In late 2007, then-Mayor Adrian Fenty sent a letter to the D.C. Council touting the developer’s experience, construction team and financing. The council swiftly approved the deal, lending $3.5 million in federal funds to help pay for the renovation of 98 units priced for the poor.
But the project died before a shovel ever hit dirt.
East of the River Community Development Corp. had taken on nearly $8 million in mortgages to buy complexes riddled with leaks, sewer backups, and buckling stairwells, roofs and floors.
Soon after the city delivered the federal money, the group declared bankruptcy and shut down. The District lost millions of dollars while the project was delayed for years.
But one group reaped millions. A handful of real estate speculators, including three previously convicted in a sweeping housing fraud scandal, had sold the complexes to East of the River based on adjusted appraisals written by one of the sellers’ associates, The Washington Post found.
The project is a case study of the breakdowns in the nation’s $2 billion-a-year affordable-housing program, in which extensive construction delays have derailed the development of thousands of homes.
The District’s East of the River project involved an inexperienced developer that cut an ill-fated deal with savvy speculators under the watch of a local housing agency that failed to protect the government’s investment.
Waste and weak oversight are endemic at housing agencies nationwide. A Post investigation found that about $400 million in affordable-housing funds from the U.S. Department of Housing and Urban Development is tied up in hundreds of troubled construction projects, including the one proposed by East of the River.
“Nothing was ever done to our building. It was a shell,” said Marva Jones, a court clerk who had lived in a $580-a-month apartment in one of the buildings that East of the River was supposed to renovate. “The buildings were just sitting there — two years later.’’
The East of the River Development Corp. was created in the late 1980s to bring growth to the distressed neighborhoods east of the Anacostia River. It helped foster small construction projects and academic and recreational programs, and it built its headquarters and space for a children’s medical clinic on Martin Luther King Jr. Boulevard, amid the bustling, embattled hub of Southeast.
In February 2006, East of the River hired Linda Jackson to replace Executive Director W. Retta Gilliam, a beloved advocate who had been struck and killed by a car while crossing Suitland Road a year earlier. Jackson had been the low-profile director of a nonprofit that built a recreation center in the area.