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Audit: Bad Oversight and Money Woes
Plague Mitchell-Lama
by Alex Ulam
What has been touted as the most successful publicly funded housing program in the country appears to be in deep financial trouble, according to a recent audit from city Comptroller Alan Hevesi. City-supervised developments in the Mitchell-Lama housing program are floundering in unpaid taxes and mortgage arrears, the audit finds.
The audit points the finger at the city Department of Housing Preservation and Development, which is solely responsible for overseeing the management of 56 of the city’s 142 Mitchell-Lama projects. Hevesi said HPD has failed to track numerous financial and maintenance violations that may put the projects at risk in the future. While most of the developments are still in good condition, some have serious physical problems that have gone uncorrected for years.
Between 1957 and 1974, the Mitchell-Lama program underwrote over 60,000 units of housing in the city for low and middle-income tenants. The program financed up to 95% of the development cost of each project. The city and state granted private developers more than $4.1 billion in low-interest, long-term loans and also gave them partial real-estate-tax exemptions.
According to the audit, though, landlords haven’t fulfilled their side of the deal. As of October 1998, 44 of the 56 city-supervised Mitchell-Lama projects owed more than $21 million in taxes and city charges. Mortgages on 20 had arrears totaling over $203 million. In addition, 50 of the 56 Mitchell-Lama projects were shortchanging their reserves or not funding them at all, meaning that the money supply for future repairs is precarious.
Since landlords are allowed to pass repair costs on to their renters, that puts tenants at risk, said Assemblymember Scott Stringer. “The problem is that the waste and the ineptitude result in large rent increases for tenants who cannot afford it.”
Last month, many of the same criticisms were leveled at HPD at a City Council oversight hearing. Elected officials fumed that HPD was allowing developers who repeatedly violated the Mitchell-Lama agreements to take advantage of a clause that allows them to buy out of the program after 20 years and raise their rents, sometimes to market rates. HPD officials responded that they were legally powerless to stop the buyouts.
An HPD response included in the audit indicated that the agency was trying to improve its oversight. But many Mitchell-Lama residents remain skeptical. “We pointed out problems twenty years ago at Bedford Gardens in Brooklyn and Independence Plaza in Tribeca [two Mitchell-Lama developments],” said Robert Woolis, co-chair of the Mitchell-Lama Tenants Coalition. “They were noted in a comptroller’s report in 1983. But conditions have actually gotten worse.”
Reprinted with permission from City Limits Weekly.