City Program to Rehabilitate Affordable Housing Left Tenants in Unsafe Conditions

New York State Comptroller DiNapoli announced than an audit of a New York City Department of Housing Preservation and Development (HPD) loan program, meant to encourage landlords to rehabilitate affordable housing, found the program was not properly managed or monitored. HPD allowed landlords to forgo repairs they promised to make in exchange for low interest loans, leaving tenants in unsafe and unhealthy conditions.

“Families who rely on affordable housing were put at risk because there was so little oversight of this important program,” DiNapoli said. “HPD allowed landlords to ignore required repairs. The agency needs to ensure that New Yorkers are living in safe and sanitary conditions.”

HPD’s Article 8A Loan Program gives low-interest loans — up to $35,000 per unit — to owners of certain rent-regulated buildings, Mitchell Lama developments and Housing Development Fund Corporation coops in New York City to correct substandard or unsanitary conditions. The loans also prolong the useful life of buildings occupied by low income tenants. In exchange, owners sign agreements to make repairs or fix violations at their own expense to bring their buildings into compliance with the city’s Housing Maintenance Code. The building loan contract describes the rehab work to be done and the costs covered by the loan. The Voluntary Repair Agreement and the Housing Repair and Maintenance Agreement list the violations and repairs owners agree to fix out of their own pockets in exchange for their loans.

The audit reviewed the repairs and violation removal agreements and found that violations and unsafe conditions remained long after the loans closed because HPD failed to check on whether owners honored their repair commitments.

DiNapoli’s review of the Voluntary Repair Agreements found the 34 buildings had a total of 1,806 housing code violations that were supposed to be corrected as a condition for receiving loans. As of Feb. 6, 2014, there were still 415 active violations. In some cases, three years had passed since the deadline by which the work to be completed. Of these, 93 were “immediately hazardous” Class C violations, such as peeling lead paint and inadequate heat or hot water.

Auditors followed up on whether landlords corrected violations at just 3 of the 34 building sampled in the audit. It was found that the staff who were supposed to monitor the agreements were not aware that agreements existed at the other buildings. Owners routinely ignored agreements to remove lead paint, install child window guards and remove asbestos.

DiNapoli’s audit recommended that HPD:

  • • Strengthen requirements to ensure only eligible owners get loans;
  • • Create written guidelines to determine loan rates, and justify in writing any interest rate below 3 percent;
  • • Create written guidelines for building inspections to ensure owners meet repair commitments; and
  • • Investigate the apparent preferential treatment given to Quadrant.

In a response, HPD officials acknowledged the need to improve the inspection process, said they enacted enhanced inspection procedures in late 2013, and denied that Quadrant received preferential treatment. The agency’s full response is available in the audit:

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