It’s a tactic Alden Torch Financial and firms like it are using to squeeze extra profits out of the federal government’s chief program for backing low-income housing, according to court cases in multiple states and interviews with more than 20 housing and legal specialists.TDC officials never imagined this scenario when they tapped into the federal Low-Income Housing Tax Credit program back in 2003, to renovate their buildings. Under these deals, a nonprofit forms a partnership with an investor (often a large bank) that provides funding in exchange for tax breaks. At the end of 15 years, the nonprofit generally gets to buy out the investor’s stake, taking ownership of the property for well below market value.
At least that was Congress’s intent, housing specialists say — keeping properties affordable for the long-term and in community hands. But the game has changed in recent years, as some project funders began selling off their partnership interests to investment firms with more aggressive profit motives. And those firms are demanding bigger payouts to exit the deals.
And of course, they are suing to force the nonprofits to make them "compensate" for the value they say the investment firm is losing by not selling the properties on the open market, despite the nature of the program.
The firm's internal email is illuminating if you've never seen how corporations decide on moves like this. It's very "business casual."