Applicants who were next in line for coveted Mitchell-Lama apartments were skipped over for people farther down the waiting lists because of lax oversight and poor controls, an audit by New York State Comptroller Thomas P. DiNapoli determined. The audit released today uncovered other lapses, including managing agents for Mitchell-Lama buildings who let residents have apartments without the required approval from the New York City Department of Housing Preservation and Development (HPD) as well as co-op owners renting out their apartments on Airbnb.

“New York is facing a dire shortage of affordable housing and it is imperative that the affordable apartments we have are managed fairly,” DiNapoli said. “No one should wait years for an apartment only to be passed over without explanation. Greater vigilance and oversight are needed to ensure Mitchell-Lama’s integrity as a resource of moderate- and middle-income housing. I commend HPD for taking steps to fix the problems we found and expect it will finish the corrections it has underway.”

DiNapoli’s audit examined three developments: Cadman Towers, a 421-unit co-op in Brooklyn; Trinity House, a 199-unit rental building on Manhattan’s Upper West Side; and Washington Square Southeast, a 174-unit co-op in Greenwich Village.

Next in Line for an Apartment, Skipped Over

Over nearly three years — Jan. 1, 2012 to Nov. 30, 2014 — just 69 apartments became available in these three developments. But at Trinity and Washington Square, managing agents did not always offer open apartments to the next applicants on their waiting lists. In one instance, the applicant selected by Trinity’s managing agent skipped ahead of three other people without explanation. Trinity’s managing agent agreed the next applicant on the list should have been offered the apartment.

DiNapoli’s auditors discovered that Washington Square’s waiting list, created by lottery in 2004, contained no addresses for most of the first 300 names on it. The building’s management explained that in 2004 it was up to the management company to use the postcards picked in the lottery to determine applicant’s addresses but that the cards were missing. Three applicants whose contact addresses were allegedly missing were not offered an available apartment. When auditors visited, they found a box labeled “postcards” in the room used by management staff. The box contained postcards for applicants 1 through 300, including the three who were passed over.

Applicants Not Approved by the City

When an apartment’s occupancy changes — whether the unit goes to a family member or a new applicant — HPD must approve the new tenant.

HPD maintains a record of Mitchell-Lama residents by having each unit submit an annual affidavit listing household members and their incomes. Separately, each development’s managing agent keeps a monthly rent roll that lists each apartment’s head of household. But when DiNapoli’s auditors compared the two lists, they found the listed names for 40 apartments didn’t match up. The vast majority of these discrepancies existed because the managing agents did not submit the names of the new applicants to HPD for approval, as required.

In one instance, the managing agent at Trinity House added the name of a resident’s caregiver to the lease at the resident’s request, but never sought HPD approval. HPD investigated the matter after auditors brought it to the agency’s attention and determined that the caregiver wasn’t entitled to the apartment and directed the building’s management to begin eviction proceedings.

Applicants Disputed Changes to Waiting List

Managing agents had no electronic record of waiting lists, only paper lists. In addition to missing contact information, the lists were heavily amended with handwritten notations regarding the applicants’ status. When auditors reached out to the applicants, many of them disputed notations that they had withdrawn their application or had been contacted by the manager but never responded. One applicant for a three-bedroom unit at Washington Square was noted to have failed to respond to building management, but she told auditors she was never contacted. An applicant farther down the list was awarded a three-bedroom apartment instead. 

Apartments Listed on Airbnb

Although Mitchell-Lama rules specifically prohibit occupants from taking payment from any guest or sub-tenant, a co-op owner at Washington Square was offering his apartment on Airbnb for $150 per night, with a three-night minimum stay. His posting had seven reviews. Another owner in the same development had garnered 50 reviews on Airbnb for an apartment which was available for $109 a night.

Recommendations

HPD generally agreed with DiNapoli’s audit recommendations that the agency:

• Implement formal plans to automate housing lotteries and waiting lists;
• Require building managers to keep supporting documentation for the notations they make to waiting lists;
• Document the reasons for awarding units to applicants other than the next available one on the list;
• Conduct more compliance reviews to ensure apartments are occupied by eligible and HPD-approved applicants;
• Follow up on the occupant discrepancies and other matters detailed in the report; and
• Follow up on the apparent misuse of Airbnb by residents at Washington Square.

Background

The Mitchell-Lama program was created in 1955 to provide affordable rental and cooperative housing to moderate income families. There are 97 HPD-supervised Mitchell-Lama developments with more than 45,000 apartments in New York City. Prospective Mitchell-Lama tenants can apply by entering a lottery as developments periodically reopen their waiting lists. The building’s managing agent notifies applicants of their position on the list and requests an application fee which is usually $200.

To read the audit, “The Mitchell-Lama Program: Awarding Housing Units and Maintaining Waiting Lists,” visit www.osc.state.ny.us/audits/allaudits/093015/14n3.pdf.