Wheeler Terrace Beats the Odds

AFFORDABLE HOUSING FINANCE • January 2009

BY BENDIX ANDERSON

Washington, D.C.—One of this city’s oldest affordable housing communities, Wheeler Terrace was built in 1947 for veterans returning from World War II. But it’s about to become one of the first aging affordable housing communities renovated to meet the toughest of green building standards. When it’s finished in September 2009, Wheeler will apply for Leadership in Energy and Environmental Design (LEED) gold certification from the U.S. Green Building Council.

Green redevelopment is hard enough, but the team redeveloping Wheeler also took on crime, the housing bubble, and the credit crisis before starting construction in the fall of 2008.

“Wheeler is a testimony of what could be done in affordable housing,” says Mark James, project manager for local affordable housing developer Community Preservation and Development Corp. (CPDC).

Gunshots, drug-dealing, and gentrification

In 2006, local police officers named the area around Wheeler Terrace one of six hot spots for crime in the city. Tucked away in the far corner of a residential neighborhood, surrounded on three sides by a park that has served as a drug market in the past, Wheeler had several shootings on its grounds that year.

“It was awful here—guys gambling all day and night, drinking, drugging, violence,” remembers Garlenda Joyner, president of the tenants association. In 15 years as a resident, Joyner has broken three ribs diving to escape gunfire.

The single mothers that head 80 percent of the households at Wheeler also worried gentrification would force them to leave their homes. In 2006, the residents received a letter from the city describing a plan by its owner to sell the property to a for-profit developer likely to demolish the buildings. At that time, luxury condos and single-family homes were rising in many long-neglected corners of Southeast D.C.

Wheeler’s project-based Sec. 8 subsidy contract, written in the 1970s, was set to expire in July 2009, taking with it the resident income restrictions.

To save their homes, residents banded together to form a tenants association. “We learned that we had rights—that we didn’t have to leave,” says Joyner.

The tenants partnered with CPDC to buy the property, renovate the apartments, and keep them affordable, using their right of first refusal as residents under a local law.

“In November [2007] right before Thanksgiving, it all changed [for the better] when CPDC bought this property,” says Joyner.

CPDC built a wrought-iron fence around the property, asked all visitors to sign in, and enforced lease provisions to keep drugs off the property. The developer also hired armed security. At least four security guards watch over the property 24 hours a day. Some of the young men that congregated at the property and in the park were unhappy with the extra attention—one even stuff ed a rag into the gas tank of a security guard’s car and lit it on fire. But the property quickly became safer. There were no gunshots in 2008.

Going green

Wheeler will meet and exceed Washington, D.C.’s new standards for sustainable design, even though they were not yet mandatory when the developer started the rehab. The standards are based on the Green Communities criteria created by Enterprise Community Partners, Inc. CPDC accepted a $50,000 grant from Enterprise.

Then CPDC decided to up the ante again by seeking LEED certification. Meeting those standards is especially difficult for a complex of old, drafty, water-damaged buildings. CPDC will tear sheet rock from apartment walls to add wider studs and two to three inches of extra insulation to the exterior. CPDC will install energy-efficient windows and Energy Star-rated appliances. Geothermal wells will help the new heat pumps that heat and cool individual units to run more efficiently on frigid days. One of the seven buildings will even have a green roof.

The deep renovation will cost $131,000 per unit in hard construction costs. That’s still cheap compared with the estimated $160,000 to $170,000 per unit it would have cost to demolish and build new apartments on the site, according to CPDC.

The green features at Wheeler Terrace with pay for themselves within 10 years, according to CPDC’s energy audit of the property. CPDC will benefi t from lower costs to heat and light the common areas, which will use 25 percent less energy. Residents and the federal government also will immediately benefit from lower utility bills, since residents pay for their own electric and heat, with help from a stipend from the government.

To pay for the $32 million renovation, CPDC took out an $8.1 million tax-exempt bond mortgage from Union Bank of California. The interest rate on the 40-year loan is fixed for 15 years at 5.6 percent with a swap contract.

Wheeler Terrace also beat the credit crisis to receive $12.1 million in equity from the sale of 4 percent low-income housing tax credits to PNC MultiFamily Capital. PNC, which is expanding in the area, paid more than $1 for each dollar of tax credits, plus depreciation, high for a deal that closed in 2008, even for a strong project like Wheeler. City officials also supported the green redevelopment with $10.2 million in housing trust funds and Community Development Block Grant money.

“Wheeler Terrace is a victory for those of us that believe all affordable housing should be green,” says CPDC’s James.