Audit Report on the Department of Housing Preservation and Development’s Monitoring of Building Owners’ Compliance with Affordable Housing Provisions and Requirements
Executive Summary
The New York City (the City) Department of Housing Preservation and Development (HPD) is the largest municipal housing preservation and development agency in the nation. The agency is responsible for promoting the construction, rehabilitation and preservation of affordable, high quality housing for low and moderate-income families, for enforcing housing quality standards, financing affordable housing development and preservation, and for ensuring sound management of the City’s affordable housing.
HPD’s Division of Asset Management (Asset Management) is responsible for monitoring various housing projects’ financial health, overseeing the physical condition of buildings that are financially assisted by or through certain City and other government programs, and for ensuring continued compliance with regulatory agreements. HPD’s Tax Credit and Home Compliance (TC&H) unit is part of Asset Management and is responsible for overseeing affordable housing projects that receive Low Income Housing Tax Credits, as well as those that are funded through a federal program administered by the U.S. Department of Housing and Urban Development (HUD) called “HOME.”
HPD’s compliance analysts review an owner certification and rent roll form submitted by building owners to assess whether the owners have fulfilled the terms and conditions of their regulatory agreements. In addition, HPD must visit 20 percent of the units identified by their owners as low-income units and verify the information provided in the annual owners’ certifications and rent rolls1. Moreover, HPD must physically inspect these affordable housing units to ensure that they are in good physical condition and compliant with the New York City Housing Maintenance Code2.
As of Calendar Year 2015, the TC&H unit monitored 589 affordable housing projects, which consisted of 54 tax-credit projects, 276 HOME projects and 259 projects that received a combination of both tax credits and HOME funds. These 589 are associated with 25,279 affordable units in 1,955 buildings.
The objective of this audit was to determine whether the controls established by HPD’s TC&H unit for the monitoring of building owners’ compliance with affordable housing provisions and requirements are implemented on a consistent basis to ensure that: 1) tenants residing in affordable housing projects meet eligibility requirements; 2) rents are charged in accordance with affordability requirements; and 3) units are adequately maintained.
Audit Findings and Conclusions
The audit found that the controls established by HPD’s TC&H unit are implemented on a consistent basis for the monitoring of building owners’ compliance with affordable housing provisions and requirements. However, we found a number of weaknesses that hinder HPD’s ability to ensure that building owners consistently comply with requirements. Specifically, we found that Asset Management does not maintain a complete list of all rental projects that the TC&H unit oversees. In addition, we found that HPD does not have a watch list to track building owners who consistently fail to comply with affordable housing requirements, and does not verify building owners’ assertions that deficiencies cited by the agency in inspection reports have been corrected. Finally, we found that HPD does not have an effective tracking mechanism in place that would allow it to review all affordable housing units under its oversight on an aggregate basis, including the issues found with the units. This hinders HPD’s ability to track building owners’ overall compliance status for their affordable housing projects.
Audit Recommendations
To address the issues raised by this audit, we make the following five recommendations:
- Asset Management should periodically review its Asset Management portfolio database and update it as needed to ensure that applicable buildings and units from the TC&H compliance data are included into the portfolio database.
- HPD should establish a watch list to track those building owners who have a history of repeated non-compliant behavior.
- HPD should enforce its contractual authority to institute legal proceedings for the repayment of funds obtained from HPD for HOME projects and take steps to prevent these owners from future business dealings with the City.
- HPD should independently verify that the measures reported by building owners to correct deficiencies were actually made.
- HPD should create a formal tracking mechanism that would allow it to clearly identify the number of projects and units that it is responsible for overseeing on an aggregate level.
Agency Response
In its response, HPD agreed with one recommendation and agreed in principle with two others. HPD disagreed with our recommendation that it independently verify that the measures reported by building owners to correct deficiencies were actually made and did not directly address our recommendation that it create a formal tracking mechanism for all of the projects and units that it oversees. HPD also disagreed with a number of the audit’s findings. After carefully reviewing HPD’s arguments, however, we find no basis to alter any of the audit’s findings and conclusions.
1 During these site visits, HPD is required to review the certifications, the documentation supporting the certifications, and the rent records for the tenants in those units.
2 Maintaining the premises in good physical condition is required by the U.S. Treasury Regulations, which call for inspections of 20 percent of low-income tax credit units. HUD guidelines similarly mandate that units are to be maintained in good physical condition and call for inspections of between 15 to 20 percent of subsidized units in HOME projects. These inspections are conducted by HPD’s code enforcement inspectors.