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The Department of Housing and Community Development is once again the subject of a report from the office of D.C. Auditor Kathy Patterson. The housing agency is under scrutiny for its management of an affordable development in Ward 7, due to a series of administrative “missteps” that spanned three mayoral administrations and nearly 15 years.
In the report, published Friday morning, journalist Charles Babcock traces the history of Woodson Heights, a network of condominiums and townhouses with 106 units (80 affordable) geared toward low- and moderate-income buyers. The Marshall Heights project required rehabilitating existing buildings around 50th and C Streets SE, as well as building out new structures on adjoining plots of land.
But the developer DHCD chose for the project in 2006, Maryland-based AmeriDream, “never finished the job,” Babcock writes. The unfinished concrete foundations and chain-link fences around St. Louis Ave. SE are “constant reminders for residents of the failure of the developer to finish the development.” Though DHCD initially gave AmeriDream a $1.2 million interest-free loan from the Housing Production Trust Fund (HPTF), a resource that provides gap financing for affordable housing development, development languished.
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At the time DHCD chose AmeriDream to develop Woodson Heights, the company’s “chief business” was providing down payment assistance to homebuyers hoping to qualify for federal loan guarantees, Babcock wrote after analyzing the company’s income. Affordable housing development was merely “a sideline.” He argues that the agency’s failure to complete Woodson Heights was in many ways inevitable, and that a more thorough vetting of the company by DHCD under then-director Jalal Greene in the early aughts could have saved the agency millions down the line. From the report:
A review of the District’s oversight of the Woodson Heights development reveals a series of missteps and unnoticed or unheeded warning signs. DHCD has not responded to an ODCA request made in February 2017 for any records that constitute a due diligence policy in effect in 2006 and documentation of steps taken to vet AmeriDream. An ODCA search of the DHCD case file of documents on the project found no paperwork showing that District officials researched AmeriDream’s background, its finances, or whether it had the experience to build a 106-unit project.
Instead of vetting AmeriDream to be sure that it would be able to complete the project, DHCD seemed focused on financing the project. DCHD officials, for example, contacted AmeriDream a number of times in 2004 and 2005 to obtain more details about the financing arrangements and construction costs. In particular, DHCD was concerned about a large increase in expected construction costs and why acquisition costs once listed at $3.4 million were up to $4.7 million.
By 2011, AmeriDream had finished only 74 units and sold 52, breaching the HPTF loan agreement and defaulting on its federal HUD grant. AmeriDream walked away the next year from the empty lots, and D.C. used HPTF funds the same year to repay the federal department of Housing and Urban Development nearly $2.5 million for the unbuilt and unsold units.
This January, DHCD proposed using $5,588,431 from the HPTF to finance the completion of an additional 32 units, now a joint venture between Horizon Hill Ventures LLC and Century Associates. That figure gives the new developers about $174,638 per unit, a significant increase from the $15,000 per unit originally granted in the 2006 HTPF loan agreement. (It is, to say the least, very expensive to build affordable housing. In a separate deal inked by the D.C. Housing Authority this year, developer WC Smith would have to pay about $400,000 per unit just to exit a deal to build 30 affordable units in Southeast D.C.)
“In an extreme case of paying twice for the same thing, the District is now paying millions more to a developer to build [properties] AmeriDream should have completed, bringing the District’s total investment in the Woodson Heights development to $6,788,431,” Babcock writes.
The report doesn’t explicitly link AmeriDream’s failure to complete its share of the Woodson Heights development with decreased property value for existing residents. But it’s difficult to imagine it didn’t play some role in the depreciation of their homes: Based on the Office of Tax and Revenue’s 2018 assessed value, sixty-five percent of the 74 Woodson Heights properties purchased between July of 2008 and October of 2013 had decreased in value since the time of purchase.
In an April 6 letter replying to ODCA’s report, current DHCD Director Polly Donaldson emphasizes her agency’s focus “on transforming the infrastructure of [DHCD] to ensure efficient program delivery and excellent customer service, improve transparency … and create pathways to the middle class.” Donaldson notes that the department has since created an online database that gives the public information about properties in the Property Acquisition and Disposition Division (PADD). The site “will improve the transparency of how DHCD is transforming vacant and blighted properties into affordable housing, workforce homeownership and/or conservation efforts,” she wrote.
Donaldson adds that DHCD has also changed the way it disposes property, moving solicitations online to an application portal that allows it to more thoroughly screen out bad actors. The agency says it expects to close and transfer part of the property it reacquired from AmeriDream to its new developers, Horizon Hill Ventures LLC and Century Associates, within 30 days.
The auditor’s office hasn’t shied away from issuing critiques (sometimes heavy) of D.C. agencies. Last week, Patterson’s office published a report alleging that D.C. has failed to ensure that companies with city contracts hired unemployed workers, as legally required. In February, she was the first major public official to call for the resignation of Antwan Wilson, the former D.C. Public Schools chancellor who bypassed local laws to enroll his daughter in an elite public high school.
And just last month, her office published a report criticizing the efficacy of the Housing Production Trust Fund.