New Yorkers pay thousands in fees for slim chance at affordable apartments: audit

Ryan Deffenbaugh

Crains New York

Dec 20, 2019

You have a better chance of getting into Harvard than landing an affordable apartment in Manhattan, a study released Friday by state Comptroller Thomas DiNapoli found.

But, now, you pay about the same for both.

An audit by the state Comptroller Thomas DiNapoli found that weak city oversight allowed property managers at Mitchell-Lama buildings to rake in hundreds of thousands of dollars in application fees from New Yorkers for affordable apartments that they will probably never get.

Out of 1002 applications in 2013, 2016 and 2017 for three buildings in Manhattan, just 23 residents were accepted, an analysis by the comptroller found.

That acceptance rate—2.3%—is lower than Harvard's for incoming freshmen.

While the city recently lowered the application fee to $75, applicants to the city's Mitchell-Lama middle-income housing program were required for years to fork over $200 to get on the waiting list for a subsidized apartment, despite the long odds.

That netted property managers more than $200,000 in fees from apartment-seekers over the three separate years that the audit covered.

Limited oversight by the city Department of Housing Preservation and Development, as well as reluctance from property managers to refund the fees, risks undermining one of the city's oldest middle-income housing programs, DiNapoli wrote in the audit.

“Mitchell Lama is too important a provider of affordable housing to be undermined by the problems we’ve found," DiNapoli said. "Collecting fees with virtually no chance for an apartment gives applicants false hope and compromises the program’s integrity.”

The audit noted, however, that the city reduced the required fee for applicants to $75—the same as Harvard's—this summer.

Applicants can spend years, even decades, on the waiting list of Mitchell-Lama apartments, which the city first financed post World War II. There are 93 rental and co-op buildings that offer about 46,500 subsidized units through the program.

The buildings are regulated by the city HPD and governed by a board of directors run by residents. Those boards often hire property managers to oversee daily tasks and maintain waiting lists.

Just getting on the waiting list requires a lottery process, which are held periodically as homes become available. When an applicant in a lottery wins a place on the waiting list, the building's manager contacts them and requests the $200 (now $75) application free.

That manager holds on to that fee while the applicant remains on the list, unless the person withdraws their application or it is denied.

"Weak controls, low turnover, and lengthy waiting lists have resulted in a significant amount of fees not being returned to applicants," the audit found.

Some of the applicants have been waiting upwards of 20 years, the report noted.

DiNapoli called on the city HPD regulators to enact better oversight of the application process and its fees, which could reduce the risk that the money is misused. He said that turnover rates for Mitchell-Lama buildings should be made public, so applicants can gauge their likelihood of getting an apartment before paying the fee to apply.

Some of those changes may already be underway. In June, the city announced it would enact stricter oversight of Mitchell-Lama applications. The changes came in response to a series of city Department of Investigation probes into co-op boards that found HPD didn’t have proper supervision of the developments, opening the door to abuses.

"We were pleased that, as expected, the audit revealed no instances of fund misappropriation or violation of Mitchell-Lama rules, and that most of the issues cited were resolved by the time the audit report was issued," HPD Commissioner Louise Carroll wrote in response to the audit. "As the report notes, we also proactively undertook a rule change reducing the application fee to $75 non-refundable, which will effectively address most of the report’s findings."