Comptroller Audit Finds that HPD Review of Affordable Housing Sponsors Was Effective

NYC Comptroller Scott Stringer. Image credit: Office of the New York City Comptroller

Comptroller audit finds that HPD’s controls to ensure that housing incentives were rewarded to qualified applicants were largely effective. On June 27, 2017, the Office of the city Comptroller Scott Stringer released a report of an audit of the Department of Housing Preservation and Development. The audit sought to evaluate whether HPD had adequate controls to ensure that its housing incentive projects were properly awarded to property owners and developers that qualified for the program, had the ability to create or preserve the required affordable units and had a satisfactory record of performance to assure the business’ integrity.  

HPD is charged with promoting the construction and preservation of affordable housing for low- and moderate-income families throughout the five boroughs. HPD’s Office of Development is charged with implementing the City’s Housing New York plan, which seeks to build 200,000 affordable homes by 2024.

During the Comptroller’s audit the Office of Development was overseeing 30 different affordable housing programs, including eight real property tax benefit programs to facilitate private and publicly-subsidized rehabilitation and new construction throughout the five boroughs. To become an affordable housing sponsor, applicants must submit a proposal that meets minimum program standards. HPD then assesses the proposals and approves qualified applicants. As part of HPD’s assessment, applicants discloses documents for all individuals and entities involved in the project. HPD also analyzes the physical condition and financial health of other properties and work with those applicants.

In the final report, the Comptroller’s Office found that while HPD has established adequate controls to ensure incentives are awarded to qualified property owners and developers, the agency’s practices and procedures limited HPD’s ability to assess applicants’ prior performances with affordable housing programs.

The Comptroller’s Office review twelve program files and found that all twelve property owners and developers met program requirements and that HPD’s determinations to award incentives were supported. The auditors found, however, that none of the twelve files “contained evidence of assessments being conducted of the applicants’ performance as affordable housing sponsors except where the applicants were previously involved with one of two federally-funded programs.”

The Comptroller’s Office recommended that HPD make four changes to address this concern. First, it called for HPD to reinforce its requirement that the Assistant Commissioners sign the sponsor review reports. Second, HPD should centrally track sponsor review reports to ensure that projects cannot proceed or close without the responsible Assistant Commissioner’s approval. Third, HPD should review and assess applicants’ compliance with affordable housing program requirements on all prior HPD projects. Fourth, HPD should continually monitor and assess all affordable housing projects’ performances in meeting and complying with program requirements.

HPD agreed with the first two recommendations. The agency disagreed, however, with the Comptroller’s finding that HPD’s practices and procedures limited its ability to assess the quality of potential sponsors. HPD responded that it was already in compliance.

Audit Report on the Department of Housing Preservation and Development’s Controls over the Awarding of Housing Incentive Projects. MJ17-065A, NYC Comptroller Scott Stringer (June 27, 2017).

By: Jonathon Sizemore (Jonathon is the CityLaw Fellow and a New York Law School Graduate, Class of 2016).

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