Postgraduate Center for Mental Health has $130 million in cash reserves and steady funding from the state, but conditions inside the apartments it rents for low-income tenants continue to deteriorate. The organization says it is forced to rent substandard units because state contracts are too low to cover better housing.
Behind the unlocked front door to a Fordham Heights apartment building, Choice Scott and her neighbors faced one hazard after another.
Scott, a mother of two, went seven months without cooking gas before it was restored in January. When City Limits visited the building on East 182nd Street that month, she and three neighbors showed off the hot plates with electric burners that management had given them the previous summer. She had recently won a court case forcing the property owner to turn the gas back on and to address a mouse and roach infestation.
On Jan. 12, her 7-year-old son was scalded by steam spraying from a bedroom radiator valve. “This is clearly a hazard in the home,” a Harlem Hospital physician wrote in a letter to the landlord, a limited liability corporation tied to property owner Jonathan Malinas. “I strongly recommend that this be addressed urgently by the landlord to prevent further injury to the children in the home.”
Scott and her children finally moved out last month, but contend with another lingering problem: Her 2-year-old daughter has had multiple blood tests that show lead levels of 4 micrograms per deciliter—higher than the threshold considered safe for children by the city and federal government. City inspectors have opened an investigation, and while initial checks did not identify lead in the paint that flaked off the apartment’s walls, Scott worries the tests weren’t thorough enough.
“It’s like a slum,” Scott said. “And I didn’t feel safe.”
Some of the problems are familiar to low-income tenants across The Bronx, where low-cost housing crumbles and absentee owners with large portfolios neglect repairs. Yet in the case of Scott and at least three of her neighbors, there were supposed to be additional protections in place.
The apartment is rented by a nonprofit tasked with providing safe housing with social services to formerly homeless New Yorkers with mental illness. That nonprofit, Postgraduate Center for Mental Health, receives millions of dollars in contracts from New York’s Office of Mental Health (OMH) for its scattered-site program and has about $130 million in reserve. Its CEO, Dr. Jacob Barak, earns more than $913,000 a year to run an organization with various real estate holdings, mental health services and housing programs, tax filings show. OMH, meanwhile, oversees the loose network of 20,000 scattered-site supportive housing units statewide, including 16,000 in the five boroughs.
But as City Limits has previously reported, egregious, unsafe conditions plague New York City’s network of scattered-site supportive housing, where nonprofit providers with government contracts rent units in privately-owned buildings and sublease them to formerly homeless New Yorkers with mental illness, HIV/AIDS and other special needs.
Postgraduate Center is no exception.
Scott’s former apartment is one of around 540 units that Postgraduate Center leases for its scattered-site supportive housing program, with just over 440 funded by contracts from OMH. That makes Postgraduate the seventh-largest OMH-funded portfolio in New York City, according to data provided by the state in response to a Freedom of Information Law request.
City Limits identified 32 buildings where Postgraduate Center rents apartments, based on a review of lawsuits, housing court documents and interviews with five tenants. Nearly half—15 of the 32 buildings—are owned by people who have appeared on the public advocate’s annual Worst Landlords List. The 32 buildings accounted for 1,433 open housing code violations as of July 8, including 398 open Class C, or “immediately hazardous,” violations. Postgraduate Center rents only some of the apartments in those buildings, while the rest of the units are leased by individual tenants and, at times, other nonprofits.
Among the findings:
- Four buildings have open lead paint violations, according to HPD records (these did not include Scott’s building, which did not have unresolved lead paint violations.)
- Ten buildings with open violations for self-closing doors that failed to shut automatically—the problem that fueled a fatal fire in The Bronx earlier this year
- Five buildings owned by companies connected to Malinas, which account for 123 open HPD violations, including 41 at Scott’s former residence.
- Two buildings owned by Worst Landlord List mainstay Eleanor Patrick, including one on Chauncey Street in Brooklyn that accounts for 182 open violations—56 of them “immediately hazardous.”
- A building owned by Ved Parkash—once ranked by the public advocate as New York City’s very worst landlord—with apartments previously leased by the city for use as cluster site homeless shelter units
- An ongoing 2017 lawsuit filed by a tenant in a Bronx building who was struck by a chunk of bathroom ceiling and injured when he slipped on a floor flooded by an overhead leak. The tenant initially sued the property owner, a company connected to landlord David Tannenbaum, before adding Postgraduate as a defendant because he said they had a responsibility to fix the leaking ceiling. The lawsuit has pitted Postgraduate against the property owner to determine legal responsibility. The building was also formerly leased by the city for use as a cluster site shelter for homeless families.
In an interview, Postgraduate Center’s Deputy Vice President of Residential Operations, Christine Narine, said the organization has been renting most of its scattered-site units for several years—sometimes more than two decades—and cannot afford new one-bedrooms or studios because prices have risen beyond what OMH contracts can cover in most cases. Older OMH agreements give providers a lump sum of around $17,000 a year per apartment for rent and services. Those older contract rates do not rise, even as median rents across the city spike and the number of vacant low-cost apartments shrinks. Postgraduate Center officials said they have opted not to renew about 40 scattered-site contracts in the past.
“At the current reimbursement rate for the model, we can’t afford to de-lease apartments and rent new ones for our consumers,” Narine said.
Instead, Postgraduate, like other providers, has been bundling its contracts, renting two-bedroom units and placing its clients together, she said. Narine said the arrangements are “more financially viable but have their own sort of issues in terms of trying to put two individuals with their own disabilities into an apartment together who don’t know each other and have to share a living space.”
One Postgraduate Center client who asked to remain anonymous said she has lived in two scattered-site units where roommates assaulted her. The woman, 32, said she is poised to move into a one-bedroom on 233rd Street, but her eagerness was tempered by the conditions there: the complex has 124 open HPD violations, including 56 Class C penalties for roaches, mold and lead paint.
Another Postgraduate Center client, Charles Edwards, said the organization moved him from a one-bedroom on 231st Street to the same 182nd Street building as Scott after he let another person live with him. He said he worried about getting an unknown roommate but was preoccupied with more immediate concerns: the refrigerator and stove were broken.
Providers have long advocated for more funding from the state and blame poor conditions on the low contract amounts they say force them to rent whatever they can find—including units owned by notoriously negligent landlords. The building on East 182nd Street, for example, appeared on then-Public Advocate Letitia James’ Worst Landlord List in 2015, but at least two nonprofit organizations currently lease units there. New York City’s Department of Housing Preservation and Development (HPD) sued Malinas and his limited liability corporation to compel them to make repairs in June. A judge set a court date for mid-August.
Attorneys representing Malinas in housing court declined to answer questions in March and again earlier this month. They hung up when City Limits attempted to call back Monday.
An OMH spokesperson defended the contract structure in a statement earlier this year, telling City Limits that “funding rental stipends and services out of the same pool of money allows providers to accommodate variations in tenant needs.” OMH also said it has no control over what units providers rent or from whom they rent them.
Above: Charles Edwards in the East 182nd Street building in February; the electric hot plate tenants were forced to use during the seven-month gas outage; the damaged floor in Edwards’ apartment. Photos by Adi Talwar.
Untouchable cash reserves
Faced with limited contracts, some nonprofit administrators say they use private fundraising dollars to cover a portion of the rent or pay for the services provided to their scattered-site clients.
Postgraduate Center is unable to do that because it does not raise money from private sources, said Barak, the CEO.
He said the organization cannot touch the more than $130 million it has stashed in a “rainy day fund,” despite the crummy conditions in the apartments it rents. That money is obligated to Postgraduate’s real estate holdings, which include 16 congregate supportive housing sites with on-site social services, six other properties and two buildings in construction, Barak said.
“The fiduciary responsibility to manage this capital reserve rainy day fund is purely for the buildings that we have developed and that we own for the long-standing,” Barak said. “We are not in a position to use this money to subsidize private, for-profit landlords.”
Postgraduate Center argued that they are actually pressed for cash: scattered-site tenants—who pay 30 percent of their income toward rent—owe more than $656,000 in arrears, while residents of its congregate supportive housing facilities owe $1.4 million more.
Nevertheless, the organization’s supportive housing contracts, along with Barak’s compensation, have attracted past scrutiny from state officials. In a 2017 audit of Postgraduate’s scattered-site contracts with OMH, inspectors from the state comptroller’s office found health and safety problems in nine of the 14 apartments they visited, including a bedbug infestation and damaged walls and ceilings. They also questioned Barak’s then-nearly $850,000 salary and flagged a bonus scheme that chiefly benefited PCMH executives. Top staff padded their pay with surplus funds that are supposed to be returned to the state, the inspectors found.
But a 2020 follow-up audit by the Comptroller’s office determined that Barak’s pay did not violate an executive order from Gov. Andrew Cuomo capping executive compensation from state contracts at $199,000. Gov. Kathy Hochul has since scrapped that order.
Barak’s salary has only increased since that audit, reaching $913,541 in the fiscal year ending in June 2020, including a $450,898 base salary, $250,000 bonus, $132,356 in deferred compensation and other benefits, according to the most recently available tax records published by ProPublica and GuideStar. In the past, Barak’s total pay has topped $1 million, as in the 2015 fiscal year when he made $847,334 in base salary and $166,321 in additional compensation, tax forms show.
An outside consultant hired to make salary recommendations said the real estate aspects of Barak’s job, combined with the social service mission, justify the pay.
“The agency continuously and increasingly each year looks less like a traditional services delivery ‘Not-For-Profit’ Agency and increasing (sic) finds its Core strategic activity found in the For Profit commercial real estate markets as it related to buying, construction, location and management of its real estate ventures,” the consultant wrote in 2014. The document was provided to City Limits by OMH in response to a records request.
In addition to Postgraduate Center, Barak runs an affiliated firm, Foundation Housing Managing Company, that finances real estate purchases and a management company, Corporation for Housing Care.
“We have used our own funds to buy the land, to develop the buildings and that is part of the activities that the organization took to enhance the number of permanent units in New York City,” Barak said. “Currently, real estate is the primary activity as far as our generation of annual budget for the organization.”
The two related companies also factor into his compensation, which more than doubled that of the top executives at seven of the nine other scattered-site housing providers with more than 400 units in New York City. Only the head of St. Joseph’s Medical Center, a hospital that operates 736 OMH-funded supportive housing units, mostly in Staten Island, earned more: CEO Michael Spicer took in a combined $1.34 million, according to the health system’s 2019 Form 990. The former head of Institute for Community Living, which has 972 OMH-funded scattered-site units citywide, earned just over $662,000 in the fiscal year that ended in June 2020.
The nonprofit also seems to invest money differently than its peers. Tax documents show that Postgraduate held nearly $5 million in investment funds based out of the Caribbean and Central America in 2020, tax documents show. An OMH official said the overseas arrangement was rare for a state-contracted nonprofit. Postgraduate said the investments were recommended by financial advisors.
Daniel Kurtz, a lawyer who specializes in nonprofits and once led the state Attorney General’s Charities Bureau, reviewed Postgraduate’s most recent available tax filing and said there did not appear to be anything illegal about the organization’s investments or executive pay.
Barak’s “compensation appears to be an outlier” but seems to follow the law, he said.
Still, foreign investments and salaries approaching $1 million at organizations serving poor New Yorkers tend to elicit backlash. On the other hand, the sector needs to attract talented managers who could earn far more in other industries, and nonprofit administrators who can effectively address New York City’s homeless and affordable housing crises are probably worth the money.
Officials from the state comptroller’s office and OMH said they would continue looking into Postgraduate Center’s scattered-site program.
In a statement, Comptroller Tom DiNapoli said mental health services are at a “crisis point,” and urged OMH to better hold organizations that provide scattered-site supportive housing accountable.
“At Postgraduate we found red flags that have been allowed to fester because of lax oversight,” DiNapoli said. “New Yorkers are owed better care and greater accounting for the services they’re getting.”
In response to questions from City Limits, OMH said it will conduct an additional audit of business relationships between Postgraduate, its related companies and their state funding.
OMH previously reviewed Postgraduate’s finances in late-January 2020 and ordered the organization to revise staff training, apartment maintenance and tenant screening policies. In response, Postgraduate created a “corrective action plan,” which included quality control measures for mental health treatment delivery, case management and health assessments. The state agency also said it has clawed back $129,000 of nearly $700,000 in “inappropriate” expenses flagged by the comptroller’s office during its 2017 audit.
OMH has added language to Postgraduate Center’s program guidelines stating that the organization “bears primary responsibility for advocating for tenants and working with landlords to ensure that the residents’ apartments are safe and habitable, and that repairs are completed promptly.”
When asked about poor conditions in the scattered-site units, OMH spokesperson James Plastiras said Postgraduate Center, like all providers, is tasked with advocating for repairs and better conditions from property owners.
“OMH conducts reviews, issues findings, requires corrective action, and oversees more than 20,000 Supportive Housing beds,” said OMH spokesperson James Plastiras. “Providers are expected to similarly conduct visits, advocate to landlords on behalf of clients, and work with tenants to maintain safe housing and promote recovery.”
Stepping up for tenants
A commitment to better housing conditions is exactly what tenants in Postgraduate Center units—and across the city’s 16,000 scattered-site apartments—say they want to see happen, especially as policymakers continue to pursue supportive housing as a main solution for reducing homelessness.
Supportive Housing Organized and United Tenants (SHOUT), a group made up of supportive housing residents, said nonprofits and the state agencies that fund them are not upholding their obligations to clients in many scattered-site settings.
“There is nothing ‘supportive’ about placing tenants in homes that are uninhabitable, and where formerly-homeless tenants are consistently exposed to dangerous, unhealthy, and psychologically distressing experiences,” SHOUT said in a statement. “That the agencies overseeing supportive housing contracts seem to have no idea that supportive housing tenants are residing in units owned by some of the city’s worst landlords—or are choosing to turn a blind eye—is a serious concern.”
Nonprofits often instruct scattered-site tenants to contact their case managers when they have a problem with their apartment rather than going directly to the property owner or manager. That adds another layer of bureaucracy that can prolong repairs and, SHOUT said, strips control from the tenant.
There is also another source of conflict that can undermine tenant needs: Nonprofits who alienate property owners could miss out on future apartment rentals, limiting their options in a tightening housing market.
But SHOUT said nonprofits should take tenants’ concerns seriously and actually fulfill their mission statements about serving low-income New Yorkers. The tenant group said they have urged city and state officials to increase oversight, investigate and intervene when living situations become dangerous, but those “requests have not been given the response that they deserve.”
“Tenants are still left on their own to fight for our rights to safe, decent, and stable housing,” they added.
That is what Scott, the mother who invited City Limits to her Bronx apartment, did when poor conditions persisted inside her third-floor unit. She sued Valentine Realty Associates, the Malinas-tied corporation listed as owner, and Postgraduate Center for repairs in November 2021. Valentine and Malinas never responded, documents show.
In court filings, Postgraduate Center said they were not notified about the apartment violations—Scott contends that she had alerted her case manager—and said it was the landlord’s responsibility to correct conditions in the building. Postgraduate “is not responsible and/or allowed to do repairs, so they cannot do any repairs requested,” the organization’s attorneys wrote.
A judge ordered the landlord to fix the problems and imposed daily fines, allowing Scott and her neighbors to finally get their cooking gas restored.
Postgraduate Center declined to comment on Scott’s specific experience, but said in general they immediately contact landlords to treat infestations or make repairs that they know about, while attempting to work with clients to address possible causes.
In rare cases, as at the East 182nd Street apartment, the organization said it will withhold rent until repairs are completed. But they said they do not want a reputation for not making monthly payments because that could turn off other landlords otherwise willing to rent to them. The organization also said it works with tenants to find new apartments that would be a better fit.
“I truly believe that we have obligations to help clients in the most effective way and for me, providing permanent housing was the element that has the greatest impact on a person’s life,” Barak said.
For Scott, the miserable living conditions are hopefully behind her.
She and her children last month moved into an apartment in a congregate supportive housing site run by another organization in Downtown Brooklyn. After living in four scattered-site apartments leased by Postgraduate Center—one in Brownsville, another in East New York, a third in East Harlem and the most recent place in The Bronx—she said she was happy to have a new start for her and her family.
“They were all just terrible,” she said of her past apartments. “This place is really nice, especially compared to where I came from.”