Attorney Charges Foul Play on Hine Project Housing Tax Credits

Attorney Charges Foul Play on Hine Project Housing Tax Credits

Asks HUD Inspector General for Investigation

by Larry Janezich

Attorney Oliver Hall has formally requested HUD’s Inspector General investigate the Hine development “to determine whether it complies with requirements for inclusion in the Low income Housing Tax Credit program [LIHTC].”  In December of 2013, DC Housing Finance Agency (DCHFC) voted to grant a 4% tax credit to Stanton-EastBanc under the federal program to compensate developers for the cost of affordable income housing. The tax credit, when traded to Wall Street investors, generates capital that pays for all of the hard and most of the soft expenses involved in constructed affordable units.  Unlike a tax deduction, the tax credit is a dollar for dollar (or more) return to the developer for every dollar invested.  In the case of Hine, this could amount to a federal grant of $6 to $7 million dollars, and is intended to pay for the entire cost of the North Building.

According to Hall, who says he obtained the Stanton-Eastbanc LITHC application under the Freedom of Information Act:  “Based on a review of Stanton-EastBanc’s LIHTC application, however, it appears that the project fails to meet the threshold requirement for low income occupancy, under either the “20-50 Rule” or the “40-60 Rule”  [20% of the units available at 50% of Area Median Income, or 40% of the units at available at 60% Area Median Income].  The result, Hall claims, is that Hine Developer Stanton-Eastbanc is receiving a full subsidy but not providing the required number of units in return.

Let’s see how this plays out.

The Hine project will include a total of 158 residential units, 46 of which are designated “affordable.”  The project is planned to be two separate structures:  the North building with 34 residential units, and the South Building with 124 units.  The developers have designated 29 units in the North Building as “affordable” at 60% Area Median Income (AMI) and thus meeting the “40% at 60%” LIHTC eligibility rule.

The North Building also has five “affordable units” at 30% Area Median Income.

According to Hall, the Hine project, considered as one development—as it was presented to the city, to the community and is subject to the PUD order—does not meet the threshold for eligibility for a federal grant. (See the full text of Hall’s letter in the Library on CHC’s homepage)

According to Hall, DCHFA declared Hine eligible only because it excluded the South Building in its entirety from its calculations. Standing alone, the North Building complies with the 40-60 Rule. “But,” Hall’s letter states “the North Building and South Building are both parts of the same project, to be constructed simultaneously by the same developer on the same lot, and they are subject to the same Zoning Commission order approving them as a single PUD” – a fact acknowledged by Stanton-EastBanc in its LITHC application.

This action, Hall says, “rewards Stanton-EastBanc for what appears to be a deliberate attempt to evade those requirements by segregating the affordable units of its project in a separate building. Further, it invites any other developer to claim that an ineligible project is eligible for housing tax credits simply by dividing it into parts, and designating a single part as a distinct project that meets either the 40-60 Rule or the 20-50 Rule.”  If considered as one project—and, in light of the fact that the developer is paying $0 for the North Parcel because he is allowed to deduct its cost from the amount paid for the South Parcel, it probably should be—the DC government has given valuable land away to a developer without receiving its fair share of affordable housing in return.

Hall says that the awarding of LITHC tax credits to Stanton- EastBanc raises questions about the process by which DCHFA approved this project, suggesting that DCHFA is not exercising adequate oversight over the LIHTC program.

In addition, the letter notes, LITHC Board of Directors Vice Chair, Leila Batties, voted in favor of granting the tax credits, despite an apparent conflict of interest “that should have disqualified her from voting to approve Stanton-EastBanc’s LIHTC application.”  Batties is an attorney with Holland and Knight, who represents EastBanc in its capacity as developer of the West End Library development.  As a partner in Stanton-EastBanc, EastBanc submitted LIHTC applications for both the Hine and West End projects.

CHC contacted EastBanc’s Anthony Lanier for comment, who refuted Hall’s claim that the LIHTC meeting was not properly noticed and stood by the legitimacy of the separating of the project in two parts in order to render it eligible for LIHTC funding.  The full text of Lanier’s response can be seen in the Library on CHC’s home page.

A spokesperson for the DC Housing Finance Agency , when asked to react to Hall’s letter, said, “We believe that the Agency’s decision to approve the Eligibility Resolution for the Hine’s project (North LIHTC) is grounded in sound legal analysis and that the project’s qualifications fits squarely within the requirements of the tax code.  Ms. Leila Batties’ vote on the project was appropriate and permissible within the parameters and requirements set forth in the Agency’s statue and the Board’s Conflict of Interest Resolution.”

Next:  The tangled web of LIHTC financing and DCHFA’s Conflict of Interest Policy


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7 responses to “Attorney Charges Foul Play on Hine Project Housing Tax Credits

  1. CarPool

    More deception leading back to developer misdeeds. Not surprised. Will the LIHTC already sold on Wall Street under fraud be the final nail on this horrible project? Corporations taking the Public for a ride.

  2. Andrea Rosen

    EastBanc similarly plans to segregate the “affordable” units at the two-building West End development, in the residences above the fire station. (Why not let those moderate-income folks suffer the disruption of fire trucks?) Now I’m guessing that that arrangement was to facilitate the same application for Federal tax credits as at Hine. But what’s really interesting about the West End giveaway is that Victor Hoskins’s DMPED secretly agreed to reimburse EastBanc for the cost of constructing the “affordable” units. I wonder whether EastBanc will make/has made that reimbursement known in any application for Federal tax credits.

    Doesn’t this conduct by DMPED seem like something the AG would take an interest in, even if the giveaways were approved in earlier legislative sessions?

  3. Maggie Hall

    Any time the FIA has to be used to find out what is going on in a particular situation means that information is something the people behind the information (in this case Stanton-EastBanc) were desperate to hide!

  4. anon

    This is getting ridiculous. Hall and his Nader-backed crusade lost on all counts, the project is getting built, and yet he’s going to keep searching for lawsuits and fail just as wholeheartedly as in the West End. This is what happens when your efforts are being bankrolled by Ralph Nader rather than residents of the community.

  5. Valerie

    The last anyone knew, the attorney for the plaintiffs here is not getting paid for his effort with city or any public funds. Rather, public funds are being used to ensure a tax break for a private developer in this project. We can argue about whether any of that should happen, but regardless, the principle remains the same: in a democracy, people have the right and an obligation to ensure that public monies are used appropriately for public purposes. Anything that sheds light on that process should be welcome by all taxpayers.

    • anon

      The attorney gets paid by Ralph Nader to litigate these types of projects throughout the city. Nader does this in many cities, including Los Angeles. Look ti up. I have no problem with neighbors and people with a vested interest raising as many issues as they want. This has become something other than either of those things.

  6. Jammin Jimmy

    RIP Eastern Market