By Paul Schwartzman
Washington Post Staff Writer
Monday, August 4, 2008
The administration of D.C. Mayor Adrian M. Fenty (D) is threatening to sever ties with two long-established nonprofit agencies set up to lure new housing and other investment to the city's poorest neighborhoods.
Home buyers in two development projects in Southeast Washington have criticized the organizations, in one case for chronic construction delays and in the other for persistent building flaws.
Fairlawn Estates, featuring 21 houses with views of the U.S. Capitol and Washington Monument, remains a boarded-up ghost town three years after prospective buyers began paying deposits to East of the River Community Development Corp. The organization has run out of funds to complete the project.
The second developer, the Anacostia Economic Development Corp., completed 10 townhouses two years ago. Owners complain about shoddy workmanship, including heating and cooling systems that do not work properly.
In June, the District's Office of the Attorney General charged AEDC's contractor with failing to seek or obtain final inspection at Randle Highlands Manor, as the townhouses at 27th and R streets SE are known. The builder is contesting the charges.
"Right now, the District is not going to do any further projects with these two entities unless there's a clear demonstration that the quality of their work and services has significantly improved," said Neil O. Albert, deputy mayor for planning and economic development.
Albert added: "The District wants to work with organizations that are professional and have the capacity to deliver. The District wants no role with mediocre organizations."
After the 1968 riots, community development corporations emerged as key players in rebuilding ravaged neighborhoods. Because of the organizations' grass-roots connections, urban leaders viewed them as effective funnels for federal grants to create housing and other investment.
With funds from the District and the federal government, as well as private sources, the East of the River and Anacostia corporations are among nine local organizations that have focused on development in blighted areas.
Over the years, critics have assailed community development organizations, many of them politically connected, for producing few tangible results after receiving millions of dollars in public subsidies. A 2002 Washington Post investigation found that eight groups got more than $100 million in taxpayer dollars over a decade and had completed 70 of 200 projects.
Leaders of AEDC and East of the River say that they are responding to buyers' complaints and that the troubled projects should not tarnish their reputations.
Albert "Butch" Hopkins Jr., AEDC's president and chief executive, said that his organization has built 155 units of housing, plus commercial and office projects, and that the problems at Randle Highlands are largely isolated. "I'm not going to let 10 townhomes keep us from moving ahead," he said. "I'm going to clean up this mess."
Linda Jackson, East of the River's executive director, said that Fairlawn Estates' future remains uncertain because her organization has run out of funds for the $8.9 million project. "We are working with our private lenders, and we do expect to resume construction and complete the project," she said.
"I don't think East of the River should be judged on this one project," she said. "This is not the norm for East of the River. We have been very successful in our other endeavors."
But Fairlawn's delays have exhausted prospective buyers' patience. A group of 10 has hired a lawyer, Ken Loewinger, who said he is preparing to sue East of the River for breach of contract. Two of the 21 homes have been sold, and one is occupied.
Melvin Hines, 36, said he paid $7,500 in deposits for a three-bedroom house at Fairlawn and rented out his home in Columbia Heights because he expected to move. "It's extremely frustrating," he said.
Another buyer, Sharon Justice, a Navy civilian employee now in the Persian Gulf, lived in her $342,000 house for nine months before moving because "they were boarding up all the other houses," Loewinger said. "She didn't feel safe."
The District's Department of Housing and Community Development oversees the development groups and conducts annual reviews of the agency's grants.
In an interview, Albert said that community development organizations "in many cases" had done "great work" in communities where the private sector had demonstrated little interest.
"But today, the market dynamics are totally different than they were 10, 20 years ago, and the private sector has shown a willingness to go to work in virtually every neighborhood in the city," he said.
In January, the Fenty administration withdrew AEDC's right to develop a property at 1900 Martin Luther King Jr. Ave. SE. The District had given AEDC the rights a decade ago, and officials grew frustrated that the land was undeveloped during the real estate boom.
The Fenty administration also was unhappy that AEDC hadn't found a private tenant for Anacostia Gateway, an office building in which the organization and the District are partners. The NAACP was to lease space but then pulled out. The District is moving its housing agency to the building.
AEDC was unable to lease the space, Hopkins said, because corporations are reluctant to move to a neighborhood with minimal retail offerings and sit-down restaurants.
"It doesn't happen overnight," he said. "There may have been a real estate boom in downtown D.C., but you have to show how there has been one in Anacostia."
Hopkins, who has led the organization since 1979, is active in District politics. Since 1999, he has given $6,000 to an array of local candidates, campaign records show. AEDC's for-profit subsidiaries, as well as a company in which an AEDC subsidiary has an interest, have donated about $15,000, including $2,000 to Fenty's 2006 mayoral campaign.
AEDC originally proposed building an assisted living facility in the 2700 block of R Street SE and received a $390,000 loan from the city's housing agency. After zoning officials rejected it, AEDC switched to townhouses and the District forgave the loan, much of which Hopkins said had been used for legal fees and to raze a building.
Buyers paid up to $325,000 for eight of the brick-faced properties. Almost from the start, they complained about a variety of problems, including heating and air-conditioning systems that did not function properly on their top floors.
"I feel like I've failed my family," said Paula Lynch, who lives in one of the properties with her husband and their six children. "They don't have heat and air conditioning. They have mold, and we live in a brand-new home. I feel like I've been had."
After Fenty visited residents in May, the District's interim attorney general, Peter Nickles, filed charges against the builder, Arnold Litman, for failing to request or obtain final inspection. Litman's attorney, David Cox, said his client is contesting the charges, which he characterized as "unfair and unfounded."
East of the River has been immersed in local politics since former council member Wilhelmina Rolark helped establish it in the late 1980s. In its early years, the mayor and Ward 8 council member chose its board of directors.
Rick Eisen, an attorney for East of the River, said it has received government funding for seven projects in which it was a lead developer or a partner. Last year, it was a partner in the project that brought Ward 8 its first new supermarket in nearly a decade.
Initially, East of the River requested no D.C. support for Fairlawn Estates, which it touts on its Web site as offering "a suburban quality lifestyle with the convenience of city living." The project's difficulties, Jackson said, began in April 2005, when East of the River's then-executive director was fatally struck by a car.
"There were problems with the administration of the project," said Jackson, who took over in 2006. "The oversight of the general contractor was not sufficient."
The faulty work, she said, included a cracked retaining wall and a manufactured house missing a bay window. Both problems have been resolved.
In April, District inspectors issued a citation because of inadequate fencing to control storm water. The fencing has been replaced. District officials also say that sloping inclines in front of at least five houses are steeper than indicated on design plans, a condition that Loewinger said has caused water to seep into several basements and create mold. Jackson said the mold was the result of vandals breaking windows, allowing rain into four homes. She said the mold has been removed.
Exacerbating its troubles, East of the River also had a payment dispute with its contractor, which put a lien on the project that halted work in November. After it ran out of money, East of the River sought $2.7 million from the city, a request that was rejected because "it didn't seem like a prudent use of funds . . . to bail out a market rate project," said Leila Finucane Edmonds, the agency's director.
East of the River has apologized to prospective buyers and offered refunds. In the meantime, the developer is seeking new funding.
"We don't know how long it's going to take," said Eisen, the attorney for the group. "We can't tell you a specific period of time."
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