At Livingston Manor, the best intentions collide with the bottom line.

The construction crews buzzing around so much of Southeast D.C. these days have yet to roll down Livingston Road. Just inside the District line one recent morning, a man standing on a littered sidewalk in the middle of the day lifts a paper bag to his lips. Up the hill, in front of a cluster of garden apartments, a street sign warns that you’re in a “Drug Free Zone”—a sure sign that you’re not. A banner hanging over the rental office announces that apartments are for lease.

A modest 1940s brick-and-block development, Livingston Manor needs updating. Nearly a quarter of its 396 units stand empty, awaiting new plumbing and heating systems and other long-deferred renovations. A couple of its buildings are boarded up. Children run around a new playground of wood jungle gyms and painted truck tires, but otherwise it’s hard to distinguish the development from that of any other absentee landlord in the neighborhoods around South Capitol Street between the Maryland line and Martin Luther King Jr. Avenue.

And that’s sort of the problem. Rather than with some wealthy private developer or unaccountable bureaucrat, the responsibility for Livingston Manor lies with a good-Samaritan nonprofit engaged in a taxpayer-aided ’90s-style public-private partnership. Just half a decade ago, the property was supposed to be a bold new kind of project, a development proving that neither public ownership nor out-and-out gentrification was required to create quality housing in a poor neighborhood.

In July 1995, the nonprofit developer Jubilee Enterprise of Greater Washington took over the property. Jubilee set up a resident-led corporation, lowered rents, and promised to turn life around in a dilapidated complex that once experienced four murders in two months. The idea at Livingston—the largest of five Southeast properties acquired by Jubilee in the ’90s—was to turn low-income residents into a neighborhood corporation that actually owned the property.

And as the nonprofit’s east-of-the-river portfolio grew to more than 1,300 units, money poured in from philanthropic organizations, private investors, and the city. Headlines followed: “A Little Girl’s Promised Land,” declared the Washington Post in 1995, when the playground went up; “A Good Idea Spreading Like a Contagion,” marveled the Cleveland Plain Dealer; “Community Revivals in Southeast,” gushed the Post a year later.

Five years and millions of dollars later, Jubilee—one of D.C.’s largest nonprofit housing groups—has pulled out of Livingston Manor, unable to absorb mounting losses. And two more of the firm’s five Southeast developments face massive debts of their own.

More than a few residents now say they want to pull out, too. “I’ve lost my morale, and I’ve lost my will to fight for the tenants,” says Tracy Ford, former president of the Livingston Manor Tenants Association. A temp agency worker, Ford lives in a two-bedroom garden apartment with her three children. “For so long, they’ve been saying they were going to fix this place up, and it was just a lot of broken promises,” she says. “There have been some improvements, but, mostly, it hasn’t changed.”

Back when Jubilee took over Livingston Manor, the notion of having nonprofits manage low-income housing was fashionable—much the way today’s vogue involves having private investors do it (“When Hell Freezes Over,” 11/5/99). Unsurprisingly, at a time when privately owned Ward 8 properties like the Walter E. Washington Estates are doing great business, some of those developers grumble that Livingston Manor is another expensive example of a nonprofit falling flat on its face after spending millions.

“If I did that, I’d be run out of town,” says one for-profit landlord in Southeast, arguing that high-profile financial failure is not a viable option in the for-profit world. He also notes that for-profit owners who preside over buildings with boards on the windows are quick to earn the moniker “slum lord.”

To Jubilee President Robert Boulter, however, the grumbling has a familiar ring. He says that when Jubilee got its start developing low-income housing in Adams Morgan during the ’80s, affluent new arrivals said the nonprofit was holding the area back. But Jubilee’s role, he says, has been to pioneer development in hard-luck sections of town before big-money types arrive. In Southeast today—as in Adams Morgan in the ’80s—”for-profits are coming in as the tide is turning,” says Boulter.

Indeed, Boulter sees Jubilee’s work at Livingston Manor as only “Phase 1” in a rescue effort that’s now being passed off to the for-profit landlord William C. Smith & Co. Inc., which purchased the bankrupt development last September.

Insolvency, however, wasn’t in Jubilee’s original business plan for Livingston Manor. What Jubilee discovered—belatedly, Boulter says—was that the required renovations were much more extensive than had been anticipated, requiring an additional $10 million to $12 million Jubilee didn’t have. Then it turned out that many of the apartments Jubilee thought were under lease when it first acquired the property were really occupied by squatters who had never paid more than one month’s rent. Jubilee, he says, had bitten off more than it could chew.

Even with the help of a $1.6 million affordable housing grant from the Federal Home Loan Bank system—the program’s largest direct subsidy in the Washington area—and $4.7 million in tax-exempt bonds issued by the D.C. Housing Finance Agency, Jubilee couldn’t staunch its financial bleeding. And the total investment, estimated at $8 million, still wasn’t enough to finance the extensive renovations necessary to rehab the entire development. Though occupancy had initially boomed, about 90 units stayed empty, rental income stayed flat, and Jubilee saw annual operating losses totalling millions.

By August 1999, the Livingston Manor Neighborhood Corp., the hallmark of Jubilee’s resident ownership concept, had filed for Chapter 11 bankruptcy. By September, the project was defaulting on its bonds. Jubilee had Livingston Manor up for sale.

And when the property went up for sale, things got confusing for many of Livingston Manor’s residents—particularly the corporation board members who had thought they were in charge. “They didn’t inform us of anything until they got into trouble,” says former board member and resident Patricia Brittingham, who now lives and works in Park Southern, a Jubilee high-rise development nearby.

Jubilee housing officer Quince Brinkley admits that his organization’s model of involving low-income residents in ownership and management has its pitfalls. “Despite Jubilee’s efforts to train residents, it’s hard for people who aren’t real estate experts to manage something that complicated,” he says. “At Livingston, they had high expectations, and they got disenchanted. They’ve got legitimate concerns. There was a lack of communication.” That’s a polite way of saying that when the money ran out, residents felt as if they’d been taken for a ride.

Oddly, given the hoopla of 1995, residents now say that it was a for-profit private developer that saved the day. Since taking over, William C. Smith & Co. has promised to put $15 million into the complex—and assume its bills. Happily for the city, its original $4.7 million in bonds was fully redeemed by underwriter First Union National Bank, which had to take some of Livingston Manor’s losses.

Once again, things are supposed to run differently at Livingston Manor. This time, the prescription begins with a three-stage renovation of things Jubilee never fixed. But although Smith might prevent Livingston Manor from demolition—the fate of more than a few failed projects in Ward 8—the days of resident ownership and management there are over. And rents are likely to creep up, according to Boulter.

It also appears that the dictates of cash flow will also require that Livingston Manor join the next great housing fad, one that has come to Southeast with a vengeance: mixed-income development. Federal housing policy in the last decade has advocated the breakup of large concentrations of poverty and a move toward communities that blend income brackets. “Certainly, we’d like to see some income diversity,” says Smith spokeswoman Desa Sealy Ruffin.

What looks like deconcentration to some may look like gentrification to others, but Boulter says it’s not a bad thing. “The residents themselves have long told us they want to create a balance here,” he says.

Meanwhile, nonprofit developers like Jubilee will have to figure out new ways to keep rents down while staying solvent. To judge from Jubilee’s other Southeast affiliates, the prospects are mixed. The 281-unit Benning Park and 357-unit Park Southern developments are considered strong, solvent properties. But Trenton Park, a 259-unit complex closer to the heart of Anacostia, is running at a deficit and facing more than $1.7 million in debt. The 44-unit Howard Hill apartments are about $800,000 in debt.

Boulter says the biggest difference between nonprofit success and failure—and the biggest difference between his own doomed Livingston Manor and successful Benning Park—is the original purchase price: how much it decreases capital available for renovation.

But with the economic spillover that has brought a building boom even to the long-suffering precincts east of the Anacostia River, getting and improving large distressed rental properties on the cheap—a la Jubilee—is becoming a harder course to steer. “I don’t know anybody else in the District doing what Jubilee is trying to do,” says Robert Pohlman, who heads the Coalition for Nonprofit Housing and Economic Development. “It’s one of the toughest jobs you can take on, and Jubilee has always tried to do it while keeping the rents low.”

Ford, who lives at Livingston Manor on a Section 8 rental subsidy, pays only $399 a month for her two-bedroom apartment. It’s a hard price to beat, but she’s also living with cracked walls, seeping water, and a growing distrust of the neighborhood. Twice in the last three years, her apartment has been broken into. “I’m trying to get out,” she says, “but I don’t know where I’m going to end up yet.”

Boulter’s reputation among low-income-housing professionals, meanwhile, apparently hasn’t suffered as a result of Livingston Manor’s troubles. He recently received a $90,000 fellowship through the Fannie Mae Foundation to think about what’s next on the low-income housing front. But he says it’s not a reward for failure. “Housing the poor is by its very nature noneconomic,” says Boulter. “That’s by definition. Somebody has to cover the gap between what people can afford and what they need for a decent standard of living. So what do you do? Somebody has to pay.” CP