The 73-unit Glover Park Apartments in Northwest Washington, bought 18 years ago by an integration-minded Philadelphia developer, is about to go condo, and some tenants say the landlord's dream of a well-balanced community may disappear as a result.
Unlike the experience at Rosemary Village in Silver Spring, another integrated project developer Morris Milgram sold to tenants last year, low-and moderate-income residents of Glover Park may not be able to afford to buy, some residents maintain. And if they do buy, the temptation to turn a quick profit on units bought at special below-market rates may soon change the character of their complex, dissident residents said.
The 25-year-old building at 2325 42nd St. NW is "going to be Georgetown -- French wine and cheese," contends one bitter resident.
That would not be what owner Milgram aimed for during the years he and his partners owned and managed both Glover Park Apartments and Rosemary Village, the 416-unit Silver Spring complex he sold to its tenants last year. Milgram said that he bought the building "with the social purpose of integrating it," assuring his investors only that they would eventually get their money back.
At Rosemary Village, tenants turned the $4.7 million garden apartment and town house complex into a cooperatiave in order to retain low- and moderate-income residents. The tenants' association used a $30,000 Community Development Block Grant from Montgomery County and a $9.5 million loan, financed through the sale of tax-exempt bonds, from Maryland, which paid for the complex plus major renovations and the fees the association incurred during the sale.
To enable nearly all residents to stay on, the Rosemary Village buyers decided that the cost of cooperatiave membership -- the equivalent of a down payment on a unit -- would be about the same amount as the security deposit each tenant had already made.Monthly payments would approximate former rents.
Tenants at Glover Park Apartments, who are buying their building for $12 million -- not much more than the $845,00 Milgram paid for it 18 years ago -- have decided to go a different route -- condominium instead of cooperatiave. But this decision, coupled with rapidly escalating mortgage interest rates, may ultimately force out some low-income families.
The apartments are expected to cost tenants from $15,855 to $38,865, well below estimated market prices of $40,000 to $84,000, according to a table distributed to tenants by the tenants' association. The building will need about $500,000 worth of reovation, they said.
With the owner of each unit free to sell his or her condominium, many Glover Park residents see their building's conversion as the end of a community. It currently boasts a friendly mix of races and nationalities, professions, lifestyles and income ranging from $6,000 to more than $30,000.
Several residents said they thought a conversion similar to Beverly Court apartments in Adams-Morgan would have suited them better. Beverly Court tenants, many of them local artists, turned their unit into a cooperatiave to ensure that residents would include low- and moderate-income people. They financed their conversion through private lending institutions.
Sharon Washburn was the first president of the 2325 42nd St. NW Tenants Association, which was formed to buy Glover Park Apartments more than a year ago after Milgram told them he had received an offer of $1.2 million for the building. Washburn, now the association's secretary, said association officers and their lawyers considered converting the unit into a cooperative.
At the time, however, the District government lacked the authority to float tax-exempt bonds that could get them a loan similar to Maryland's loan to Rosemary Village. (Congress authorized such authority for the District April 1.) Help from the federal government would take too long, she said.
The Glover Park association's treasurer, Estelle Mallinoff, estimates that 59 out of the 64 tenants plan to buy their units. Of the building's 73 apartments, five were vacant; four tenants have waived their right to buy. Vacated units will be sold at market value and the profits shared by remaining tenants. Buyers also had to pay 5 percent of the cost of their unit as earnest money -- an average of $1,100 -- which will go towards the estimated down payment of less than $2,000.
"Anyone making under $2,000 will be forced out of here," said Peggy Kilburn. "That's what it takes to qualify. I think quite a few people will be displaced."
Kilburn said she could qualify to buy at a 12 percent mortgage interest rate but not at 17 percent, which was the figure discussed in tenants' meetings. She said her unit -- valued at $63,000 -- will cost her about $22,295. "When there is that much money to be made, greed is the motivating factor," Kilburn said. "We have a tenants association that really has done nothing for the people that are borderline."
However, Washburn said a $20,000 fund has been set up by the tenants' association from their anticipated profits on the conversion to help tenants with down payments up to $1,000. According to Mallinoff, seven persons have applied.
Washburn doesn't believe the community will charge. "Ninety percent of the building is buying, depending on mortgage interest rates," she said.
One tenant, Janice Taylor, lives with her two daughters, Karmin, 14, and Nichele, 10, in a pleasant one-bedroom, second floor apartment at Glover Park. She makes $10,319 as an assistant payroll clerk in the Department of Interior. A second job as a hairdresser provides $200 more per month and she occasionally works overtime at her daytime job.
If she buys, Taylor figures monthly payments on her unit, including utilities and condominium fee, will be about $500, nearly half her monthly take-home pay. Her rent is now $269.
Taylor has requested a $1,000 loan from the association and is trying to get $1,000 on her own. I've always lived in this area," Taylor said. "I couldn't picture taking the kids into a paved place, away from the woods."
"I'm very concerned that many people who could have rented forever will not be able to buy for a minute," said resident manager Dan Pyle. Pyle, a former translator for the Library of Congress who speaks several languages, has been instrumental in creasting the mix of people at Glover Park.
Several tenants say they were not informed by the tenants association about any city or federal programs available to home buyers and learned only recently about the District's Home Purchase Assistance Program.
According to Robert Moore, director of the Department of Housing and Community Development, the District government also provides technical, financial and legal assistance to tenants buying their buildings and makes rehabilitation and bridge loans.
Washburn said the association discussed a subsidy for some of the units. But the members were discouraged by the complexity of such a program, its cost, administration and questions -- such as whether the asociation will have to subsidize the unit when a resident leaves. She said the group felt the best way to help was through down payment assistance and allowing partnerships. Under present rules, an outsider such as a parent or friend can provide financial assistance to a tenant unable to afford the unit by becoming part owner of the unit.
Several residents cite another action by the association that they believe is a problem for low-income residents; the huge penalty that was imposed by the association on tenants who don't pay a $75 monthly fee assessed each unit to pay for lawyers and consultants working on the sale.
Tenants who don't pay the fee by the 14th of each month will be charged 10 percent on the paper profit of their unit, or about $3,000 each month they are late. The amount of the penalty will be added to the price of the apartment at the time of sale to the tenant.
Washburn defended the action, citing the need to pay lawyers and consultants. "Before we could start talking to banks, we needed to know now many people would be buying. We found the deadline and penalty made people take it seriously," she said.
Washburn said the decision to impose the penalty was less stringent than actions taken in some conversions, where those who won't pay assessment fees automatically lose their right to buy.
Mallinoff, the treasurer, said the penalty was voted in by the association members. "It was intended to get the money in, not be punitive," she said.
So far no one has had the full penalty imposed. Six tenants have been assessed some penalty, ranging from $1,000 to $3,000 to be paid once. At least 10 tenants who were in arrears had the penalty waived entirely, she said. lSome cases are still pending.
Until purchase options on Glover Park are decided, no one is certain how many tenants will be able to buy. It also remains to be seen whether those in the association who are concerned about low-income tenants will push the association to set up financial assistance for those residents if they can't get aid elsewhere.
Gil Gold, Milgram's representative in the Washington area, said it is "too early to tell" what kind of communities Rosemary Village and Glover Park will ultimately become.
"If you want to maintain housing for moderate-income families, chances are the cooperative is a better form than condominium," he said.