  the  affordability  require-
 ments.
   26.  For  the vast majority of HDFC co-ops, the proposed enhanced real
 estate tax benefit -- together with  the  availability  of  below-market
 interest  financing  available  through  HPD  --  would be sufficient to
 ensure both affordability and fiscal stability. However, for perhaps  10
 to  20 percent of HDFCs -- which are in fair to poor financial condition
 A. 2707                             6
 
 - something more is needed. In  recognition  of  this  special  need  of
 economically  distressed HDFCs, the legislation extends the authority of
 the city of New York to offer special tax relief to HDFC co-ops that are
 in  severe  fiscal distress and that are in danger of tax foreclosure by
 reason of unpaid real estate taxes. Such tax relief  is  conditioned  on
 the  HDFC co-op agreeing to enter into a special regulatory agreement in
 which the city exercises appropriate oversight  and  monitoring  of  the
 HDFC.  Current  legislation  was  enacted  in  2002  and  authorized tax
 forgiveness only for HDFCs that "(as of) January 1, 2002 had outstanding
 municipal real estate taxes relating to any period prior to  January  1,
 2001."  This  baseline year for tax forgiveness (i.e., tax arrears as of
 2001) has never been updated to a more current tax year. The legislation
 updates the baseline year so that the city has the flexibility to  offer
 tax forgiveness (in appropriate cases and subject to strict controls set
 forth  in  current law) for HDFC co-ops that are at risk of tax foreclo-
 sure. In this way an economically distressed HDFC co-op  is  saved  from
 tax  foreclosure,  and  may  thereby  provide sustainable and affordable
 housing for years to come. This is critically important - not  just  for
 the HDFC shareholders themselves - but also for neighborhood stability.
   27.  In summary, this legislation provides a much needed permanent tax
 incentive for HDFCs -- as well as targeted tax relief  for  economically
 distressed  HDFCs.  The permanent tax benefit will eliminate the current
 uncertainty surrounding the expiration of the DAMP tax exemption in 2029
 - and will thereby ease  the  availability  of  mortgage  financing  for
 HDFCs.  Furthermore,  the  permanent  tax benefit will serve as a strong
 incentive for HDFCs with expired regulatory  controls  to  affirmatively
 choose   to   remain  as  affordable  HDFC  housing  subject  to  income
 restrictions -- consistent with  democratic  principles  of  self-gover-
 nance.  This  approach  is  a  matter  of basic fairness and justice; is
 consistent with the promises given to HDFCs over the past thirty  years;
 and  is  in  full accord with how all other government-sponsored private
 housing under the private housing finance law is treated (such as  Mitc-
 hell-Lama  housing  and  Article V redevelopment companies). Most impor-
 tantly, this approach will ensure the long-term  economic  viability  of
 affordable HDFC co-ops.
   §  3. Subdivision 5 of section 573 of the private housing finance law,
 as amended by chapter 410 of the laws of 1984, is  amended  to  read  as
 follows:
   5.  The  secretary of state shall not file the certificate of incorpo-
 ration of any such corporation  or  any  amendment  thereto  unless  the
 consent  or  approval  of the commissioner or the supervising agency, as
 the case may be, is affixed thereon or attached thereto. Consent to  the
 filing of such certificate of incorporation shall be based upon findings
 by the commissioner or supervising agency as to the character and compe-
 tence  of  the  sponsor.    FOR  PURPOSES  OF THIS SUBDIVISION, THE TERM
 "AMENDMENT" AS APPLIED TO SUCH CORPORATION SHALL MEAN  AND  INCLUDE  ANY
 CHANGES IN A CERTIFICATE OF INCORPORATION AS AUTHORIZED IN SECTION EIGHT
 HUNDRED  ONE  OF THE BUSINESS CORPORATION LAW BUT SHALL NOT BE DEEMED TO
 INCLUDE A DISSOLUTION OF SUCH  CORPORATION  PURSUANT  TO  SECTION  EIGHT
 HUNDRED  FIVE  OF  THE BUSINESS CORPORATION LAW. THE DISSOLUTION OF SUCH
 CORPORATION DOES NOT REQUIRE THE CONSENT OR APPROVAL OF THE COMMISSIONER
 OR THE SUPERVISING AGENCY. A HOUSING DEVELOPMENT FUND  COMPANY  HAS  THE
 RIGHT  UNDER  THIS  SECTION AND SECTION FIVE HUNDRED SEVENTY-SIX OF THIS
 ARTICLE TO DISSOLVE AND RE-INCORPORATE UNDER  THE  BUSINESS  CORPORATION
 LAW  OR OTHER APPLICABLE LAW, PROVIDED THAT THE HOUSING DEVELOPMENT FUND
 COMPANY:
 A. 2707                             7
 
   A. WAS FORMERLY SUBJECT TO A REGULATORY AGREEMENT BUT SUCH  REGULATORY
 AGREEMENT  HAS  EXPIRED  AND/OR  WAS  FORMERLY  SUBJECT  TO  CONTRACTUAL
 RESTRICTIONS IMPLEMENTING  THE  REQUIREMENTS  OF  SECTION  FIVE  HUNDRED
 SEVENTY-SIX  OF  THIS  ARTICLE  BUT  SUCH  CONTRACTUAL RESTRICTIONS HAVE
 EXPIRED; AND
   B. HAD FORMERLY RECEIVED A TAX EXEMPTION AND/OR TAX ABATEMENT PURSUANT
 TO  SECTION  FIVE  HUNDRED  SEVENTY-SEVEN  OF  THIS ARTICLE AND SUCH TAX
 EXEMPTION AND/OR TAX ABATEMENT HAS EITHER EXPIRED  OR  IS  OTHERWISE  NO
 LONGER BEING RECEIVED.
   §  4.  Section  576  of  the private housing finance law is amended by
 adding a new subdivision 4 to read as follows:
   4. A HOUSING DEVELOPMENT FUND COMPANY THAT IS NO LONGER SUBJECT EITHER
 TO A REGULATORY AGREEMENT OR TO DEED RESTRICTIONS ENTERED INTO WITH  THE
 COMMISSIONER  OR  SUPERVISORY AGENCY SHALL CONTINUE TO BE SUBJECT TO THE
 OVERSIGHT OF THE COMMISSIONER OR  SUPERVISORY  AGENCY,  SUBJECT  TO  THE
 LIMITATION SET FORTH IN PARAGRAPH (D) OF SUBDIVISION ONE OF SECTION FIVE
 HUNDRED  SEVENTY-SEVEN OF THIS ARTICLE, PROVIDED THAT THE HOUSING DEVEL-
 OPMENT FUND COMPANY CONTINUES TO ELECT TO RECEIVE A TAX EXEMPTION AND/OR
 TAX ABATEMENT PURSUANT TO SECTION FIVE  HUNDRED  SEVENTY-SEVEN  OF  THIS
 ARTICLE.  IF SUCH HOUSING DEVELOPMENT FUND COMPANY ELECTS NOT TO RECEIVE
 A  TAX  EXEMPTION AND/OR TAX ABATEMENT PURSUANT TO SUCH SECTION, THEN IT
 SHALL CEASE TO BE SUBJECT TO THE REGULATION AND OVERSIGHT OF THE COMMIS-
 SIONER OR SUPERVISORY AGENCY.
   § 5. Subdivision 1 of section 577 of the private housing finance  law,
 as  amended by chapter 658 of the laws of 1967, paragraph (a) as amended
 by chapter 428 of the laws of 1980, paragraph (c) as  added  by  chapter
 494 of the laws of 1995, and paragraph (d) as added by chapter 73 of the
 laws of 2009, is amended to read as follows:
   1.  (a)  The  local  legislative  body  of any municipality in which a
 project of a housing development fund company is or is to be located may
 exempt AND ABATE the real property in such project from local and munic-
 ipal taxes including school taxes,  other  than  assessments  for  local
 improvements,  to the extent of all or part of the value of the property
 included in the completed project. The tax exemption AND  TAX  ABATEMENT
 shall  operate  and continue for [such period as may be provided by such
 local legislative body, but in no event for a period of more than  forty
 years, commencing] SO LONG AS A HOUSING DEVELOPMENT FUND COMPANY REMAINS
 IN  COMPLIANCE WITH THE REQUIREMENTS OF THIS SECTION, AND SHALL COMMENCE
 in each instance from the date on which the benefits of  such  exemption
 first  became available and effective.  THE TAX EXEMPTION AND TAX ABATE-
 MENT SHALL BE APPLIED TO:
   (I) NEWLY CREATED HOUSING DEVELOPMENT FUND COMPANIES THAT ARE  SUBJECT
 TO  REGULATORY AGREEMENT AND/OR CONTRACTUAL OR DEED RESTRICTIONS IMPOSED
 BY THE COMMISSIONER OR SUPERVISORY AGENCY;
   (II) HOUSING DEVELOPMENT FUND COMPANIES THAT ARE PRESENTLY SUBJECT  TO
 A  REGULATORY  AGREEMENT AND/OR CONTRACTUAL OR DEED RESTRICTIONS IMPOSED
 BY THE COMMISSIONER OR SUPERVISORY AGENCY; AND
   (III) HOUSING  DEVELOPMENT  FUND  COMPANIES  THAT  ARE  NOT  PRESENTLY
 SUBJECT  TO  A  REGULATORY  AGREEMENT  AND  ARE NOT PRESENTLY SUBJECT TO
 CONTRACTUAL OR DEED RESTRICTIONS IMPOSED BY THE COMMISSIONER OR SUPERVI-
 SORY AGENCY BUT THAT AGREE TO THE CONDITIONS OF THE  TAX  EXEMPTION  AND
 TAX ABATEMENT AS HEREINAFTER DESCRIBED IN PARAGRAPH (B) OF THIS SUBDIVI-
 SION.
   (b)  IN  ORDER  FOR  A  HOUSING  DEVELOPMENT FUND COMPANY DESCRIBED IN
 SUBPARAGRAPH (III) OF PARAGRAPH (A) OF THIS SUBDIVISION TO  BE  ELIGIBLE
 FOR  A  TAX  EXEMPTION  AND TAX ABATEMENT PURSUANT TO THIS SECTION, SUCH
 A. 2707                             8
 
 COMPANY SHALL BE REQUIRED, FOR SO LONG AS IT RECEIVES SUCH TAX EXEMPTION
 AND TAX ABATEMENT, TO NOT APPROVE A SALE  OF  AN  APARTMENT  UNLESS  THE
 PURCHASER  OF  THE  APARTMENT  PROVIDES SATISFACTORY PROOF OF INCOME AND
 UNLESS THE INCOME OF THE PURCHASER IS NO GREATER THAN THE INCOME LIMITA-
 TION  SPECIFIED HEREIN. SUCH INCOME LIMITATION SHALL BE, AT THE ELECTION
 OF THE HOUSING DEVELOPMENT FUND COMPANY, EITHER (I) THE APARTMENT RESALE
 REQUIREMENT OF PARAGRAPH B OF SUBDIVISION ONE OF  SECTION  FIVE  HUNDRED
 SEVENTY-SIX  OF THIS ARTICLE; OR (II) A REQUIREMENT THAT THE INCOME OF A
 PURCHASER OF AN APARTMENT NOT EXCEED ONE HUNDRED SIXTY-FIVE  PERCENT  OF
 THE  AREA  MEDIAN  INCOME, AS DETERMINED FROM TIME TO TIME BY THE UNITED
 STATES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT. AS  A  CONDITION  OF
 THE  CONTINUING  RECEIPT  OF  SUCH  TAX EXEMPTION AND TAX ABATEMENT, THE
 HOUSING DEVELOPMENT FUND COMPANY SHALL FILE AN ANNUAL CERTIFICATION WITH
 THE COMMISSIONER OR SUPERVISORY AGENCY THAT  THE  COMPANY  HAS  COMPLIED
 WITH  THE  REQUIREMENTS  OF  THIS  SECTION.  SUCH CERTIFICATION SHALL BE
 LIMITED TO A LISTING OF APARTMENTS SOLD  OR  TRANSFERRED  IN  THE  PRIOR
 TWELVE MONTHS AND A STATEMENT THAT THE INCOME OF THE PURCHASER OR TRANS-
 FEREE  OF  THE  APARTMENT  COMPLIES  WITH THE INCOME REQUIREMENT OF THIS
 PARAGRAPH, EXCEPT THAT A TRANSFEREE WHO IS A MEMBER OF THE  TRANSFEROR'S
 FAMILY OR HOUSEHOLD NEED NOT COMPLY WITH SUCH REQUIREMENT.
   (C)  (I)  THE  COMMISSIONER OR SUPERVISORY AGENCY MAY REVIEW AND AUDIT
 THE SALES RECORDS OF A HOUSING DEVELOPMENT  FUND  COMPANY  IN  ORDER  TO
 ENSURE COMPLIANCE WITH THE REQUIREMENTS OF THIS SECTION. THE COMMISSION-
 ER  OR  SUPERVISORY AGENCY SHALL HAVE THE AUTHORITY TO SUSPEND OR REVOKE
 THE TAX EXEMPTION AND TAX ABATEMENT APPLICABLE TO ANY  HOUSING  DEVELOP-
 MENT  FUND COMPANY, IN PROPORTION TO THE PERCENTAGE OF DWELLING UNITS AT
 A HOUSING DEVELOPMENT FUND  CORPORATION  NOT  IN  COMPLIANCE  WITH  THIS
 SECTION,  IF  THE COMMISSIONER DETERMINES THAT THE COMPANY HAS WILLFULLY
 VIOLATED THE PROVISIONS OF THIS SECTION, SO LONG AS THE HOUSING DEVELOP-
 MENT FUND COMPANY IS PROVIDED WITH PRIOR WRITTEN NOTIFICATION AS TO EACH
 SPECIFIC INSTANCE OF NONCOMPLIANCE AND TO WHICH DWELLING UNIT SUCH  NON-
 COMPLIANCE IS ALLEGED.
   (II)  A HOUSING DEVELOPMENT FUND COMPANY SHALL HAVE THE RIGHT TO REBUT
 ALLEGATIONS OF A WILLFUL VIOLATION OF THIS SECTION, AND ALSO  TO  CHARGE
 AND COLLECT ADDITIONAL MONIES FROM ANY SHAREHOLDER, INCLUDING SUCCESSORS
 AND  ASSIGNS,  FOUND  BY  THE COMMISSIONER OR SUPERVISORY AGENCY TO HAVE
 WILLFULLY NOT COMPLIED WITH THE REQUIREMENTS OF THIS SECTION  SO  AS  TO
 RECOVER EXPENSES FOR ALL LOSSES OF TAX EXEMPTIONS AND TAX ABATEMENTS AND
 SO AS TO RECOVER ALL EXPENSES ASSOCIATED WITH RESPONDING TO SUCH ALLEGA-
 TIONS BY THE COMMISSIONER OR SUPERVISORY AGENCY.
   (III) ANY ANNUAL CERTIFICATION SUBMITTED PURSUANT TO THIS SECTION THAT
 HAS  BEEN ACCEPTED FOR FILING AND THAT HAS NOT BEEN SUBJECT TO A SUSPEN-
 SION OR REVOCATION ACTION BY THE COMMISSIONER OR SUPERVISORY AGENCY  FOR
 A  PERIOD OF FIVE YEARS SHALL BE DEEMED CORRECT AND SHALL NOT BE SUBJECT
 TO FURTHER AUDIT OR REVIEW BY THE COMMISSIONER OR SUPERVISORY AGENCY.
   (D) THE CONDITIONS SET FORTH IN  PARAGRAPH  (B)  OF  THIS  SUBDIVISION
 SHALL  BE THE SOLE AND EXCLUSIVE CONDITIONS GOVERNING THE ELIGIBILITY OF
 A HOUSING DEVELOPMENT FUND COMPANY DESCRIBED IN  SUBPARAGRAPH  (III)  OF
 PARAGRAPH  (A)  OF THIS SUBDIVISION FOR RECEIPT OF THE TAX EXEMPTION AND
 TAX ABATEMENT AUTHORIZED IN PARAGRAPH (E) OF THIS SUBDIVISION.
   (E) FOR EACH ELIGIBLE HOUSING DEVELOPMENT  FUND  COMPANY,  THE  ANNUAL
 AMOUNT  OF  THE  TAX  EXEMPTION AND TAX ABATEMENT AUTHORIZED PURSUANT TO
 THIS SECTION SHALL BE THE GREATER OF:
   (I) TWELVE THOUSAND FIVE HUNDRED FORTY-TWO DOLLARS, EQUIVALENT TO  THE
 CAP ON ASSESSED VALUE PER APARTMENT OF FIFTY THOUSAND DOLLARS IN THE TWO
 A. 2707                             9
 
 THOUSAND  TWENTY-FOUR  TAX  YEAR,  AND WHICH SHALL INCREASE BY TWO AND A
 HALF PERCENT PER YEAR IN EACH SUBSEQUENT TAX YEAR; OR
   (II) THE NET REDUCTION IN REAL ESTATE TAXES RESULTING FROM TWO HUNDRED
 PERCENT  OF  THE  TAX  ABATEMENT  FOR HOUSING COOPERATIVES AUTHORIZED BY
 SECTION FOUR HUNDRED SIXTY-SEVEN-A OF THE REAL PROPERTY TAX LAW.
   (F) Where a municipality acts on behalf of another taxing jurisdiction
 in assessing real property for the purpose of taxation,  or  in  levying
 taxes therefor, the action of the local legislative body of such munici-
 pality in granting such tax exemption shall have the effect of exempting
 the real property in such project from local and municipal taxes includ-
 ing  school taxes, other than assessments for local improvements, levied
 by or in behalf of both such taxing jurisdictions.
   [(c)] (G) The local legislative body of any municipality may grant  an
 exemption  under  paragraph (a) of this subdivision to the real property
 of a project of any entity to which it is  authorized  to  make  a  loan
 pursuant to section five hundred seventy-six-c of this article.
   [(d)] (H) In a city having a population of one million or more, within
 one  hundred  twenty days following receipt of a written submission from
 the supervising agency requesting a tax exemption pursuant to  paragraph
 (a)  of this subdivision for the real property containing the project of
 a housing development fund company, the  local  legislative  body  shall
 approve  or disapprove by resolution the requested tax exemption. If the
 local legislative body fails to take  such  action  within  one  hundred
 twenty  days  following  receipt  of  such  written submission from such
 supervising agency, then the tax exemption requested by the  supervising
 agency shall be deemed approved pursuant to paragraph (a) of this subdi-
 vision.
   §  6.  Paragraph  (b) of subdivision 1 of section 577-b of the private
 housing finance law, as amended by chapter 225 of the laws of  2004,  is
 amended to read as follows:
   (b)  on January first, two thousand [two] TWENTY-FOUR, had outstanding
 municipal real estate taxes relating to  any  period  prior  to  January
 first, two thousand [one] TWENTY-THREE.
   §  7. This act shall take effect on the first of January next succeed-
 ing the date on which it shall have become a law.