Project Linked to Big Offer Is Canceled

A housing developer who had offered to give a Virginia town an unprecedented amount of money to build a luxury subdivision has abandoned plans for the community, blaming a cooling housing market as a factor in the project's failure.

Dallas-based Centex Homes, which had offered 8,000-resident Warrenton a cash donation of $22 million to approve the project, informed the town of its decision in a letter this month.

"I wanted you to know that I am personally saddened by the prospect of not moving ahead with the . . . project," Centex Division President Robert K. Davis wrote. "Unfortunately, in my world, as in yours, everything must be couched in terms of economic and political viability; it is a harsh reality for all of us indeed."

The community would have been an upscale, gated subdivision for older adults, with homes starting at $850,000.

Centex originally sought to build nearly 800 homes on the 500-acre property, but that proposal was rejected by officials in development-averse Fauquier County.

To appease local officials, the company scaled back the project to 300 houses and offered $74,000 per home, more than double what Fauquier usually receives from developers to offset the need for more services.

In July, the Town Council agreed to the deal, putting Warrenton in line to receive an amount equivalent to about half the town's yearly budget -- with virtually no strings attached. Officials planned to use the money to pay down debt on a new aquatic center.

Town leaders lauded the agreement as a victory for suburban communities who have watched farms turn into cul-de-sacs and townhouses while local governments, they said, have shouldered the burden of providing services.

"It was kind of a win-win for everybody," said George B. Fitch, Warrenton's mayor. "I assumed that they had done their homework, that they saw the downturn coming and still thought it was a viable project."

Industry experts, however, watched with alarm. Developers worried that the unprecedented donation would set a new bar for the amount they would be asked to give for each home they built. Affordable housing supporters called the donation a bribe, saying such projects drive home prices up and suburban sprawl farther into the country.

But in August, just weeks after the Town Council passed a resolution in favor of the project, the company indicated that the market might not be able to support the community after all and withdrew the offer of $22 million unless a higher-density project was approved.

At the time, town officials expressed a willingness to compromise with Centex. But Centex's announcement this month ended any hope for a new deal.

"All in all, it's a significant disappointment," said Town Council member John V. Albertella. "Then again, we understand the commercial reality of the present time."

A recent report from the National Association of Realtors showed that there was a record number of unsold homes on the market during the summer, when home prices declined for the first time in five years.