Baltimore Affordable housing advocates are growing increasingly frustrated as old, bankrupt affordable housing properties are auctioned off by the Department of Housing and Urban Development (HUD), often to owners that flip the projects to market-rate.
“We’ve seen situations were people have come in and bought old FHA [Federal Housing Administration, a division of HUD] housing and rebuilt it with no affordable housing units,” said Paul Graziano, commissioner of Baltimore Housing.
But Baltimore has other plans for its older affordable housing. Now that the city’s most dangerous public housing projects have been rehabilitated, its housing agency has turned its attention to Baltimore’s 14,200 apartments still subsidized under old HUD housing programs, such as Sec. 236 and Sec. 8.
“We have not hesitated to make very large acquisitions,” Graziano said. His agency has already purchased three huge foreclosed projects totaling nearly 1,000 units of bankrupt housing from HUD.
Some housing agencies might hesitate to take over the ownership of a crumbling 307-unit project like Freedom Village in East Baltimore, which Baltimore Housing bought from HUD in 2002 for $25.
But officials in Baltimore have realized that they will be held accountable for what happens at their city’s affordable projects, whether they own the properties or not – especially when affordable housing is converted to market-rate and poor families are evicted.
“Politically we own the problem,” Graziano said. “We might as well own it technically.”
This summer, construction will begin at Freedom Village, which Baltimore Housing has merged with two other distressed projects to create a package of 751 units of blighted affordable housing.
Claremont Homes, next door to Freedom Village, is a nearly vacant, severely distressed public project with 292 rowhouse units. Between the two rises Claremont Extension, a 152-unit apartment tower.
This summer Pennrose Properties, a private developer chosen by the city, will begin to redevelop the three projects into over 500 mixed-income units. The 172-unit first phase will include 100 rental apartments, 20 of which will rent at market rates, another 30 that will be affordable to households earning up to 60% of the area median income (AMI), and 50 that will be affordable to very low income households earning up to 30% of AMI, thanks to rental subsidies provided by project-based Sec. 8 vouchers. Another 72 units will be sold to a mix of low- and moderate-income households.
The second phase of Freedom Village/Claremont will add another 72 rental units and 117 homeownership units. The last phase will focus on rehabilitating or replacing the 152 units at the Claremont Extension, according to Mark Dambly, president of Pennrose Properties.
The Freedom Village/ Claremont project is a lot like the redevelopments of public housing financed by HUD’s HOPE VI program in its scale and its focus on mixing incomes and adding homeownership to the new project. Like many HOPE VI projects, Freedom Village/Claremont will also finish with fewer units of affordable housing than it started with, though many of those affordable units were vacant at the old Freedom Village.
But Freedom Village received no HOPE VI grant. Instead HUD financed the first phase of the project with $3.2 million through its Up-Front Grant program, which provides up to $40,000 per unit in grant money to purchasers of bankrupt HUD properties that commit to keep the projects affordable.
The $100 million first phase will also receive $7.4 million in tax credit equity, along with a package of $6.2 million in soft debt and $3.25 million in hard debt.
Baltimore Housing’s other two rehabilitations of HUD housing are similarly massive in scale. By this summer, the city plans to choose a developer to redevelop Uplands Apartments, another bankrupt HUD property. The city’s mixed-income master plan calls for 696 new homes and apartments. Most of those new units, 481, will be for-sale housing. The remaining 215 units will be rentals.
Baltimore officials are also planning to develop about 450 for-sale housing units on two nearby sites, bringing a total of 1,146 new units of housing to the neighborhood.
“Uplands is much bigger than a HOPE VI,” said David Tillman, a spokesman for Baltimore Housing. The city expects to finish the project in 2010 at a total development cost of $300 million.
Even the smallest of the three HUD rehabilitations includes hundreds of units. It called for Baltimore to merge the 91-unit Barclay Townhomes with 167 city-owned properties for a total of 258 units.
Baltimore’s plan for HUD housing
Baltimore Housing is looking at all of the HUD properties within city limits along with their landlords.
“A number of them are doing a good job, and we’re happy that they’re there,” Graziano said. Baltimore Housing is working with these landlords to help keep their projects in good condition.
Also, after decades of owning and managing a HUD property, many owners are hoping to sell, especially since many of these properties now produce little income. Baltimore Housing is working to connect would-be sellers with buyers willing to preserve the properties as affordable housing. These new buyers can then raise money for property rehabilitation using resources like tax-exempt bond financing, 4% low-income housing tax credits and federal HOME funds.
But the agency is also using neighborhood complaints, building code violations and police reports to target communities with serious problems. Baltimore Housing encourages owners of these communities to take a more active role in keeping their projects safe and well-maintained though its Property Based Crime Solutions Program. As a last resort, the agency can threaten to take away a project’s multifamily dwelling license. The program has motivated several owners to improve the management of their properties, according to Graziano. “It’s been very effective to use that as a prod,” he said.
A project that loses its license will probably default on its HUD affordable housing loan. “That’s a short path to foreclosure,” Graziano said. The city would then purchase the property from HUD and pass it on to an affordable housing developer.
So far, Baltimore Housing has only revoked one project’s license, sparking a lawsuit which is now in progress. The owner of the property also owns six other affordable projects in Baltimore totaling over 1,000 units of housing. It’s one of the largest portfolios of affordable housing in the Northeast, and all of the projects in it have had numerous health or safety violations and received multiple neighborhood complaints, according to Tillman.
Baltimore Housing declined to name this housing owner because of the lawsuit, though it seems increasingly likely that Baltimore Housing will eventually become the owner of the portfolio.