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A Seattle federal judge on Tuesday dismissed a lawsuit brought by an investment firm against the Washington State Housing Commission, in a case that has been widely followed by housing officials in Massachusetts and across the country.
The case involved Alden Torch Financial of Denver, which manages investments in low-income housing tax credits and allegedly attempted to extract money or control of housing groups, including in Boston and Seattle.
State housing agencies are the sole watchdog for low-income housing tax credits, the federal government’s multibillion-dollar program to secure housing finance from banks and private financiers. affordable. Historically, lenders would invest in these properties, receive 15 years of tax benefits in return – and then allow the nonprofit housing group to take ownership of the property for a small fee.
But things have changed in recent years. Companies like Alden Torch have bought out aging tax credits from other investors, in an attempt to eventually force properties to sell at market value or demand more money from the association at the end of the term. transaction.
After several real estate disputes, the Washington State Housing Finance Commission published a report in 2019 criticizing the practices of these investors. He also issued a rule to increase control over these companies. Alden Torch then sued the agency and its commissioners.
In his complaint, Alden Torch argued that under the rule as written, the commission could block a sale to any buyer unable to certify that he had not “engaged in litigation regarding participation of a sponsor ”. Alden Torch argued the rule was unfair and could penalize a potential buyer who had “simply defended against frivolous claims.”
The commission revised its rule twice in response to Alden Torch’s objections. The rule now states that the commission will review previous legal findings against a party to assess its “suitability as a potential project partner” under the federal tax credit program. But the commission said it would not penalize a company upfront for exercising its right to resolve disputes through litigation.
U.S. District Court Judge Barbara Jacobs Rothstein fired The case of Alden Torch, saying the court should “take the Commission at its word, unless and until it acts in the way complainants fear”.
The judge also wrote: “Although the Commission clearly has a cynical view of [Alden Torch’s] In practice, it is beyond the power of this Court to state with precision and assurance that it is “inevitable” that the Board will apply the rule to claimants as they expect … “
A WBUR survey in April detailed actions by Alden Torch and other investors, including a unit of American International Group Inc., to get money or control of properties from housing groups. In Boston, Alden Torch is fighting in court to try to prevent the nonprofit from taking over 36 brownstones where it houses hundreds of residents.
David Davenport, a lawyer representing TDC in the case, called the judge’s decision on the Washington commission “an excellent precedent-setting result.”
The lawsuit had a chilling effect on housing officials in Massachusetts and other states, who were reluctant to comment on the TDC case, fearing that Alden Torch would be brought to trial.
Alden Torch and his lawyers did not respond to requests for comment.
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