New York City's $4B shelter system rife with mismanagement, nepotism, investigators say

NEW YORK — A yearslong investigation of New York City's $4 billion homeless shelter system found widespread mismanagement, self-dealing and nepotism.

The review of dozens of nonprofit organizations that contract with the city to provide shelter to unhoused individuals and families began in 2021, before the arrival of tens of thousands of migrants placed additional strains on New York’s shelter system. It was released on Thursday by the city's Department of Investigation.

Among the problems uncovered were that some shelters employed immediate family members of senior executives and board members in apparent violation of their contracts with the city, the 100-page report states. In other instances, investigators found that some executives of city-funded shelters were also employed by security firms hired to provide services at the shelters.

Some shelter providers failed to follow competitive bidding rules when procuring goods and services, the investigators said. And some awarded multimillion-dollar maintenance contracts to companies affiliated with the buildings’ landlords rather than putting the contracts out to bid.

Executives at some nonprofits that are funded largely by city taxpayers made $700,000 or more a year, the report said, adding that the city lacks rules governing how much they can earn.

“When it comes to protecting the vast taxpayer resources that City-funded nonprofits receive, prevention is key," Department of Investigation Commissioner Jocelyn Strauber said in a statement. “City-funded nonprofit service providers pose unique compliance and governance risks, and comprehensive City oversight is the best way to stop corruption, fraud, and waste before it starts.”

Neha Sharma, a spokesperson for the city Department of Social Services, which oversees homeless services, said the department takes "every instance of non-compliance very seriously, which is why DSS has completely stopped doing business with a number of providers highlighted in the report, enhanced invoice review policies and practices, and reinforced our robust audit and accountability mechanisms.”

Sharma said the report “does not reflect our current contracting and oversight processes," noting that the review began before the current mayor, Democrat Eric Adams, took office in 2022.

New York City has long provided shelter to more unhoused people than any other U.S. city, in part because of a 1981 court ruling that requires the city to provide shelter to anyone who asks for it.

According to the Department of Investigation report, the nightly population in city-funded shelters ranged from 45,000 to 55,000 from 2020 until mid-2022 and has grown to more than 87,000 since then, largely because of the large numbers of migrants who have arrived over the past two years.

The city spent $4 billion on homeless shelters in fiscal year 2024, up from $2.7 billion in 2022, according to the report.