New Audit: 81-Out of-113 Buildings Await Co-Op Conversion under Affordable Neighborhood Co-op Program by Dept of Housing Preservation and Development

New York, NY – In a new audit of the Department of Housing Preservation and Development (HPD), New York City Comptroller Brad Lander found only 13 buildings in the Tenant Interim Lease (TIL) program were converted to co-ops since 2012. The conversion for all 13 buildings significantly exceeded HPD’s established benchmarks: delays ranged from 15-to-87 months for conversion processes that took 6-to-11 years. Eighty-one out of the 113 buildings still awaiting conversion entered the Affordable Neighborhood Cooperative Program (ANCP) and the conversion process is underway. Forty-five buildings, totaling 802 units, do not have an assigned developer and have not started needed rehabilitation. The residents living in the building with the longest wait entered TIL in September 1997 and do not have an assigned developer to their building.      

The Comptroller’s auditors made several recommendations, including that HPD develop a centralized mechanism to identify specific issues delaying the completion of projects and use that data to analyze the most common recurring causes of delays. In addition, the auditors recommended that the City of New York work to encourage collaboration between the City Council, the Mayor’s Office of Management and Budget (OMB) and the Department of Buildings (DOB) toward a more streamlined approval process. Auditors also recommended that HPD continue to explore methods that can be used to establish better communication and relationships with TIL tenants.  

“The residents of TIL buildings, who are disproportionately people of color, stayed put and fought to rebuild their communities during the devastation of disinvestment in the 1970s and 1980s, yet decades later, they are still waiting for the City to fulfill its promises. Mismanagement from City Hall hinders interagency collaboration, and the Mayor’s OMB repeatedly puts up blockades that keep these New Yorkers from achieving the American dream. The solutions are clear: release the funds from OMB that my office fought for and secured through the Battery Park City Authority Joint Operating fund and expedite hiring processes at OMB so that HPD has the staff to carry out their work. This would allow HPD to update its technology, significantly improve its efficiency, adopt the policy changes laid out in our office’s Building Blocks of Change report.” said Comptroller Brad Lander.  

When HPD successfully converts TIL buildings, it generally meets the goals of ANCP. Maintenance charges under ANCP fell well below the affordability threshold of 40% of Area Median Income (AMI) and auditors found that HPD staff helped tenants obtain Section 8 vouchers as necessary to ensure affordability. However, at every stage of the process, HPD routinely exceeds its set completion benchmarks and as a result, very few buildings have converted to affordable co-ops, and very few program participants now own their apartments. 

Finally, the audit found that in response to advocates’ and elected officials’ concerns regarding the debt on ANCP co-ops, HPD modified the terms of the debt for the program, reducing the interest that accrues on the loan principal to 0%, effective Fall 2022. HPD debt also has $0 monthly payments if the co-op complies with HPD’s requirements, and the debt term can be extended if the co-op signs a new regulatory agreement before the end of the initial 40-year term (such that HPD debt never comes due). HPD stated that they communicated this information to residents at multiple meetings since 2022. 

“I am deeply disappointed by the audit’s findings, which expose unacceptable delays in the TIL/ANCP program, leaving tenants in limbo for years—even decades. With only 13 buildings converted since 2012 and 800 units still without assigned developers, these delays have stalled the promise of homeownership for too many families. This program was meant to provide stability and opportunity, yet it has instead trapped tenants in uncertainty. Converting these buildings into co-ops is critical to preserving affordability, empowering residents, and strengthening communities in my district and across the city,” said Senator Cordell Cleare. 

Background:

The City created the TIL Program in 1978 to provide a pathway to homeownership in City-owned buildings by helping organized Tenant Associations (TAs) develop economically self-sufficient, low-income co-ops. Under the terms of the TIL program, the City agreed to make needed capital repairs in TIL buildings. When ANCP replaced the TIL program in 2012, HPD changed the approach they took. Under TIL, the City covered the cost of capital repairs, but the repairs were frequently not substantial and resulted in only partially repaired buildings being passed on to the new owners. ANCP was designed to provide the new owners with gut rehabbed buildings and includes affordability protections for converted co-ops in the form of Regulatory Agreements that are stricter and offer greater protection to tenants than those under TIL.  

The ANCP conversion process is comprised of four phases: 

1. Developer Designation: HPD selects and matches a qualified developer with a cluster of buildings for development.
2. Pre-Development: The budget for construction is established, financing is obtained, scope of work is defined, and tenants are temporarily relocated.
3. Construction: Buildings are under construction; and tenants attend co-op homeownership training.
4. Marketing and Conversion: Vacant units are sold to outsiders who meet eligibility criteria, through public lottery; co-op ownership is transferred to shareholders. (TIL residents have already become co-op owners under ANCP during this phase.) 

According to the benchmarks HPD established for the program, the process from pre-development to completion of conversion should take approximately 48 months to 60 months (four to five years) per project.  

Before a building joins ANCP, HPD informs tenants of the redevelopment plan for the building and the various phases of the process. Then a minimum of 80% of the existing tenants in a building must agree to purchase their units to convert the building to a cooperative. Buildings may opt out of the program at any point in the process by submitting this in writing to HPD. If this happens, the building is removed from the cluster and the building’s rehabilitation is put on hold. The building will remain in TIL until it can either be assigned to another ANCP cluster for rehabilitation or assigned to a Multi-Family Preservation Loan Program (MPLP) as a rent-stabilized rental building, pending rehabilitation.    

If an individual tenant decides not to purchase, they can remain in the apartment as a rent-stabilized tenant, rather than an owner. In this situation, the rent will be restructured as preferential rent, based on affordability standards, to cover the cost of building maintenance, reserves, and operations. Purchasing and non-purchasing tenants may also qualify for Section 8 so that they pay only 30% of their household income towards rent or maintenance.  

According to HPD, no new buildings (that are not currently part of TIL) can join the ANCP.  In addition, HPD confirmed that the ANCP will end when all current TIL buildings are renovated and converted to co-ops, which HPD anticipates will occur within the next 8 fiscal years. 

Findings:

• Only 13 TIL buildings were converted to co-ops since 2012. The conversion for all 13 buildings significantly exceeded HPD’s established benchmarks: delays ranged from 15-to-87 months for conversion processes that took 6-to-11 years. Eighty-one out of the 113 buildings still awaiting conversion entered the Affordable Neighborhood Cooperative Program (ANCP) and the conversion process is underway. Forty-five buildings, totaling 802 units, do not have an assigned developers and have not started needed rehabilitation. The residents living in the building with the longest wait entered TIL in September 1997 and do not have an assigned developer to their building.      

• One major contributing factor to HPD effectively identifying and mitigating delays with the ANCP conversion process is HPD’s lack of a practical, centralized mechanism for tracking and reviewing key performance indicators—including the number of unresolved issues, how long issues remain unresolved, the specific delays, and how long it took to resolve the issues that led to the delays. As a result, HPD cannot comprehensively identify or dismantle systemic obstacles experienced during the conversion process. This limits its ability to deploy resources, offer meaningful oversight and assistance, and recognize trends and devise solutions to mitigate delays in future projects. 

• When HPD successfully converts TIL buildings, ANCP goals are generally met. However, lengthy delays greatly hinder the effectiveness of the program. At every stage of the process, HPD routinely exceeds its set completion benchmarks and as a result, very few buildings have converted to affordable co-ops, and very few program participants now own their apartments. 

• HPD provided auditors with the initial average maintenance fees charged under ANCP for the 13 converted buildings for the years when they were converted. Based on the AMI during the respective years that the buildings converted, the auditors calculated the dollar threshold limit for monthly maintenance fees (40% of AMI) and compared the amounts to the actual maintenance fees charged at the date of conversion for each building. The analysis revealed that the actual average maintenance charges under ANCP were often well below the affordability threshold of 40% of AMI.  

• HPD provided the auditors with the family size, composition, and household income ranges for 74 households that applied for Section 8 subsidies at 19 buildings in the marketing phase. The incomes for these 74 households ranged from $4,170 to $140,933. Based solely on the auditors’ review of the data provided, 70 of the 74 households qualified for Section 8 subsidies. The incomes for the 70 households reviewed by auditors ranged from $4,170 to $82,372 per year, meaning that the maximum amount per month that these households would be required to pay for their housing would range from $104 to $2,059. The other four tenants were deemed ineligible for Section 8 because they were in higher income brackets that exceeded the amounts allowed under Section 8. The incomes for these households ranged from $85,725 to $140,933. Using HUD’s affordability requirement, households should pay no more than 30% of their monthly income on household expenses (rent and utilities), which for these four households would be $2,143 to $3,523. The auditors found that this was indeed the case, with the highest proposed maintenance amount ($1,386) falling well below the 30% benchmark for the above-mentioned incomes.   

• According to the time benchmarks HPD established for the program, the process from pre-development (when a building first enters the program) to completion of conversion should take approximately 48 or 60 months depending on the project. Had these benchmarks been met, HPD would have converted 69 of the 81 buildings that began the ANCP conversion process. Instead, HPD converted only 13 buildings. The auditors found that the actual conversion process timelines for 13 buildings ranged from just over nearly six years to 11 years for the remaining. The shortest conversion period for one building was 69 months, or 5.75 years. 

Auditors acknowledge that HPD has taken important steps and made commitments to address several of the concerns that auditors shared with the agency. These include: 

• Increasing the subsidy per unit and lowering interest rates 

• Prioritizing buildings where residents have already been relocated 

• Updating the unit switch policy due to changes in household size 

• Overall increasing resident democracy and participation by: 

• Creating a new position at HPD dedicated to improving communication with TIL tenants 

• Meeting more regularly with residents to provide project updates 

• Developing a structure to allow residents to make the final selection on the development partner 

• Increasing the role of nonprofit organizations who can amplify resident voices in the process, including considering creating an owner’s representative position.

The Office of the Comptroller supports the adoption of these improvements. 

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