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. The audit covered the period from January 2019 through April 2025.

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 June 25, 2024, there are 92 HPD-supervised Mitchell-Lama rental and limited-equity co-op developments, with approximately 46,787 units.

Owners of City Mitchell-Lama developments often enter into written agreements with agents for management services, which 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: Clinton Towers (Manhattan), Evergreen Gardens (Bronx), and Tivoli Towers (Brooklyn).

Key Findings

Our audit found that HPD needs to improve its oversight of 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 their residents and commercial tenants and used development funds for activities that were not directly related to the developments’ operations.

• Across the three developments, we observed several hazardous physical conditions, including façade damage; non-working self-closing/fire doors; units with mold, water damage, and peeling paint; and a commercial tenant (day care) with mouse droppings in classrooms.
• We found approximately $163,862 in transactions for the period from January 2019 through December 2024 that were either unrelated to normal operations or inadequately supported. Included in the $163,862 were:
  • $114,288 in non-mandated bonus payments, holiday events, and gratuities
  • $49,574 in expenses that were not supported with invoices or canceled checks
• We estimated that managing agents were unable to collect $327,514 in unrealized rental income from units that remained vacant for more than 120 days at Clinton and Tivoli Towers.
• We found all three developments had aggregate payments to vendors exceeding $100,000 and did not notify HPD, as required. Further, Evergreen contracted with five vendors with payments over $100,000 without receiving HPD approval and no evidence of competitive bidding.

Key Recommendations

• Improve monitoring of the three developments, including but not limited to:
  • Verifying the managing agents maintain the developments in a manner that preserves the properties and protects the health and safety of their 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.
  • Ensuring that immediate corrective action is taken when hazardous conditions are identified.
  • Developing and implementing policies and procedures regarding bonus and gratuity payments.
• 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.
  • Promptly filling vacant units.
  • Periodically reviewing a sample of expenses to identify payments to vendors and service providers that, in the aggregate, equal or exceed $100,000 in any fiscal year to ensure HPD has approved them, and that contracts were competitively bid and those at $100,000 or more were approved by HPD.

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