Objectives

To determine whether Mitchell-Lama developments supervised by the New York City Department of Housing Preservation and Development are being maintained in a manner that protects the health and safety of residents, and whether funds at these developments are being used for intended purposes. Our audit covered the period from January 2019 through February 2024.

About the Program

The Mitchell-Lama Housing Program (Program) was created in 1955 to provide affordable rental and cooperative (co-op) housing to middle-income families. The New York City (City) Department of Housing Preservation and Development (HPD), the nation’s largest municipal housing preservation and development agency, is charged with promoting the quality and affordability of the City’s housing and the strength and diversity of its many neighborhoods. There are both City-supervised and State-supervised Mitchell-Lama developments. As of February 22, 2024, there are 93 HPD-supervised Mitchell-Lama rental and limited-equity co-op developments, with approximately 46,902 units.

Owners of City Mitchell-Lama developments enter into written management agreements with agents for management services; these agreements must be approved in writing by HPD. The managing agents of Mitchell-Lama developments are required to maintain developments in an economically viable manner, in good physical condition, and in compliance with current Mitchell-Lama rules. This audit is based on a sample of three developments: Arverne/Nordeck (Queens), Arlington Terrace/North Shore (Staten Island), and York Hill (Manhattan).

Key Findings

Our audit found that HPD does not adequately oversee the physical and financial conditions at the sampled developments. Management at all three sampled developments failed to provide a safe and clean living environment for residents, and they misspent funds.

• Across the three developments, we observed hazardous/unsafe physical conditions, including façade damage, non-working self-closing/fire doors, and units with mold, water damage, collapsed walls and ceilings, peeling paint, and broken doors and windows.
• Even though HPD utilizes the City’s Housing Development Corporation (HDC) to perform physical inspections of certain Mitchell-Lama developments, we found a number of hazardous conditions previously observed and reported by HDC inspectors that either remained uncorrected or persisted.
• We found approximately $1.6 million in transactions for the period from January 2019 through August 2023 that were either unrelated to normal operations or inadequately supported. Included in the $1.6 million are:
  • $1,134,563 in unsupported transactions, including $578,840 in various capital improvements, $71,697 in payroll expenses, and a $300,000 payment to one vendor for which we could not determine what services were provided.
  • $392,038 in salaries where the general ledgers did not include the employees’ names. As salaries were listed with the employees’ titles only, we had no assurance as to whom salaries were paid.
  • $43,628 in bonuses despite numerous hazardous/unsafe conditions identified at the sampled developments.
  • $28,698 for parties, meals, and gifts, including a $9,037 Rolex watch provided as a retirement gift for a building superintendent.
• We found $620,000 in contracts with no evidence of competitive analysis and/or bidding and written HPD approval.
• We estimated that managing agents were unable to collect over $1.5 million in unrealized rental income from apartments that remained vacant for more than 120 days.

Key Recommendations

• Improve monitoring of the three developments, including but not limited to:
  • Verifying that managing agents maintain the developments in a manner that preserves the properties and protects the health and safety of residents by ensuring annual individual unit inspections are conducted, related reports are completed, and deficiencies are corrected; and routinely checking to verify that all self-closing/fire doors are fully operational.
  • Coordinating with HDC, when applicable, to ensure physical inspection reports are provided to HPD and the managing agents in a timely manner.
  • Taking immediate corrective action when hazardous/unsafe conditions are identified.
• Ensure managing agents operate the developments in a fiscally sound manner by:
  • Adequately reviewing transactions for appropriateness of expenses and sufficiency of supporting documentation during annual reviews.
  • Developing and implementing policies and procedures regarding bonus and gratuity payments.
  • Periodically reviewing a sample of contracts and expenses to identify payments to vendors and service providers that, in the aggregate, equal or exceed $100,000 in any fiscal year, to ensure that they are competitively bid and that contracts at $100,000 or more were approved by HPD.
  • Promptly filling vacant units.

Photos

2023-N-2 Photo Galleries

• North-Shore – Interior
• North-Shore – Exterior
• Averne – Interior
• Averne – Exterior
• York Hill – Interior

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Averne – Exterior

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Averne – Interior

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North-Shore – Exterior

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North-Shore – Interior

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York Hill – Interior

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