New York, NY – August 6, 2009 – (RealEstateRama) — New York City Comptroller William C. Thompson, Jr. today issued an audit finding that the city’s Department of Housing Preservation and Development (HPD)’s Cornerstone Program, which is supposed to provide affordable housing to qualified New Yorkers, has provided a relatively small percentage of the completed housing units to low-income families.
“HPD’s Cornerstone Program was meant to expand affordable housing in the City,” Thompson said. “However, it has been more successful at providing a greater share of market-rate units than affordable units for low-income families.”
HPD’s mission is to improve the availability, affordability and quality of housing in New York City. To fulfill this mission, HPD uses a variety of preservation, development, and enforcement strategies and works with private, public and community partners to strengthen neighborhoods and to enable more New Yorkers to become homeowners or renters of well-maintained, affordable housing.
In 2000, HPD established the Cornerstone Program, a multi-family, new construction initiative, designed to expand private housing and create affordable rental and homeownership units. The primary goals of the program are to sell City-owned land, often for a nominal fee, to stimulate private residential development and investment, and to create affordable rental and homeownership units in specific neighborhoods.
Thompson’s audit, which can be viewed at www.comptroller.nyc.gov, determined whether HPD ensured that the goals of the Cornerstone Program were met. The audit covered Fiscal Year 2008.
One of the primary goals of the Cornerstone Program is to sell City-owned land, often for a nominal fee, to stimulate private residential development and expand rental and homeownership opportunities. As of March 2009, a total of 51 sites (encompassing 4,536 units) had been approved for the Cornerstone Program and construction had been completed at 20 of the 51 sites. The Department of Buildings issued Certificates of Occupancy for 2,191 units at these 20 sites.
Although another primary goal of the Cornerstone Program was to increase the availability of affordable housing in the city, more than one third of the units sold or rented at market-rate. Of the 2,191 completed units, only 475 (22 percent) were designated for low-income families and another 1,035 units (47 percent) were designated for middle-income families. Low-income families would need to have a household income of up to $61,450 for a family of four to qualify. Middle-income families earning between $88,320 and $192,000 would qualify. The remaining 681 units (31 percent) were market-rate or unspecified.
Further, HPD did not maintain accurate information on the number of developments participating in the Cornerstone Program or any information on the number of affordable units being developed as a result of the first three Cornerstone RFPs. When auditors asked for a complete list of development projects, HPD provided a list of 71 developments. However, by reviewing sale-closing documentation in Department of Finance records, auditors found that many of the developments were not associated with the Cornerstone Program. HPD subsequently provided a list of 51 developments, which auditors verified were associated with the program.
“By not tracking started, completed and affordable units, HPD has been unable to adequately assess the effectiveness of the Cornerstone Program in meeting its primary goals,” Thompson said.
HPD also did not maintain adequate evidence of its detailed evaluations of responses to the fourth Cornerstone RFP to develop twenty sites in Harlem, Brooklyn, and the Bronx. Auditors, therefore, were unable to ascertain whether the proposals were fairly evaluated in a transparent and consistent manner.
“Since HPD does not follow the City’s Procurement Policy Board rules in its RFP selection process, it is especially important that HPD ensure that it is evaluating developers in a fair and transparent manner,” Thompson said. “HPD, however, failed to demonstrate that it had done so.”
Furthermore, the housing lottery process, which HPD uses to select applicants for interviews for available Cornerstone Program units, has the potential for some applicants to receive preferential treatment over others. Auditors’ observations of two housing lottery selection processes revealed that developers manually selected applicant envelopes and manually logged their selection onto a log sheet. Since the process is not automated or sufficiently random, one of the persons conducting the lottery could select or add an application and log it high on the list. While observing the process, auditors also noted that more than 200 applicants were denied the opportunity to participate in the lottery since the Post Office had filed applications for one lottery with applications for a later lottery.
Finally, neither HPD nor the developers independently verify income qualifications of tenants and homeowners. Auditors noted that as a result, there is an increased risk that unqualified applicants may be selected for units at the expense of qualified ones.
“Given the high demand and need for affordable housing in the City, HPD must take all measures to ensure that all applicants have a fair opportunity to apply for and are qualified to live in the housing,” Thompson said.
Thompson recommended that HPD:
- Ensure that it accurately tracks its Cornerstone Program developments.
- Ensure that all relevant documentation for the RFP process is maintained, including the scores given by individual reviewers and the scores given by the panel of reviewers in each category.
- Allow applications for the housing lottery to be filed online or by phone, as well as by mail.
- Assume the responsibility for the selection of applicants for the affordable units by developing a new set of procedures for listing and randomly selecting applicants, and incorporating appropriate segregation of duties and supervisory oversight into this process.
- Require that developers provide copies of applicants’ employment-income documentation along with evidence that they validated the documentation.
- In future agreements with developers, include income limits for subsequent owners or renters of affordable units and ensure that these limits are enforced.
In its response, HPD generally agreed or partially agreed with six of the recommendations and indicated that it would consider the remaining two.
