A state judge has invalidated an “affordable housing” law that local real estate agents complained lowered property values and that the Bloomberg administration said could have displaced the lower-income tenants the Mitchell-Lama program is intended to help.

The law, passed in 2005, would have forced Mitchell-Lama landlords who wanted to sell or convert apartments to market-rate properties to first offer to sell them to tenants.

In ruling that the city overstepped its statutory bounds when it encroached on a program run by the state, Justice Marilyn Shafer of State Supreme Court barred the city from enforcing the law. The April 11 decision was made public yesterday.

An attorney for the Real Estate Board of New York, Scott Mollen, said the law would have discouraged developers from participating in future lower-income housing programs. The board was the plaintiff in the suit.

The City Council speaker, Christine Quinn, said in a statement that she was “disheartened” about the court’s decision, and vowed to “push for more affordable housing options for working New Yorkers.”

The council overrode Mayor Bloomberg’s veto in 2005.

A spokesman for the Department of Housing Preservation and Development, Neill Coleman, said the city concurred with the ruling.

The mayor recently signed two new laws giving tax breaks to Mitchell-Lama developments in exchange for 15 years in the program.