Housing Hopes Come Up Short

Not everyone agrees. Jim Humphrey of the Montgomery County Civic Federation, who lives a few blocks away and has monitored the Hampden Lane project, said the delays are symptomatic of a dysfunctional program. "The affordable-housing program needs more staffing, funding and continued oversight," he said.

Greenberg declined to discuss the arrangement.

Officials at P.N. Hoffman would not give details, either, saying only that they did all the county required.

The story of the unbuilt Bethesda apartments offers a window into the operations of Montgomery's landmark affordable-housing program, established in 1974. The program put the county in the vanguard of affluent communities trying to work with the private sector to resolve the affordable-housing shortage.

Current law requires anyone planning to build more than 20 market-rate units to set aside at least 12.5 percent of what is built for the affordable program, which is designed for working residents whose household income for a family of four in 2006 did not exceed $63,000. In exchange, developers can win the rights to build more of the upscale units than they might otherwise be allowed.

The program has created about 12,000 units since 1974 but now has roughly 3,700 under its supervision; most are owner-occupied. Until recently, the units could be resold on the regular market after 10 years. The County Council tightened those rules in 2004 by keeping units in the program for 30 years, but by then many were already out of the program. About 700 households are on a waiting list for the affordable-housing program. More than 17,000 others are seeking some type of subsidized housing.

One key reason for the dwindling number of units is that developers for years were allowed to make contributions to the county housing fund in lieu of building them, according to data compiled by the County Council's Office of Legislative Oversight, as well as a report by the Montgomery County Civic Federation.

Both found that buyouts caused a deficit of at least 600 to 800 required affordable units and that buyout amounts did not appear to match the cost to the county to replace the lost units. In Bethesda alone, the civic federation estimated, developers made donations totaling about $1.6 million rather than building 65 units. Many market-rate apartments in Bethesda currently sell for more than $1 million.

It is not clear whether the buyouts spurred creation of other affordable housing nearby, another requirement of county law. The county housing agency was unable to provide data that would show how many replacement units were built with funds from the buyouts or where they are located. Giloley said the $39 million fund has had many successes.

Rick Nelson, who was appointed last year to head the county's housing agency, told the County Council this week that the buyout program "clearly did not work, and it didn't get the units produced that we could or should have gotten produced."

The buyouts, according to data in the council study, were often a good deal for the builders and developers.

In one instance, which data show was typical, the Bozzutto Group and Smith Payes LLC -- developers of the Bethesda Theater project on Wisconsin Avenue, which included high-end housing -- in 2000 paid about $16,700 a unit to avoid building some affordable units. In 1996, Natelli Communities paid $100,000 to avoid building two moderately priced houses in Avenel in Potomac. Both areas are surrounded by homes that sell for millions of dollars.