Inadequate oversight of a New York City rental assistance program is leading to significant delays in finding permanent housing for homeless people and those at risk of homelessness, according to an audit released today by New York State Comptroller Thomas P. DiNapoli. The audit found the New York City Department of Social Services (DSS) is not properly managing the City Fighting Homelessness and Eviction Prevention Supplement (CityFHEPS) program.

“The New York City Department of Social Services should improve its management of the CityFHEPS program to ensure every dollar goes towards helping people experiencing homelessness,” DiNapoli said. “The housing affordability crisis in New York City underscores the importance of an effective and efficient rental assistance program.”

DSS launched CityFHEPS in 2018, and according to officials processed 41,563 cases through January 2024, helping 87,588 individuals find permanent housing. From New York City fiscal years (FY) 2019 to 2023, CityFHEPS’s expenses increased from $174 million to $365 million. The program’s budget is $816 million for FY 2024. The audit reviewed the program from July 2019 through December 2023.

Unreliability of Data 

DSS’s data of shelter exits was found to be unreliable. Case files for 57 households identified in exit reports as having left the shelter system were reviewed. In several cases, the households had not actually left shelters or found housing. In response, DSS indicated cases were not coded correctly in its system. Auditors said these findings point to a failure in monitoring and oversight. Incorrect data in DSS’s Client Assistance and Rehousing Enterprise System (CARES), including exit reports, may limit a shelter resident’s access to permanent housing because this data plays an important role in identifying households who are potentially eligible for CityFHEPS.

Eligibility Delays 

Auditors reviewed 52 cases of households approved for CityFHEPS and found significant delays in determining eligibility. For the cases sampled, on average, households had to wait almost 10 months for approval and exiting the shelter into permanent housing. One household waited more than three years before being approved for the program.

Shopping Letters Delays 

Once households meet CityFHEPS requirements, they are issued a “Shopping Letter,” which enables them to start looking for housing. The letter states the highest amount of rent a household is allowed to spend. Auditors found numerous delays in households receiving these letters. While delays in issuing these letters cause longer shelter stays, auditors found DSS has not taken any steps to investigate why delays are occurring or how to fix them.

Subsidy Payment Delays 

Auditors requested proof of payments made in 52 CityFHEPS cases, but DSS only provided proof of payment for 12 cases. In seven instances, DSS failed to make timely rental assistance payments to landlords. In one case, DSS continued issuing rental assistance payments to the landlord for two months after the tenant moved from the housing unit back to the shelter.

Rent Payments in Excess of CityFHEPS 

Some affordable housing units provided by the New York City’s Department of Housing Preservation & Development (HPD) and Housing Development Corporation (HDC) are allowed to exceed CityFHEPS’ maximum rents. According to data from DSS, there were 4,441 of these cases between February 2020 to September 2023.

Auditors found no assurance that DSS matches households to proper units because it lacks sufficient written policies and procedures for how these cases are chosen and approved. There is also a lack of communication between DSS and HPD regarding client selection and eligibility.

In addition, DSS does not have a process to verify that “unit hold” incentives, equal to one month’s rent, are only paid to eligible landlords while a CityFHEPS application is being processed. Auditors found that NYC Human Resources Administration (HRA) incorrectly paid $1.7 million to landlords who were ineligible for the unit hold incentive during the period from January 2019 to March 2024. DSS blamed the issue on an internal system coding error and said it would try to recoup the inappropriate payments.

Supportive Housing Units Vacant and Uninhabitable 

In 2021, DSS entered into contracts with four developers worth $447 million over 30 years to provide permanent housing and a range of supportive social services to the tenants of 14 buildings in the Bronx. Of the 567 units for use by CityFHEPS households, known as Subchapter B units, 20% remained vacant as of December 2023 and according to DSS and the contractors were uninhabitable. In addition, auditors found DSS paid a contractor for units with CityFHEPS funds that had been vacated.

As of March 12, 2024, units in Subchapter B buildings had a total of 5,374 open housing code violations, including 1,396 Class C violations, which are deemed immediately hazardous. Violations include defective or missing fire safety doors, mouse, rat or roach infestations, mold or peeling lead paint.

DSS did not provide adequate oversight of Subchapter B contractors to ensure the units were managed efficiently and made available to eligible clients referred to by the Department of Homeless Services (DHS). Further DSS did not conduct physical inspections of any of the units to ensure they met safety and habitability standards.

DiNapoli’s audit made several recommendations to DSS including:

• Implement a system that appropriately monitors clients’ eligibility for CityFHEPS and ensure that Shopping Letters are issued and renewed in a timely manner.
• Routinely monitor client case management records in DHS CARES for potential errors and update or correct them accordingly.
• Establish proper internal controls over CityFHEPS payments to landlords, including monitoring of incentives and recoup any overpayments or improper payments, as warranted.
• Improve controls related to Subchapter B units, including but not limited to:
  • Establishing proper policies and procedures related to the administration of Subchapter B units.
  • Performing regular physical inspections of units to ensure their habitability for CityFHEPS clients.
  • Monitoring monthly rent payments to ensure that DSS is only paying for units that are occupied by CityFHEPS clients.

In response, DSS disagreed with several of the recommendations, claiming shopping letters aren’t delayed and many of the issues identified with Subchapter B units are the responsibility of HPD.

Audit 
Administration of the CityFHEPS Program for Department of Homeless Services Shelter Residents