Final Letter Report on the Follow-up Review of the Development of City-Owned Vacant Lots by the New York City Department of Housing Preservation and Development

Executive Summary

A follow-up review was done by the New York City Comptroller’s Audit Bureau to determine whether the New York City Department of Housing Preservation and Development’s (HPD’s) made progress toward establishing realistic development schedules for 1,125 City-owned vacant lots under its stewardship.  This review follows the Audit Report on the Development of City-Owned Vacant Lots by the New York City Department of Housing Preservation and Development, Audit #FM14-112A, issued on February 8, 2016 (Vacant Lots Audit).

The Vacant Lots Audit found that HPD failed to adequately plan for the timely disposal of 1,125 City-owned vacant lots—most of which the agency earmarked for residential development—for which HPD was responsible.  As a result, the audit found that vacant lots remained undeveloped in the City’s possession for as much as 50 years, or longer.  Based on those findings, the audit recommended, among other things, that HPD develop realistic time schedules for transferring the vacant lots in its inventory for development that accounted for the time that would be needed to complete required pre-transfer steps, and that HPD document those schedules and the reasons for any subsequent changes.

In its response to the Vacant Lots Audit, HPD stated that “[y]our assertion that HPD allows vacant City-owned properties to languish in the face of the affordable housing crisis is simply wrong.”  HPD contended that in its view, the audit “omit[ted] important tasks related to the development of new affordable housing on vacant City-owned property,” such as HPD’s consultation with neighborhood residents and partners, the need to ensure that services such as schools, transportation, police and hospitals are sufficient to support new residential development, and the need to time investments in changing neighborhoods to use the City’s financial resources responsibly and ensure that affordable housing developments are financially successful for the long term.

The follow-up review sought to determine whether HPD adhered to the schedule for the transfer of the vacant lots that it set for itself, presumably taking into account all of the factors it cited above.  In particular, the review sought to determine: (1) whether HPD transferred or would transfer the 525 lots to developers by the dates projected in its September 18, 2015 schedule, including specifically the 454 lots that it scheduled for transfer to developers by June 30, 2017; and (2) whether HPD set realistic time schedules for transferring to developers the remaining 600 lots (out of the 1,125 in our audit scope), for which HPD, as of September 18, 2015, had not established any target transfer dates.

Audit Findings and Conclusions

The follow-up review found that HPD failed to follow its own time schedule for transferring vacant lots, and in particular, that it failed to meet its stated schedule for the transfer of 454 vacant lots it had designated for transfer by June 30, 2017.  Specifically, the review found that in the two-year period between September 18, 2015 and September 18, 2017:

• HPD transferred only 64 of the 1,125 lots for development.
• HPD transferred 54 of the 1,125 lots to other City agencies.
• The other 1,007 lots in our audit sample have remained in HPD’s inventory.
• At the rate established in the past two years, it will take HPD approximately 17 years to transfer those lots either for development or to another agency.
• HPD failed to transfer 360 of the 454 lots (79.3 percent) that it had previously scheduled for transfer to developers by June 30, 2017.
• HPD did not designate a projected transfer date for 588 lots (52 percent).

In sum, in the past two years HPD transferred a small number of vacant City-owned lots to developers (less than 6 percent), but the vast majority—nearly 90 percent—of the vacant lots that were in its inventory two years ago remain there, which means they remain undeveloped and unproductive for purposes of meeting the City’s housing and development goals.  Moreover, HPD did not meet its own target dates for nearly 80 percent of the lots that it projected would be transferred to developers through June 2017 and instead pushed most of those target dates further into the future.  Finally, HPD has refrained from setting any target-transfer dates whatsoever for more than half of the vacant, City-owned lots in its current inventory.  Thus, on the whole, the data shows that HPD is not setting realistic timetables for transferring its undeveloped lots to developers for the construction of new housing or other appropriate development purposes.

Audit Recommendations

Based on the findings, the follow-up review reissues two recommendations and makes one additional recommendation.

1. HPD should develop and propose a realistic time schedule for transferring the City-owned lots in its inventory to developers or other City-agencies.
2. HPD should take into consideration the required interim steps and the time frames in which they should be completed when determining the time schedule for the transfers of the lots in its inventory. Those 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; and
   • Obtaining all necessary approvals from within HPD to proceed with the project and transfer the lots.
3. As it establishes a realistic schedule for the transfer and development of the vacant City-owned lots in its inventory, HPD should systematically track its progress in completing the required steps, document the reasons for deferrals of projected transfer dates, when applicable, and adjust the schedule based on the interim steps that remain to be completed and the time frames in which they should be completed.

Agency Response

HPD stated it disagrees with our findings and the conclusion of this report. HPD did not address the report’s recommendations.

In its response, HPD has attempted to deflect attention from this review’s findings that HPD has continued to fail to set realistic development schedules for 1,125 City-owned vacant lots under its stewardship.  Rather than responding directly to the follow-up review’s specific findings, HPD recites the reported accomplishments of the Mayor’s Housing New York plan, a matter not at issue in either the original audit or this follow-up review.  Notwithstanding HPD’s claims about the City’s recent housing development and preservation efforts, the central findings of the audit are undisputed: more than 1,000 lots in HPD’s inventory have remained undeveloped during a housing crisis, some of them for as long as 50 years, and HPD’s projected transfer dates for most of those lots either have been repeatedly deferred or are yet “to be determined.”