City to Review Claims Condo Fees to Aid the Poor Went Uncollected
Wednesday, April 5, 2006
The condominium binge in recent years should have been a boon for the District's housing assistance fund, which relies on fees from the sales of units to help low-income city residents pay their rent, relocate to new apartments and even purchase homes.
But the agency that manages condo conversions doesn't know whether the appropriate fees were paid by developers or whether hundreds of exemptions were improperly granted.
The D.C. Department of Consumer and Regulatory Affairs, which administers the fund, has declined to speculate about the amount of money that has gone uncollected. But the agency, at the urging of church leaders, has agreed to bring in an outside auditor to scrutinize at least three years of records to determine how much was owed, how much was collected and how best to avoid a problem in the future.
"I'm committed to a full review," agency Director Patrick J. Canavan told about 40 people last night at All Souls Church, Unitarian in Northwest Washington. "We want the maximum amount in the fund that we can get to use towards its intended purposes."
The city requires developers to pay a fee of 5 percent on the sale price for each condominium unit. On a 20-unit building, for instance, with units selling for an average of $400,000, the fee would be $400,000 if other exemptions did not apply. But the Washington Interfaith Network, the low-income housing advocate that uncovered the problems, contends that the housing assistance fund has been shortchanged and that the city has no explanation.
"There's a fund of a few hundred thousand dollars where there ought to be millions of dollars," said Jeff Krehbiel, pastor of Church of the Pilgrims in Dupont Circle, which belongs to the interfaith network. "When we went to them, we realized how little they knew about the condo funding, how little tracking they were doing."
Since 2002, the number of rentals converted to for-sale units has quadrupled to slightly more than 2,000 units during the fiscal year that ended in September.
Conversions have drawn the ire of low- and moderate-income housing advocates, who have long complained that the desire to make swift money has led some unscrupulous developers to threaten residents with eviction, allow buildings to fall into disrepair or pay occupants small amounts to leave as a way to empty buildings. The net result, most everyone agrees, is a reduction in the number of rentals for the poor and elderly.
It's the sort of negative impact that the law establishing the housing assistance fund, passed in 1980, was meant to prevent. But D.C. Council member Jim Graham (D-Ward 1) said loopholes -- particularly one that exempted owners of empty buildings from paying the fee -- have undermined the law from the beginning.
"It has been irrelevant to affordable housing," he said. "It hasn't worked."
The housing assistance fund also has not met its promises. Graham, who runs the committee that oversees the regulatory affairs department, said that in most years too little was collected -- a mere $387 in 2003 -- to be of use. In 2005, the one year in which a hefty amount, $304,000, was generated, it involved a single large collection. It's unclear, Graham said, whether any of the housing assistance money was spent.
That's unfortunate, Graham said, because 18,000 families have filed applications for emergency housing assistance with the city's housing department.
"You've had a bureaucracy that has shown little interest in collecting this," he said. "It's clear that millions of dollars have been lost."
As part of the DCRA review, officials will determine whether they can go back and collect fees that went uncollected. Since arriving at the agency more than a year ago, Canavan has sought to overhaul its image and operations.
He has hired more inspectors who speak Spanish to investigate complaints and has told inspectors that they have to do more than wait for calls reporting people living in squalor -- one of the many complaints the agency is supposed to investigate.
Canavan has worked closely with organizations such as the Washington Interfaith Network, regularly meeting with them and responding to complaints including the one concerning the collection of the housing assistance money.