NYC developers indicted for pocketing $1 million from affordable housing program

Six New York City real estate developers were indicted Wednesday for collecting more than $1 million in property tax benefits to promote affordable housing while renting units at sky-high prices.

Manhattan prosecutors claim Joel Kohn, Michael Ambrosino, Alen Paknoush, Mendel Gold, Ioan Sita, Gheorghe Sita, and their businesses have abused an affordable housing tax incentive program since 2011.

The developers collectively own six Brooklyn buildings.

“Not only did they illegally charge substantially higher market rents for years, but they did so while personally reaping the benefits of generous property tax abatements,” said Manhattan District Attorney Alvin Bragg.

The Bushwick developers approved unauthorized people to live in their affordable units and charged some of them $1,000 more than legally allowed, according to the indictments.

Bragg’s office brought the charges with the city Department of Investigation as the developers filed paperwork at the Manhattan-based Department of Housing Preservation and Development.

DOI Commissioner Jocelyn Strauber said the developers took homes off the market while the city reeled from a deepening housing and homelessness crisis exacerbated by the COVID-19 pandemic.

“[T]hese landlords charged higher rents to New Yorkers, made no attempt to determine if they qualified for such housing, and made misrepresentations to the city to obtain tax credits to which they were not entitled,” said Strauber.

The indictment charges Kohn, Ambrosino, Paknoush, Gold, and the Sitas with 13 counts of grand larceny and a host of related criminal tax fraud charges. They pleaded not guilty in State Supreme Court in Manhattan on Wednesday before Judge Melissa Jackson.

The tax abatement program they are accused of abusing is called 421-a. It was started in 1971 and expired in June, was designed to make housing available for financially struggling New Yorkers by incentivizing developers to make a percentage of units affordable in new multi-family developments through generous tax breaks.

It had immense significance on the city’s affordable housing stock, with the NYU Furman Center estimating that almost 70% of residential properties built since 2012 benefited from the abatement.

Critics have complained that without a designated watchdog, the developer-friendly program was highly vulnerable to corruption. It was by far the city’s most expensive, costing over $1 billion a year in tax revenue, according to the New York City Comptroller.

A lack of meaningful agency oversight on the state and local level has given the city’s tenants few methods to hold slumlords to account. The Daily News reported earlier this month on how massive backlog has resulted in tenants waiting as long as four years for the Office of Rent Administration to review their complaints.

Efforts to reach the indicted developers and their lawyers were unsuccessful.