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Of all the city’s affordable housing programs, this has to be among the worst returns on investment: The city, through its Housing Production Trust Fund, subsidizes the construction or renovation of an affordable home. A low-income resident buys it at a steep discount. After 15 years, the resident can sell the property and pocket not only the initial purchase price and any appreciation, but also the value of the city’s subsidy. The seller walks away with a windfall profit, the home is no longer affordable, and the Trust Fund investment is gone.

The affordable housing nonprofit Manna finds this problematic. So over the past three years, the organization, together with several partners, has worked on a solution that culminated in a proposal Manna shopped to several members of the D.C. Council: first Ward 4 Councilmember Muriel Bowser, then Ward 5 Councilmember Kenyan McDuffie, who expressed interested in introducing the legislation, and finally At-Large Councilmember Anita Bonds, who jumped on the proposal with the most gusto and quickly introduced it as a bill earlier this week.

The Bonds legislation would do two things. First, it would create a “recapture and recycle” program, by which the initial subsidy in the home (or, if greater, the difference in value between what the buyer paid and what it was actually worth) would go back into the Housing Production Trust Fund, so that the city’s affordable housing investment returns to the city for future such investments. “That windfall that everyone is concerned about people getting, that comes completely out,” says Manna’s Sarah Scruggs.

Second, in so-called distressed neighborhoods, the bill would reduce the resale restriction period from 15 to five years. It aims to serve as “an economic incentive for people to buy housing and create homeownership,” says Bonds spokesman David Meadows, by making these homes more attractive to buyers who might have been wary of the 15-year resale period.

But some affordable housing advocates say the bill gets a few key things wrong. First off, says Cheryl Cort of the Coalition for Smarter Growth, the measure of a “distressed” neighborhood is off the mark. It defines these neighborhoods as census tracts where 20 percent or more of the population is below the poverty line. But D.C. as a city suffers from about 20 percent poverty, Cort says, so that Bonds’ bill ends up applying to more than a third of the city—-including parts of neighborhoods like Petworth, Columbia Heights, Bloomingdale, and Trinidad, where the housing markets are already booming.

“The bill’s goal is really to incentivize homebuyers to buy in neighborhoods that are distressed, places where people don’t want to invest,” Cort says. “We think that’s a reasonable goal. The measure proposed in the bill is the wrong measure. It doesn’t identify distressed neighborhoods.” Cort also worries that the bill’s reliance on sometimes years-old census data means it’ll lag behind the realities of changing neighborhoods and offer the new incentives to neighborhoods that have thriving real estate markets.

Jim Steck of City First Homes is also concerned about the bill’s effect on the city’s affordable housing stock and funding. He thinks the resale restriction period should be lengthened, if not extended indefinitely, so that homes built or renovated through the Housing Production Trust Fund stay affordable in the long term or permanently. He’d also prefer to see the value of a home’s appreciation divided between the city and the seller, rather than going entirely to the seller, so that it can be used to fund future investments in affordable housing. Otherwise, he says, as real estate prices in D.C. continue to climb, the city’s effectively losing affordable-housing funding by not gaining any of the added value, since the recouped initial investment won’t go as far.

“We’re afraid that as the city continues to gentrify, the options for low-income families in D.C. will be drastically reduced,” Steck says.

Cort and other advocates have proposed an alternative measure would restrict the reduction in the resale period to neighborhoods where the median sale price and the rate of home appreciation are both under 50 percent of the city average. By that metric, she says, it would only apply to Ivy City/Brentwood and a number of neighborhoods east of the Anacostia River—-neighborhoods with truly struggling housing markets.

Scruggs counters that there’s “no perfect measure” of the right neighborhoods for the proposal, and says that the suggested revisions from Cort and the D.C. Fiscal Policy Institute didn’t come to her attention until Bonds had already taken up the legislation. But she says there’s still room for changes to be made as the Council debates the bill.

Photo by Darrow Montgomery