City Agency Audit Reports

Audit Report on the Development of City-Owned Vacant Lots by the New York City Department of Housing Preservation and Development

FM14-112A
February 8, 2016

EXECUTIVE SUMMARY

This audit focuses on City-owned vacant land that can be developed into affordable housing and whether HPD has, in accordance with its rules, established plans with realistic time schedules for the transfer of these lots for development.

HPD’s mission is “to make strategic investments that will improve and strengthen neighborhoods while preserving the stability of our existing housing stock.”  In furtherance of this mission, the agency “is responsible for carrying out Mayor Bill de Blasio’s Housing New York: A Five-Borough Ten-Year Plan, an initiative to build or preserve 200,000 affordable housing units.”  To help accomplish these goals, HPD enters into agreements with developers to construct and rehabilitate buildings on City-owned land and private sites.  Generally, developers must respond to a Request for Proposal (RFP) or a Request for Qualifications (RFQ), as part of a competitive process to be selected to develop housing on public, i.e., City-owned land.  Next, development on public sites generally requires that the developer to go through a Uniform Land Use Review Procedure (ULURP), which involves reviews and approvals of the plans by multiple parties such as Community Boards, the City Planning Commission, and elected officials including the Mayor.

The City provides developers with various financing and tax incentives to encourage them to build affordable housing.  As a result of HPD’s efforts, underutilized vacant properties that were a blight in many City neighborhoods have been developed into safe affordable homes.

According to HPD’s records, as of September 18, 2015, there were 1,131 City-owned vacant properties under its jurisdiction that are suitable for residential development, approximately half of which are slated for development within the next few years.

Audit Findings and Conclusion

Our audit found that the City owns over a thousand vacant lots that could be developed under existing urban renewal programs, but many of these lots have been allowed to languish and remain undeveloped for up to 50 years or longer.  While HPD contends that over the years it has disposed of most of the lots it has been responsible for, we found that as of September 18, 2015, HPD listed 1,131 vacant lots under its jurisdiction.  Further, we found that although HPD solicits developers to build on these properties, it has not established plans with realistic time schedules to actually transfer City-owned vacant properties to developers.

Pursuant to General Municipal Law § 502, HPD has devised urban renewal plans for areas that include its vacant properties.  However, we found that the projected schedules are often pushed to a later date and sometimes no date is specified at all, notwithstanding the fact that the law requires “a proposed time schedule for the effectuation of such plan.”  Accordingly, it appears that schedules with adequate procedures to enable the transfer of City-owned properties to developers in accordance with those schedules have not been consistently formulated.  Finally, we identified an additional 340 City-owned vacant lots under the jurisdiction of other City agencies that could be considered to be used for residential construction.

Audit Recommendations

The audit made the following four recommendations:

• HPD should develop and propose a realistic time schedule for transferring City-owned lots to developers.
• HPD should take into consideration the required steps and the time frames to complete these steps when determining the time schedule.  These steps should include:

• Selection of a developer for a specific site
• Submission of architectural plans by developer
• Approval of architectural plans
• Meeting with community representatives
• ULURP process
• Obtaining financing
• Obtaining all approvals from within HPD to proceed with project and transfer the lots

• HPD should document, retain, and track established time schedules it proposed for transferring City-owned lots to developers.  This should include instances where a timeframe has yet to be determined.  Additionally, HPD should document reasons why any established time schedules are subsequently changed.
• HPD should coordinate with other City agencies and the Mayor’s Office to review the lots identified herein as being assigned to other City agencies and determine whether the lots would be better suited for development of affordable housing.

Agency Response

In her response, HPD’s commissioner stated:

We agree that new affordable housing on vacant City-owned property is an urgent priority given the City’s affordable housing crisis. As you know, in Housing New York, Mayor Bill de Blasio charged HPD with financing the development or preservation of an unprecedented 200,000 affordable residences over the coming 10 years.  Two years into the plan, we are ahead of schedule, having financed 40,204 homes for low, moderate, and middle-income New York families.

Your assertion that HPD allows vacant City-owned properties to languish in the face of the affordable housing crisis is simply wrong. Your audit notes that HPD controls 1,131 vacant City-owned properties.  Of those:

• Approximately 310 have major development challenges – they are in flood/hurricane danger zones, for example, or have severe infrastructure deficiencies. . . .
• Over 150 of these properties are better suited for non-residential uses. . . .
• Approximately 670 of these properties are suitable and feasible for residential development. Roughly 400 of these have been designated or are earmarked for developer designation within the next two years.

Auditor Comment

HPD’s attempt to diminish the audit conclusions fails to address its most salient finding—that the City owns more than a thousand vacant lots under HPD control that can potentially be developed for affordable housing and that 75 percent of these have been owned by the City for more than 30 years without being developed or otherwise disposed of.  These lots, most of which HPD had earmarked for development at one time, have been allowed to languish and remain undeveloped.  We recognize that the development of land and particularly of affordable housing is challenging.  However, the audit findings identify deficiencies in the City’s planning processes that have affected its ability to meet these challenges.  During the as much as 50 years when it owned some of these properties, the City was required to formulate plans with meaningful timeframes and, as part of that process, should have made a determination of the best use of these properties.  HPD’s recent conclusion that 150 of these properties are better suited for non-residential uses itself highlights the inadequacy of its prior planning efforts.  Further, HPD states that 400 properties have been designated or are earmarked for developer designation within the next two years.  We hope that, unlike what we found frequently occurred in the past, these development schedules are adhered to and not unduly delayed or abandoned.

The full text of HPD’s response is included as an addendum to the report.