DiNapoli: Unsafe Conditions, Questionable Spending Found at Affordable NYC Housing Complexes

October 1, 2024

Photos Available Here

Unsafe conditions and over $1 million dollars in questionable spending at three affordable housing complexes show a need for greater oversight of the Mitchell-Lama program by the New York City Department of Housing Preservation and Development (HPD), according to an audit released today by New York State Comptroller Thomas P. DiNapoli. Auditors found broken fire safety doors, mold, collapsed ceilings and pest infestations among other unsafe conditions at developments in Manhattan, Queens and on Staten Island.

"Every New Yorker deserves safe and clean affordable housing," DiNapoli said. "The conditions identified in this audit are unacceptable. The city needs to do a much better job overseeing the Mitchell-Lama program and ensure funding for these buildings goes toward their maintenance."

The Mitchell-Lama program provides affordable rental and cooperative housing to middle-income families across the state. HPD oversees 93 Mitchell-Lama developments in the city with about 46,902 apartments. The city's Housing Development Corporation (HDC) performs physical inspections of the developments, and HPD relies on HDC reports to determine whether developments are being maintained as required.

Auditors inspected three of these developments in 2023: Arverne/Nordeck in Queens, Arlington Terrace/North Shore on Staten Island and York Hill in Manhattan.

Hazardous or Unsafe Conditions Found (Photos in Audit)

• Arverne/Nordeck: Collapsed ceilings and walls caused by severe water damage, black soot, exposed nails, mold and peeling paint were found inside vacant apartments. Cracks were also observed in the foundation of one building as was a large hole in the residents' courtyard.
• Arlington Terrace/North Shore: Collapsed and missing stairs, large holes and cracks in walls, peeling and chipped paint, water damage and leaks, exposed electrical wiring and pipes, mold, roach infestations, bird feces, broken sinks and cabinets, and missing floor tiles, window guards and doorknobs were found inside vacant apartments and common areas. Unsafe building façade conditions were also observed.
• York Hill: Mold, water leaks and rusting were found in apartments and cracks, rust and peeling paint on one building's façade.

"Mitchell-Lama has for decades been a vital tool for affordable housing, as rents rise rapidly citywide, yet affordability cannot come at the expense of safety," New York City Public AdvocateJumaane Williams said. "I thank State Comptroller DiNapoli for shining a light on these dangerous, egregious conditions through this audit, and call for HPD to ensure they are resolved. Housing is a human right, and reforms need to be made to ensure tenants can live with dignity. My office's annual Worst Landlord Watchlist spotlights private landlords' negligence and need of repair, and I hope this audit helps push the city to see these conditions quickly addressed."

"The hazardous conditions highlighted in this audit-ranging from severe water damage to unsafe building facades-directly impact the quality of life and wellbeing of residents," State Senator Brian P. Kavanagh, Chair of the Senate Committee on Housing said. "It is imperative that we prioritize the maintenance and safety of these properties as a part of our efforts to ensure that all New Yorkers can live in dignity and security. I thank State Comptroller DiNapoli and his auditing team for bringing the conditions of these buildings to light. I look forward to working with HPD and my colleagues in government who represent the impacted developments to ensure that these issues are addressed."

"The audits of Mitchell-Lamas (M-L) conducted by State Comptroller DiNapoli show that these affordable buildings are deteriorating, endangering the homes of thousands of residents and forcing them to live in unacceptable conditions," State Assemblymember Linda B. Rosenthal (D/WF-Manhattan), Chair of the Assembly Committee on Housing said. "The results of this and prior audits clearly demonstrate that there is barely any oversight of the M-L program, the Boards of Directors, management companies and those whose responsibility it is to ensure proper maintenance and repair. Rents increases for hardworking tenants are a constant, yet many of the necessary services and upkeep required to maintain their homes are ignored. Preserving our affordable housing stock must be a priority at all times, but especially during a housing shortage. This lax approach to monitoring M-L buildings must change, as I have been saying for years. These valuable audits by the State Comptroller must spur important changes to oversight and governance of these properties, and I will be using this information for the benefit of all Mitchell-Lama residents."

"I am very glad State Comptroller DiNapoli has taken a close look at HPD and several Mitchell-Lama developments, including York Hill in my district," State Senator Liz Krueger said. "The Mitchell-Lama program provides critical affordable housing, and yet my office has heard many concerns from York Hill residents about the ongoing problems there, which the State Comptroller's audit has substantiated. HPD needs to address these issues swiftly and effectively."

"Safe, affordable housing is vital to strong communities, and the Mitchell-Lama Program must meet that promise," State Senator James Sanders Jr. said. "The findings in the State Comptroller's audit are alarming, and I urge swift action to address these conditions. I'll be meeting with my local co-ops to discuss how we can ensure residents have the best quality of life possible and explore the role government plays in making this happen. My focus remains on how I can be most useful to the residents of the tenth senatorial district."

"My constituents deserve safe living conditions, and the findings from State Comptroller DiNapoli's audit are deeply concerning," State Senator Jessica Scarcella-Spanton said. "The hazardous conditions reported at the Mitchell-Lama developments highlight that there is an urgent need for action to make sure these residents have safe and well-maintained homes. I want to thank State Comptroller DiNapoli for his diligence in investigating these issues, as it's crucial that we prioritize the health and safety of our communities."

"Nordeck Development in Arverne is home to over 1,000 homeowners looking to build a better future for their families. The State Comptroller's audit is a damning confirmation of the dilapidation reported by residents," State Assemblymember Khaleel Anderson said. "HPD is asleep at the wheel. The findings from the State Comptroller's audit highlight the urgent need for accountability and immediate intervention to address these long-standing issues. My office will work to ensure residents have a better quality of life they deserve as homeowners."

"Every resident deserves safe, well-maintained, and affordable housing," State Assemblymember Rebecca A. Seawright said. "Thank you to State Comptroller Tom DiNapoli for identifying deeply concerning issues in our state's Mitchell-Lama buildings. We must demand transparency and accountability in our government housing programs."

"The findings from State Comptroller DiNapoli's audit of three Mitchell-Lama developments deemed living conditions at all three developments, including York Hill on the East Side of Manhattan, hazardous and unsafe," New York City Council Member Julie Menin said. "This is entirely unacceptable. Safe, well-maintained housing is not a luxury, but a necessity. It is imperative that these hazardous living conditions be redressed immediately as well as any and all mishandling of finances."

"State Comptroller DiNapoli's audit reveals disturbing failures, with the dangerous and unlivable conditions at Arlington Terrace being particularly alarming," New York City Council Member Kamillah M. Hanks said. "It is absolutely unacceptable that Staten Island residents are forced to endure such hazards. The Mitchell-Lama program is a cornerstone of affordable housing for countless New Yorkers, but without rigorous oversight and accountability, we are failing those it was designed to protect. Proper maintenance and responsible management of funds are non-negotiable-anything less is a betrayal of the public trust."

Other Safety Concerns

Several stairwell doors at Arverne/Nordeck and Arlington Terrace/North Shore did not latch and self-close so in the event of a fire, they could allow smoke or fire to spread faster. Building management at Arverne/Nordeck claimed they never received notice about the issues from HDC or HPD, while managing agents at Arlington Terrace/North Shore never corrected the issues cited in HDC's reports.

HPD did not provide auditors with any of the required annual apartment inspection reports that building managing agents are supposed to conduct. The audit found that HPD failed to properly monitor managing agents at the developments and did not inspect the developments. HPD claimed HDC never provided them with inspection reports, but auditors found HDC's past reports which noted unsafe conditions which were never fixed by HPD.

Loss of Rental Revenue

Auditors estimated approximately $1.5 million in unrealized rental revenue from apartments vacant for more than 120 days, which included $1,045,373 at Arlington Terrace/North Shore, $459,744 at Arverne/Nordeck, and $43,104 at York Hill. Reasons given for the extended vacancy periods included HPD's continuous delays in inspecting and approving vacant units (Arlington Terrace/North Shore) and units deemed uninhabitable (Arverne/Nordeck).

Questionable Spending

Under city law, managing agents at Mitchell-Lama developments are responsible for maintaining all books, records or bills pertaining to the housing complex and to prudently use funds for business related to the development. HPD failed to adequately review the expenses at these developments.

Auditors reviewed a sample of transactions made at the three developments. They found managing agents spent approximately $1.6 million that were either unrelated to normal operations or were inadequately supported with financial documentation. In addition, $620,000 in contracts did not have written HPD approval and/or had no evidence of competitive analysis or bidding.

Despite many of these developments operating at a funding loss, auditors found performance bonuses or gratuities were awarded to property management staff even in situations where hazardous or unsafe conditions had not been fixed. DiNapoli's audit recommends HPD create policies or procedures regarding performance bonuses or gratuities.

DiNapoli's audit also recommends HPD improve its monitoring of Arverne/Nordeck, Arlington Terrace/North Shore, and York Hill and that it:

• Verify managing agents maintain the developments to preserve the property and protect residents' health and safety by ensuring annual individual unit inspections are conducted, that related reports are completed, and that problems are corrected; and routinely verify that all self-closing doors are fully operational.
• Coordinate with HDC to ensure physical inspection reports are provided to HPD and managing agents in a timely manner.
• Develop and implement policies and procedures regarding bonus and gratuity payments.
• Monitor managing agents and the developments' Boards where applicable to ensure they:
  • Operate the developments in a fiscally sound manner, with HPD providing training, if necessary.
  • Promptly fill vacant units.
• Adequately review transactions for appropriateness of expenses and sufficiency of supporting documentation, during annual reviews.
• Periodically review 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 they are competitively bid and that contracts at $100,000 or more were approved by HPD.

In response, HPD disagreed with "certain descriptions and characterizations," said funding was allocated to all three developments to address conditions prior to the audit and that competitive bidding was not required for vendor contracts under $100,000.

Audit
Physical and Financial Conditions at Selected Michell-Lama Developments