CHICAGO - Bricks rained down on the roof of Marsha Markham’s car, breaking through her windshield and pinning her to her seat.

Markham backed her white SUV into a support column of an apartment building here in September 2004. A significant part of the building collapsed onto her car, sending the Chicago-area resident to the hospital with serious injuries. That damaged building was just one structure in a portfolio of nearly 100 buildings in Chicago’s North Lawndale neighborhood, totaling 1,048 apartments.

Markham’s accident set off a chain reaction that would put all of those buildings into default.

When housing inspectors visited these buildings, they found more than 1,800 building code violations. Many apartments were without heat, hot water, or electricity, and buildings like the one Markham hit that had severe structural weaknesses. Worse, the properties were plagued by crime. Drug users often cruised through the neighborhood to purchase controlled substances.

Workers hired by 23 different affordable housing development companies are now swarming over these buildings, repairing years of neglect and preserving the whole portfolio as safe, well-capitalized affordable housing, according to John G. Markowski, commissioner of Chicago’s Department of Housing.

The portfolio, called the Lawndale Restoration, was a massive affordable housing project for very low income tenants. The Department of Housing and Urban Development (HUD) financed the scattered-site project decades ago with a low-interest mortgage and project-based Sec. 8 rental subsidy.

After the collapse, HUD quickly foreclosed. Immediately afterward, the department sold Lawndale Restoration, which still had $51 million in outstanding debt, to the city for just $10.

“We did not want these to go into foreclosure and go to the highest bidder,” Markowski said. The city passed the portfolio on to a nonprofit company called Community Initiatives, Inc., while city officials began to look for developers for the restoration by issuing a request for proposals. Community Initiatives is an affiliate of the Community Investment Corp., a 30-year-old nonprofit multifamily lender.

Most of the 23 companies that the city picked to work on Lawndale Restoration are very small developers with strong ties to the neighborhood. For example, JDS Development, LLC, has developed and managed just 39 units of supportive housing at several projects. But all of those apartments, along with the company’s headquarters, are located in the same six-block area of North Lawndale, a neighborhood that still bears scars from the riots of the 1960s and the decay and neglect that followed.

That local focus is important, because many of the people living at Lawndale Restoration have been in the neighborhood for years, even decades. Many are afraid of being displaced. After decades of crime and blight, new market-rate condominiums have begun to appear just 10 blocks east of the properties. The price of a vacant lot has risen from $25,000 to as much as $100,000 since 2000.

JDS is nearly finished rehabilitating a nine-unit building. Although five of the seven families that lived in the building permanently moved after construction began in the fall of 2006, most still live in the neighborhood, and several have moved into other apartments at Lawndale Restoration.

About a third of the developers working on Lawndale Restoration have closed their construction financing and are starting work, according to Larry McCarthy, an administrator and technical service provider for Community Initiatives.

Most of these developers kept their financing plans very simple, concentrating on conventional loans and developer equity.

HUD offered to match the financing for these projects with grants of up to $40,000 per unit, provided that the developer agreed to preserve the housing as affordable. The grants come through HUD’s Up Front Grant program and could add up to $33.5 million to help rehab or replace as much as 838 units of housing.

But many developers like JDS decided not to use the money, even though they plan to rent their apartments to very low income households. They didn’t want to wait for HUD to approve their grant applications. Also, by not accepting federal money, they don’t have to comply with a federal requirement to use union workers in the construction of their projects.

HUD is also offering rental subsidy to Lawndale Restoration: 402 units will receive project-based Sec. 8 rental subsidies. In addition, 610 households will receive Sec. 8 vouchers they can use either to stay in their newly renovated homes or move to new homes.

Many developers also plan to rent whatever empty apartments they have to Sec. 8 voucher holders referred by the Chicago Housing Authority. This would be an easy decision to make, because most of the developers working on Lawndale Restoration agreed to reserve their rental apartments for families earning no more than 80 percent of the area median income (AMI) in exchange for free land. Renting to moderate-income tenants would bring in less money than renting to voucher holders.

Another local developer, NHS Redevelopment Corp., plans to rehab its part of Lawndale Restoration to become for-sale housing, affordable to tenants earning up to 115 percent of AMI. Together, NHS’s seven buildings total just 15 units of housing, including three 100-year-old greystone mansions. Work to repair these buildings began in October 2006.

NHS will finance the entire $2.7 million deal using only an existing line of credit that has an attractive 6 percent interest rate, provided by its local bank, MB Financial, Inc. “That’s what allowed us to get started pretty quickly,” said Floyd Gardner, deputy director of single-family programs for NHS. “We didn’t have to go out and fill out a loan application.”

Only a few developers even considered financing their work with more complicated programs like federal low-income housing tax credits, although Holsten Real Estate Development Corp., based in Chicago, has partnered with ACORN’s Chicago office to rehabilitate 250 apartments at Lawndale Restoration with a low-interest tax-exempt bond mortgage and 4 percent low-income housing tax credits. ACORN is an advocacy group for low and moderate-income families with offices across the country.

Stopping crime in Lawndale

The biggest challenge these developers faced wasn’t financing. They needed to keep crime out of their buildings in one of the city’s toughest areas. “These were the worst properties in the neighborhood,” Markowski said.

To make the buildings safer, the new owners of Lawndale Restoration evicted anyone not listed on the lease and installed new doors and new security systems.

The hardest work is finished at 4037 West Gladys, a yellow brick apartment building built in the 1930s. Three dangerously unstable apartments in the front of the building have been gutted and rebuilt. Local developer Brian Rowland thinks he and his team of workers can finish another three apartments every two months until the 18-unit building is finished in October 2007.

New security cameras and a property manager who lives at the building day and night have made 4037 West Gladys a much safer place. “The people living there used to be terrified,” Rowland said. Now, finally, their neighborhood is becoming a safe place to live.