Audit Reveals Shocking Conditions at Three Mitchell-Lama Co-ops

Thomas DiNapoli, the comptroller of New York State, has produced a textbook on how not to run an affordable co-op.

In a recently released audit, DiNapoli uncovered appalling conditions at three Mitchell-Lama co-ops — York Hill in Manhattan, Arverne/Nordeck in Queens, and Arlington Terrace/North Shore on Staten Island — conditions that included broken fire safety doors, mold, collapsed ceilings, pest infestations and unsafe facades. To top it off, the auditors discovered more than $1 million in questionable spending at the three co-ops.

“The conditions identified in this audit are unacceptable," DiNapoli said in a statement. "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. The department of Housing Preservation & Development oversees 93 Mitchell-Lama developments in the city with about 47,000apartments. 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.

However, 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.

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.

The audit recommends that HPD do the following: verify that managing agents conduct annual individual unit inspections, that related reports are completed, and that problems are corrected; develop and implement policies and procedures regarding bonus and gratuity payments; and periodically review contracts and expenses to identify payments to vendors and service providers. If a contract exceeds $100,000 in any fiscal year, make sure it is competitively bid and approved by HPD.

"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 Sen. 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."