State comptroller raises questions about spending at Mitchell Lama development

The city’s Department of Housing Preservation and Development needs to keep a tighter leash on spending by Mitchell Lama developments, according to a new report by the state Comptroller’s Office.

The report found that Linden Plaza, a 1,525-unit Mitchell-Lama development in Brooklyn, spent $10.7 million on 173 vendors from January 1, 2016, to August 31, 2017 — all of which wasn’t monitored by HPD. That’s in part because the city only requires contracts above $100,000 to be competitively bid and approved by HPD. The agency’s rules for when a contract is required also aren’t clear, according to the report.

In June, Linden Plaza’s owner, an affiliate of the DeMatteis Organizations, informed tenants that it planned to request a rent increase from HPD due to the vendor costs and the $23.3 million it had spent during the same timeframe on mortgage payments, insurance and utility expenses. This rent bump would follow the 10.5 percent increase applied between 2014 and 2017.

The report indicates that had HPD monitored this vendor spending, it might’ve spotted cost saving opportunities — meaning that a rent increase wouldn’t be needed.

“HPD takes its oversight of its portfolio of Mitchell-Lama developments extremely seriously,” a spokesperson for HPD told Crain’s. “There was no finding of overspending at Linden Plaza, and while we are always working to improve our procedures, we follow the Mitchell-Lama program rules for competitive bidding and monitor expenditures at all Mitchell-Lama developments extremely closely in order to protect the health and governance of this vital source of affordable housing for New Yorkers.”[Crain’s] — Kathryn Brenzel