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September 16, 2019Cart

Business

by Westchester County Business Journal
by WCBJ

Ineligible tenants jeopardize low-income tax credits, MacQuesten Development charges

The Modern – a low-income housing project in Mount Vernon that MacQuesten Development opened in September – is accusing a nonprofit organization of not doing its part in finding eligible tenants.

The building owner, 130 Modern LLC, sued Community Housing Innovations Inc. for $2 million in Westchester Supreme Court on Jan. 29.

The Modern. Photo by Bill Heltzel

Community Housing Innovations leased units to tenants who had too much income, the lawsuit claims, “preventing needy individuals and families who did qualify from gaining access to this low-income housing project.”

“CHI categorically denies any wrongdoing,” its attorney, James K. Landau, responded.

The nonprofit organization, based in White Plains, was founded in 1991 and provides housing for homeless and low-income individuals and families.

It booked $22.4 million in revenue in 2016, according to an auditor’s report, and had assets of $28.5 million.

MacQuesten Development of Pelham, the parent of 130 Modern, built the $31.5 million, 11-story structure at 130 Mount Vernon Ave. It has 81 apartments and ground-floor retail space.

MacQuesten said it paid CHI $100,000 to market the project and find tenants whose household income was no more than 60 percent of the area median income. Twenty-two apartments also were set aside for households with at least one person recovering from a psychiatric disability.

But CHI approved at least one tenant and leased at least one apartment to an applicant who was ineligible to live in The Modern, the complaint states. CHI employees then allegedly tried to conceal their mistakes from the developer and from a tax credit compliance consultant.

MacQuesten accuses CHI of breach of contract, negligence and acting in bad faith.

Tax credits allow developers to get a dollar-for-dollar reduction on federal taxes on a portion of the development costs. Developers typically allocate their credits to investors in exchange for development capital.

The project received $16.3 million in tax credits, according to a 2014 report by the federal Office of the Comptroller of the Currency.

MacQuesten claims that its tax credits have been reduced, costing it $100,000 in capital contributions. It said losses could increase if more tenants are found to be ineligible, and the error potentially puts it in violation of financing and regulatory agreements.

“There were issues with the lease-up,” Landau, the CHI attorney, said, “which we hope to resolve amicably with the developer.”