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NYS Comptroller

THOMAS P. DiNAPOLI

NEWS from the Office of the New York State Comptroller

Contact: Press Office 518-474-4015

Mitchell Lama Applicants Charged $200 for Virtually No Chance of Apartment in Their Lifetime

DiNapoli Recommends Stronger Oversight, Reasonable Limits on Waiting Lists


December 20, 2019

Despite waiting lists for Mitchell Lama apartments being very long and turnover very slow, some developments continued to collect $200 fees from applicants who had virtually no chance of getting an apartment in their lifetime, an audit released today by New York State Comptroller Thomas P. DiNapoli found.

The audit determined that weak oversight by the New York City Department of Housing Preservation and Development (HPD) combined with development managers’ failure to return fees to applicants not only misleads applicants about their chances of getting an apartment, but also created a risk that application fees could be misused.

“My office has conducted several audits of the Mitchell Lama program and continues to find troubling flaws with its management and oversight,” DiNapoli said. “Mitchell Lama is too important a provider of affordable housing to be undermined by the problems we’ve found. Collecting fees with virtually no chance for an apartment gives applicants false hope and compromises the program’s integrity.”

The audit examined application fees at three developments in Manhattan: Trinity House, a rental development on the Upper West Side, and two co-op developments: Washington Square Southeast in Greenwich Village; and York Hill on the Upper East Side. They held six lotteries for applicants to get on waiting lists for apartments in 2013, 2016 and 2017, collecting over $200,000 in fees from 1,002 applicants. They awarded just 23 apartments. Another 29 people on the waiting lists asked to be removed and for a refund of the $200 fee, leaving 950 people on the waiting lists

The three developments are holding more than $340,000 in fees for 1,706 applicants, if lotteries going back to 1997 are included. Some applicants have been waiting for more than 20 years with many having little or no chance of getting an apartment.

Given that there are 93 HPD-supervised Mitchell Lama developments, with approximately 46,500 apartments, there is potentially a significantly larger amount of fees being held by developments around the five boroughs.

DiNapoli’s audit found that HPD had not established criteria to decide how many applicants should be selected and placed on waiting lists when conducting lotteries for the various developments.

The audit found waiting lists contained a number of inaccuracies that could block eligible applicants from getting apartments, while letting ineligible applicants get one.

Additionally:

  • Auditors could not find proof of payment for 30 applicants on the waiting lists, who were nevertheless deemed eligible for an apartment.
  •  Auditors found copies of checks and money orders proving that eight applicants did in fact pay their fees, even though they were listed as having not paid. Had they been higher on the waiting lists, they would likely have been skipped over as ineligible for an apartment.
  • At Trinity, the management company said 24 people on the waiting list for studio apartments should not have been on the list because they didn’t pay their fees. They could not explain how this supposed error occurred, but neither HPD nor the management company could rule out the possibility that the money had in fact been received.

The rules allow management companies to keep $50 of the $200 fee if an applicant withdraws. If they are rejected, however, the entire fee is to be returned. The audit found that management needed to do more to return fees to applicants or inform applicants when they were rejected.

In August 2019, as the audit was in progress, HPD lowered the fee to a non-refundable $75. It also stated during the course of the audit that management companies have reached out to nearly all rejected applicants so they can get back their fees.

DiNapoli’s audit made a number of recommendations to HPD, including that it:

  • Use turnover rates to set reasonable sizes for Mitchell Lama waiting lists and make the rates public to avoid collecting fees from people with little to no chance of getting an apartment.
  • Provide guidance to managing agents on how to account for application fees, handle refunds from lotteries prior to the change in the application fee, canvass the waiting lists and periodically review them for compliance.

HPD generally agreed with many of the audit findings and recommendations and indicated it has taken action to address many of the issues identified. The agency’s full response is in the audit.

Read the report, or go to: https://osc.state.ny.us/audits/allaudits/093020/sga-2020-18n4.pdf

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