The Arlington County Board, committed to completing housing for low- and moderate-income families in Colonial Village, was forced to borrow $370,000 from housing development funds last week, an action that may sharply limit county money for other housing projects next year.
High interest rates and changes in federal regulations were blamed by county officials for adding unanticipated costs to the much-publicized redevelopment near the Courthouse.
County officials say most of the money will be repaid during the next five years. But next year's $255,000 housing development fund is depleted, at least temporarily.
The transfer "will restrict the ability of the county to commit money for other projects in the county in the next year," said county housing officer Ed Brandt. To complete Colonial Village, the county board also borrowed $70,000 from its rental rehabilitation program and shifted $45,000 in funds left over from other projects.
"There will be no new development money next fiscal year except to the extent to which the funds are paid back from the Colonial Village project," said Arlington planning director Robert Wheeler.
Rising interest rates and financing difficulties have hurt developers of moderate-income housing across the nation. "Developers of rental housing today are in deep trouble," says housing expert Chester Rapkin, a professor at Princeton University. "The interest rates are so high they are forced to ask for . . . rents that are higher than we ever imagined. As a result, only two kinds of rental housing are being built: luxury apartments and Section 8 and other subsidized housing."
Under HUD's Section 8 program, rents have been limited to 25 percent of the tenant's income, with HUD paying the landlord the difference between the rent and a "fair market" ceiling.
This spring, requests for low-interest Government National Mortgage Association (Ginnie Mae) federal loans, a key source for many housing developers, totaled about $2 billion, but only $700 million was provided--to projects selected by a computer in a random drawing.
Colonial Village Commons Inc., (CVCI) a 72-unit, nonprofit cooperative, was one of the winners and obtained a 7 1/2 percent loan for its project. But the Arlington Housing Corporation (AHC), which is renovating 70 rental units there for low- and moderate-income persons, was one of the losers and was forced to turn to more expensive tax-exempt bonds. As a result, roughly $125,000 was added to the corporation's project costs.
Mobil Corp. purchased the 47-year-old Colonial Village complex in 1977 and later sold units to the two groups for conversion into cooperative and rental housing.
"I think everybody's scrambling" for money, said Susan Schruth, president of the cooperative. "We are very fortunate and it's very difficult to get financing."
"There has been a general tightening by the federal government in the funding of housing programs," Brandt said. To help hold down federal spending, HUD increased cash reserve requirements for both Colonial Village developers, adding another $125,000 to AHC's needs and also prompting CVCI to request more county funds.
In all, the County Board approved immediate cash transfers last week of $300,000 to the Arlington Housing Corp. and $70,000 to Colonial Village Commons.
The total $370,000 earmarked for Colonial Village is to be paid back from leftover construction monies, from money placed on reserve until the rehabilitation is completed and from selling shares in the AHC part of the project to outside investors.