Comptroller: 2 affordable Westchester co-ops face poor financial and physical conditions

Two affordable housing properties in Westchester face hazardous physical conditions and fiscal mismanagement, according to an audit by the state Comptroller's Office.

The audit sampled five Mitchell-Lama developments outside New York City. The Mitchell-Lama program is a state initiative launched in 1955 to create affordable rental and cooperative housing for moderate- to middle-income families.

Two of its buildings are in Westchester, Barker Terrace in Mount Kisco and Sunnyside Manor in Yonkers.

The audit focused on the state office that oversees Mitchell-Lama developments, the Division of Housing and Community Renewal, and found it "does not adequately oversee the financial and physical conditions" at the developments audited.

Auditors also determined that management across the five properties had mismanaged nearly $330,000 in funds. Some buildings faced hazardous conditions, including rusty railings and water damage that were not repaired for years.

More: 76-unit affordable housing apartment complex coming to Yonkers' Main Street

Audit cites alleged mismanagement

The report showed Sunnyside Manor, a 121-unit co-op building managed by Metro Management, failed to “disclose conflict of interest and did not have appropriate mechanism to ensure that all bids were solicited and evaluated fairly.”

For example, it paid $14,159 to a construction company owned by the management superintendent, who handled purchasing and obtaining estimates for work contracted to outside vendors.

Barker Terrace, a 92-unit co-op building managed by Ferrara Management Group, was accused of operating under outdated management plans and making reimbursements to individuals not employed by the property. In 2021, the property was operated at net losses of $141,027 and applied for rent or maintenance increases.   

“Developments that spend funds on unnecessary transactions and operate at a loss will eventually have to pass the cost down to tenants and cooperators through rent and carrying charge increases,” the report said.

Health and safety hazards, such as water damage and structural deficiencies, were also identified in Barker Terrace and were left unrepaired for years, according to the report.

The audit criticized the Division of Housing and Community Renewal for not staying on top of the housing developments.

"Had DHCR officials adequately monitored developments by conducting the required visits and ensuring corrective action was taken when necessary, they would have been able to identify and potentially correct hazards that impact the safety of residents," the report said.

Targets of audit say findings are flawed

Both The Ferrara Management Group and the Division of Housing and Community Renewal took issue with the audit's findings.

Robert Ferrara, president of The Ferrara Management Group, said they have requested for years that Housing and Community Renewal rectify the financial and physical conditions for years. But he said the process was delayed as DHCR did not support the release of the funds in a timely manner.

Ferrara said Barker Terrace is operated cooperatively by board members, shareholders and the management company. He said the rent increase was driven by rising operational cost and his company has never mismanaged funds.

"The report is inaccurate and misleading as it made unsubstantial claims and unsupported allegations that are baseless and without merits," Ferrara said. "The management group and board of directors have acted in a proper, lawful and professional manner in compliance with its duties, management agreement and requirements of DHCR."

State Comptroller Thomas DiNapoli urged Housing and Community Renewal to strengthen its oversight and recoup money to fix unsafe conditions. 

“New York is in an affordable housing crisis and Mitchell Lama is an invaluable resource of affordable rental and cooperative housing for working families," DiNapoli said. "It is vital that Mitchell Lama developments are properly managed so that they remain places where middle class families want to live."

Ruthanne Visnauskas, commissioner at DHCR, responded in the report that the audit insufficiently recognized the limited regulatory role the agency has in overseeing day-to-day management of Mitchell-Lama developments and that the audit inadequately accounted for the impact of the pandemic.

"The report acknowledges that it is the responsibility of the Mitchell-Lama owners and managing agents to provide safe and habitable housing and ensure the physical and financial integrity of their projects," Visnauskas said. "Yet, it contains recommendations that suggest the DHCR should manage even the smallest of financial transactions and minor repairs at the properties."

For example, all problematic transactions cited were under $100,000, but the DHCR is only required to review individual purchases over $100,000 in single year, she said.

"In addition, daily operations at Mitchell-Lama developments were significantly affected by the unprecedented economic impact of the pandemic followed by a period of unusually high inflation," she said. "As the state has emerged from the pandemic, DHCR has intensified its efforts to provide support within the bounds of its limited supervisory role to distressed properties."

Nevertheless, she said, the agency has agreed to reinforce timely filing and address the physical needs at the two developments.

This article originally appeared on Rockland/Westchester Journal News: Westchester NY affordable co-ops mismanaged, comptroller finds