As discussed in our December 16, 2022 and March 8, 2023 alerts, Section 610 of the New York Private Housing Finance Law (Section 610) was adopted to permit owners of rent stabilized properties under certain circumstances to collect rents above registered legal rents for units receiving rental assistance. Initially each of the regulatory agencies adopted their own procedures for implementation, but last month, the New York City Department of Housing Preservation and Development (HPD), the New York City Department of Social Services (DSS), the New York City Housing Authority (NYCHA), the New York City Housing Development Corporation (HDC), and the New York State Homes and Community Renewal (HCR) released consolidated guidance outlining the procedures owners must follow to charge and collect Section 610 rents, which vary depending on the applicable regulatory agency and subsidy provider. While HPD’s Standard of Procedure provides guidance on a range of project types and phases, this alert focuses on projects with existing regulatory agreements which have converted to permanent financing.
Eligibility
The property in question must 1) be subject to an existing regulatory agreement with a state or municipal agency or public benefit corporation, 2) be subject to rent stabilization, and 3) receive tenant- or project-based subsidy. The agencies have interpreted Section 610 to allow agency discretion in making the determination of whether a given project should be permitted to charge and collect Section 610 rents, and all regulatory agencies assess project financials in order to prioritize projects with the most need, whether it be financial stress and/or physical disrepair
Application procedure
Interested owners must submit an application to the agency with a regulatory agreement affecting the property. Owners of projects with two or more regulatory agreements should apply to whichever agency provided the low-income housing tax credits (LIHTC) or tax-exempt bonds, and should take care to review all applicable regulatory agreements to identify and amend any provisions that would limit the collection of rental assistance rents in the absence of explicit language providing otherwise.
The below chart provides a summary of submission requirements
| Regulatory Agency | Submission Materials |
|---|---|
| HPD (Offices of Development and/or Asset & Property Management) |
Supporting Documentation: HPD Section 610 request form Note: Projects in HPD’s Asset Management portfolio must be up to date on annual submissions, including the most recent year’s project financials |
| HDC |
Supporting Documentation:
|
| HCR (9% LIHTC), HFA (4% LIHTC), and New York State Housing Trust Fund Corporation (HTFC) or HOME) |
Supporting Documentation:
|
Section 610 approval is evidenced by an amended regulatory agreement authorizing the collection of rental assistance rents, and an approval letter from the regulatory agency which owners will deliver to subsidy providers during the implementation phase.
Implementation procedure
For tenant-based or project-based vouchers, owners may charge Section 610 rents only after approval of the new rent by the Section 8 administering agency (or other subsidy provider) and upon renewal of an existing lease or upon entering into a new lease, and only if 1) the date of such renewal or new lease is after the date of the regulatory agreement amendment, and 2) the lease appends the Section 610 rider required by DHCR (Rent Stabilized Lease Notice to Tenants—Rights Concerning Legal Rents and Higher Actual Rents, RA-LR3), which informs the tenant of the owner’s rights under Section 610, in addition to any required rent stabilization riders. Requests for Section 8 project-based voucher rent increases must be made in conjunction with the contract anniversary date. Owners may collect up to the payment standard for (i) the unit size payment standard or (ii) the household size payment standard pursuant to the subsidy agency’s payment calculation and subject to the subsidy provider’s rent reasonableness requirements, and in no circumstances may the tenant portion of the rent be modified as a result of Section 610 benefits.
What’s next?
We are monitoring the agencies’ prioritization of Section 610 applications and tracking reported difficulties and delays in collecting subsidy payments even after Section 610 approval from the regulatory agency. We have noted extended delays in processing the increases in Section 8 voucher assistance payments with some Section 8 agencies.
For more information on the content of this alert, please contact your Nixon Peabody attorney or the authors of this alert.