The Benning Heights housing project, the largest resident-owned co-operative in the District and once considered a model tenant-purchase effort, is now faced with the threat of financial collapse.
The 474-unit garden apartment complex, located near Benning Road and Alabama Avenue SE, has been operating in the red for the past year, its cash reserves being spent for patchwork repairs and maintenance.
The National Consumer Co-operative Bank, which lent $2 million to get the co-op started in 1981, is threatening to foreclose unless the co-op finds a way to begin major rehabilitation and continue to pay its monthly mortgage installments.
In addition, the co-op has been given a Sept. 30 deadline by the Department of Housing and Urban Development's regional office to begin rehabilitation of 97 Section 8 apartment units that were exempted from the original 1981 conversion.
Section 8 is a federally subsidized housing program that pays any portion of rent that is above 30 percent of low-income tenants' monthly income. In order to qualify for this program, the Benning Heights shareholders had to agree to restore the housing to a "like new" condition. Section 8 funding has been frozen for this year, and the program probably will not be funded in fiscal 1984, HUD officials said.
The co-op's board of directors, unable to acquire the money necessary to begin rehabilitation before the Sept. 30 deadline, is considering a plan to sell the 97 units to a private developer for renovation. An additional 51 units would be included in the sale because Section 8 money would be transferred to Benning Heights from other local housing projects if the sale is approved.
The board has selected Boston-based Winn Development Co., which would carve out a separate project from the co-op, consisting entirely of the 148 newly renovated Section 8 units. This plan, if adopted, could displace some residents of the co-op.
Those who exceed Section 8 income limits, or whose households are smaller than is allowable under the program's guidelines, would have to move into smaller units in the new project or move to unrenovated buildings.
If none are available, they would have to move out of Benning Heights. HUD officials said exceptions can be made in special cases, but residents critical of the plan argue that the sale could displace many longtime residents and compromise the co-op's hard-won autonomy.
Thelmiah Lee said he and other residents believed the $1,000 fee they paid to become co-op members guaranteed them the right to stay in their apartments, and they are angered by the threat of re-location.
"The whole plan is a half-baked idea that has been railroaded down our throats," Lee said. "We paid our money to stay where we are, and now we will be displaced. They say they are going to put you in better housing, but they don't show us anything in black and white."
Jack Kerry, Washington office manager of Winn Developers, said the proposed project will cause only "minimal" displacement of residents. He said shareholders will be ensured a voice in management of the new development under the sale proposal.
"We are confident that we will be able to execute the plan with as little interim displacement as possible," Kerry said.
City Council member H.R. Crawford (D-Ward 6) said he thinks the plan will help Benning Heights. "We have spent a lot of time on this project, and we will be doing our best to respond to any problems that they might have . . . . We want to see this project succeed."
Bill Hobbs, of the District's housing department, said the sale of the units would help the city recover some of the $800,000 it lent in long-term mortgage funds on the units to be sold.
Hobbs said the advantage to the developers in buying the units is that real estate tax laws favor owners of lower-income housing, and they also can sell the tax benefits to other investors.
Hobbs said the plan "does have its drawbacks" for the co-op members, "but our main concern is that Benning Heights make its own decisions and the people who are affected will be taken care of," he added.
"There is a trade-off," said Michael Crescenzo of MUSCLE Inc., a community-based nonprofit housing assistance agency. "The plan does not address the problems of the rest of the co-op, and over the next year-and-a-half the unity of the co-op is going to be shattered."
Some residents said they fear adoption of the plan could eventually lead to the sale of the rest of the project to investors. The plan offers the co-op first rights to buy the property back after 20 years, but some residents are skeptical.
"There are people out here that have spent their money to fix up this place, and there is a lot at stake for these people. We won't be able afford this place in 20 years," resident Albert Jiggetts said.
"We are low-income people out here," echoed Thelmiah Lee, "and we worked long and hard to put up our money to join the co-op. It was a big celebration because we finally owned something. Now they are talking about displacing the shareholders who are the real backbone of this place; it's very disheartening."
Residents who oppose the plan are protesting a vote called by the board of directors in which 62 shareholders voted for it and 55 against. They contend too few of the 305 shareholders were present to have given a clear mandate.
The co-op's board has tried several alternatives to selling the 148 units in an effort to shore up the co-op's finances, but their efforts have been frustrated by shrinking federal housing funding and rising interest rates, according to Ann Garfinkle, attorney for the co-op.
"We are trying to use the funds before the government can recapture them," she said, "but if we don't, we will lose Benning Heights co-op, and it will be an absolute shame."