Opa-Locka Community Development Corporation Wins Key Affordable Housing Lawsuit
Earlier this month, the Opa-locka Community Development Corporation (OLCDC) won a lawsuit against HallKeen Management, a property management company, over ownership stakes of Aswan Village Apartments.
Founded in 1980 by Willie Logan, the OLCDC is a nonprofit organization that builds and sustains affordable housing communities in northern Miami-Dade. It also provides under-resourced communities with outlets in arts and culture, entrepreneurship, education, and other services.
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Aswan Village is a 216-unit, affordable housing complex that’s home to low-income families, seniors, and single parents. The residents’ household income is between 30 percent and 60 percent of the county’s median income.
The OLCDC sued HallKeen after it did not comply with the non-profit organization’s right of first refusal under Section 42 of the Internal Revenue Code (IRC). The section establishes the Low-Income Housing Tax Credit (LIHTC) program.
The LIHTC provides more locally-owned affordable housing developments to avoid gentrification. In this case, the program allows the OLCDC the right of first refusal of HallKeen’s offer to purchase Aswan Village. The right of first refusal is enacted if HallKeen planned to sell the property.
“We were selling to an investor, someone who had never built affordable housing units, and what they saw was the value and the equity in this property,” Logan said. “And we were afraid that once the compliance period was over, this investor would not be motivated to keep affordable housing.”
HallKeen was looking to sell the Aswan Village property to an equity firm in New York. However, non-profits who participate in the LIHTC program, such as OLCDC, can purchase the property at the lowest price at the end of the investor’s term of the investment. HallKeen tried to sell it at fair-market value.
“The court, on all accounts, agreed with us without having to go to trial that the facts of the case and the evidence that was presented, it was clear that our contract had been breached by HallKeen,” Logan said. “We had a right to purchase the property for that agreed-upon price when they signed that contract with us.”
HallKeen must now transfer Aswan Village to the OLCDC at the below-market sale price.
“This ruling by the judge will ensure that affordable housing, when it’s built, would remain affordable housing to mission-driven organizations if they have that right of first refusal, and those properties would not be sold from under them,” Logan said.
David Davenport, OLCDC’s attorney for this case, mentioned that investors who try to manipulate these nonprofit organizations are a threat to the affordable housing industry.
“Across the country, in a variety of different circumstances, you may end up with situations where you have less-sophisticated parties,” Davenport said. “Parties that don’t have the resolve or don’t have the wherewithal or don’t have the financial means to go through a costly litigation battle like this.”
Davenport explained that HallKeen made the case more expensive than it needed to be in an effort to overwhelm OLCDC.
“I’ve seen that happen in other instances where [the non-profits] say, ‘I can’t afford to fight, so here, take it.’ And that’s sad,” Davenport said.
Logan understands the role that local nonprofits play in underdeveloped and underrepresented communities.
“We are the backbone of those communities, and we’re bigger than most small businesses and medium-sized businesses, minority or otherwise, and should be treated and looked at as such because, without us, most of our communities would be in much worse shape,” Logan said.
Now the OLCDC’s legal team will tie-up any loose ends following the case, and they’ll schedule a jury trial on damages of more than $1 million.
“We’re going to take this money and not only invest and renovate on these particular units, but we will take some of those proceeds, buy additional land, and build additional affordable housing units,” Logan said.