The Pennsylvania Avenue Development Corporation, which once promised a "unique and model in-town living environment" in the heart of downtown Washington, is backing away from its seven-year-old commitment to include low- and moderate-income housing in its redevelopment plans.
The quasi-public agency initially planned to have 250 low-income units among 1,500 housing units interspersed with commercial, office and retail structures.
But PADC chairman Max N. Berry said yesterday that such a plan is no longer feasible because of the Reagan administration's opposition to housing subsidies, and the dramatic rise in downtown land costs and interest rates.
"If the question is will there be government subsidized housing, that possibility is very remote," Berry said. "The property is too expensive to subsidize."
Berry said that whatever housing is built in the PADC area will be high-income condominiums, co-ops or apartments, thus doing little to offset the shortage of available low- and middle-income housing that has driven many out of the District and placed Washington on the path of becoming a city of the very rich and the very poor.
In their efforts to revitalize the old downtown area, city planners had hoped to avoid an extension of the seemingly endless wall of steel-and-glass office buildings that now line the K Street corridor and usually are abandoned at night. They sought instead to create a night-and-day "living downtown" with a wholesome social and economic mix.
Though some PADC officials refuse to completely abandon that goal, the dramatic changes in the economy and real estate market in addition to the Reagan administration policy apparently have combined to sharply reduce that possibility.
PADC member James O. Gibson, the D.C. city planner, said yesterday that the elimination of moderate- and low-income housing from the plan appeared unavoidable in light of the Office of Management and Budget's unequivocal opposition to any subsidized housing in the PADC planning area.
However, Gibson said, the city would look unfavorably at any attempt by the PADC to reduce its overall commitment to building housing in the area, regardless of conflicting pressures to use the land principally for commercial purposes.
"We would not be comfortable with any sign of a decrease in the number of units proposed," Gibson said.
City Council member Charlene Jarvis (D-Ward 4), chairman of the council's Housing and Economic Development Committee, said she would object to changes in the PADC plan that would result in the construction of exclusively high-income, market-rate housing.
"I just want to make sure we don't build housing that only 5 percent of our population can buy," she said. "Housing is one of the most critical needs we have in the city. For each large project of this kind, there has to be planning for all incomes."
Congress this year cut back funding for the Lower Income Rental Assistance Program, which offers subsidies to cover 75 percent of the rent for low-income families for up to 40 years, and enables developers to obtain financing for new housing construction.
The law was changed to require renters to pay 30 percent of their monthly adjusted income toward rent instead of 25 percent. Also, the percentage of funds in the program that could be earmarked for promoting new construction was reduced.
The PADC's staff and consultants are putting the finishing touches on major revisions to the 1974 master plan, which called for construction of a total of 1,500 units of housing in an area roughly bounded by E Street on the North, Pennsylvania Avenue on the South, Ninth Street on the West and Sixth Street on the East.
Although the revised plan won't be formally presented to the PADC until next month at the earliest, Berry acknowledged yesterday that the overall housing goal might be reduced by 10 to 15 percent and that plans for subsidized housing would be excluded from the package.
The condominiums, co-op apartments and rental housing likely to be built in the area could only be afforded by middle-income professionals, couples with two incomes and elderly people of substantial means, he said.
The staff began its review of the housing plan 15 months ago, in search of a scheme to achieve a suitable mix of housing in the face of rapidly changing economic conditions.
The staff hoped to complete its work last spring, but probably won't finish up until next month, in time for an Oct. 7 board meeting. The board plans to hold a series of public hearings and confer with city and federal officials before taking final action.
"The challenge to produce reasonably priced housing in 1981 in this country is a much more complicated challenge than existed in 1974," said W. Anderson Barnes, the agency's executive director. "But that doesn't mean a reasonable mixed-use program can't be achieved."
The staff's delay in completing the study prompted the Office of Management and Budget to temporarily defer authorizing the PADC to spend $30.9 million in federal funds for land acquisition and planning for new housing in the area.
An OMB staff member said yesterday that his agency concluded there was no need to authorize the spending until the PADC had a new plan from which to work. He described the deferral as routine and said it would have no impact on the PADC's long-term housing program.
PADC emphasized its commitment to some type of housing in the area during recent negotiations with developers planning an office-hotel-retail complex on a site bordered by the avenue, Seventh and D streets NW.
Westminster Properties, a subsidiary of B.F. Saul, has proposed to build 240 units of housing as part of the project. The PADC has agreed to assist the firm in acquiring the necessary land, either through negotiations or condemnation.
However, the success of the overall housing program may hinge on the success of another plan to build about 750 units just north of Market Square on a huge, four-block parcel larger than the massive FBI facility.
Originally, a multi-story megaplex patterned on an Italian hill village was to be built atop an underground storage facility for the National Archives. However, the Archives concluded that the proposed storage center was too costly, and pulled out of the deal.