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NYCHA Faces Financial Crisis as Nearly Half of Tenants Are Late on Rent, With Many Awaiting Missing Aid

The drop in rental income appears to imperil NYCHA’s ability to perform repairs to aging properties as required by a recent agreement with the feds.

December 24, 2022 Greg B. Smith, The City
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Nearly half of the city’s public housing households are now behind in their rent, owing $450 million in all — a huge pandemic-related problem caused in part by tenants waiting for rent reimbursement from the state that will likely never come.

New York City Housing Authority officials outlined a drastic fiscal situation Wednesday, one that will likely imperil NYCHA’s ability to meet required deadlines for repairs to aging properties as spelled out under a 2019 agreement with the federal government.

A crucial obstacle to turning the situation around is the state’s Emergency Rental Assistance Program (ERAP), created near the start of the pandemic to reimburse tenants who fell behind in their rent. The program exhausted its funding for priority applicants earlier this year and the portal is set to close next month.

When state leaders crafted ERAP, their legislation specifically placed public housing tenants at the bottom of the list for reimbursement. At the same time, it prohibited all landlords — including NYCHA — from filing eviction cases seeking back rent while an ERAP application is pending.

NYCHA tenants have not received a single dollar in ERAP compensation since the program’s launch. Meanwhile, residents who have applied for ERAP can remain in their apartments indefinitely while not paying rent.

“ERAP has really changed the culture at NYCHA,” said NYCHA Chief Financial Officer Annika Lescott-Martinez in remarks to reporters. “It’s created this situation where even now, after the ERAP opportunities are closed, it’s created this idea that ‘we’re just not going to pay our rent to see what happens.’ There’s this false hope that they’re going to get some sort of funding.”

NYCHA officials made clear they’ve been lobbying Albany for months to bump public housing tenants up the list for reimbursement and alter the rules so NYCHA could go to court to pursue back rent from tenants who are way behind, even if their ERAP applications are pending.

Asked if either Albany legislative leadership or Gov. Kathy Hochul has made any commitments to changes, NYCHA Interim Chief Executive Officer Lisa Bova-Hiatt said, “At this moment, no.

“They’re telling us that they’re looking into it,” Bova-Hiatt said.

Responding to THE CITY’s question about where Gov. Hochul stands on NYCHA’s requests, spokesperson Hazel Crampton-Hays emailed, “By law, this program cannot pay applications from subsidized housing unless all others are paid first. We continue to evaluate the funds remaining in this program and how many applications will ultimately be paid once the portal closes next month, and we remain in ongoing communication about these issues with impacted parties.”

On Wednesday neither Assembly Speaker Carl Heastie (D-The Bronx), nor Senate Majority Leader Andrea Stewart-Cousins (D-Westchester), responded to THE CITY’s questions about where they stand on NYCHA’s request.

Threatened Repair Cuts

Rent pays for about one-third of NYCHA’s operating costs, and NYCHA is due rent from 160,000 households across its portfolio. Under federal law, tenants pay no more than 30% of their income, with the rest paid for by the government.

As of Nov. 30, 73,000 of those households had to some degree fallen behind in their rent payments, NYCHA officials said. That’s 46% of tenants.

The result is $454 million in rent arrears so far this year, way up from the $125 million in 2019, the last year before the pandemic hit. That year, NYCHA was collecting about 90% of its expected rent; it’s now getting about 65%.

As a result, by the end of this year NYCHA will have only a one-month reserve fund, far short of the three- to four-month reserve recommended by the U.S. Department of Housing & Urban Development (HUD).

As THE CITY reported last month, NYCHA recently informed HUD and the U.S. Attorney for the Southern District of New York (SDNY) that the rent collection gap could stymie the housing authority’s ability to reach its promised repair goals under the 2019 agreement.

In January 2019, NYCHA, HUD and the Manhattan U.S. attorney signed the pact with a specific timeline for repairs to heat and elevator systems, as well as a thorough cleanup of lead paint, toxic mold and vermin. The deal came in response to the federal prosecutor’s investigation, which uncovered years of mismanagement and deceit by NYCHA’s leadership to cover up squalid conditions of thousands of public housing units.

In its budget presentation Wednesday, NYCHA warned: “Without additional funding or improvement in tenant rent payments, NYCHA will be forced to significantly cut expenses and curtail property repairs beginning in 2024.

“This could potentially impact repairs required for HUD/SDNY agreement compliance.”

On Wednesday, NYCHA officials said they’re negotiating with HUD for extra money to cover the costs of meeting “environmental expenses” spelled out in the January 2019 agreement, including lead and mold abatement.

They’re hoping that if HUD approves their request, that will cover the costs of meeting the stated repair goals on time. But even that may not be enough. As CFO Lescott-Martinez put it, “We will try to meet those goals, but if at some point, if you don’t have enough revenue, we’ll have to revisit this.”

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