Creates the New York City department of housing preservation and development homeowners improvement trust fund and the HPD homeowner standard warranty

Summary of provisions

New Article XXVIII is added to the Private Housing Law. Section 1233 sets forth the definitions of the new article. Section 1234 establishes the New York City Department of Housing Preservation and Development Homeowners Improvement Trust Fund (the "Fund"). Each sponsor of an HPD project shall be required to contribute to the Fund by submitting not less than 5% of the total value of the project into the fund.

Moneys shall submitted into the Fund to cover future warranty claims related to the HPD project. In the event that no warranty issues are outstanding, 50% of the funds submitted by the sponsor shall be returned thirty months after completion of the project. In the event that no warranty issues are outstanding, the remaining 50% of the funds submitted by the sponsor shall be returned sixty months after completion of the project.

Section 1235 establishes the warranty to be provided by the HPD sponsor's project.

Section 1236 sets forth the powers and duties of the Commissioner relating to HPD projects.

Section 1237 sets forth the process for dispute resolution of relating to defects and warranties of HPD projects.

Section 1238 sets for the penalties for violating Article XXVIII.

Justification

The New York City Department of Housing Preservation and Development ("HPD") is a New York City Mayoral agency responsible for the development and preservation of affordable housing. HPD facilitates the expansion and preservation of the City's affordable housing stock. The agency finances affordable housing through the administration of City Capital funds, federal HOME Investment Partnership funds, tax credits and abatements and the subsidized disposition of City-owned land. HPD solicits private development partners through Request for Proposals and Requests for Qualifications. Additionally, HPD advertises available housing units to the public and administers housing lotteries; this practice results in the public often

mistakenly believing they are purchasing a home from the City, not entering into contracts with private developers.

HPD's development process is subjected to limited oversight compared to other City agencies, which are subject sealed, competitive bidding processes. This lack of oversight has resulted into corruption in the procurement process and unscrupulous contractors repeatedly awarded affordable housing construction projects. The end result is shoddy construction, the repairs for which then become additional burdens to the homeowners, whom already have financial limitations which qualified them for the housing in the first place. Independent inspectors have found serious construction defects, including cracked foundations, leaking roofs, improper electrical wiring, unfinished or mislaid plumbing, lack of insulation and inadequate heating, improperly installed windows, the wrong sized pipes, and poor to subpar building materials. HPD has no method of recourse in place for the homeowners, and in fact occasionally applies for additional public funds to address the needed repairs. Under the administration of Mayor Bloomberg, 160,000 units of affordable housing were created and preserved through both new construction and renovation. Mayor De Blasio is proposing another 200,000 units of housing.

This bill would require all developers who participate in the HPD-sponsored projects to make a deposit equal to five percent (5%) of the value of the project to cover any future potential warranty issues. In the event that no outstanding warranty issues exist, after thirty (30) months half of the deposit will be returned to the developer. After sixty (60) months, if no outstanding warranty issues exist, the remaining deposit shall be returned.

This bill will protect future homeowners. It will work as both a preventative measure, incentivizing the developers to construct a higher quality product in order to get their money out of escrow, and provide an avenue for affordable, timely repairs for homeowners.

Prior legislative history

New Bill.

Fiscal implications

None to the state.

Effective date

This act shall take effect on the first of January after it shall have become a law.