When tenants of a 19-unit apartment building at 1354-56 Euclid S. NW finally reached the end of their two year struggle to purchase the property one day last month, tenant leader Shirley Hines was ebullient: "We're through with all the hassles," she proclaimed. "We're homeowners now."
But other low-income buyers who have been through the same process could tell her that the difficulties may have just begun.
"For me the greatest change has been coming from being a tenant advocate to being a landlord," said Robert Simon, president of the 474-unit Benning Heights cooperative in Southeast Washington. "We've got to operate it just like the tightest landlord in town. It's a business."
The tenant sponsors of Benning Heights constitue the largest of the 41 groups to which the city has lent $8.6 million for purchases and organizing. Those properties have a total of more than 2,300 apartments.
Simon and the other new tenant owners have had to deal with all the concerns faced by the building's former landlords and have taken on new problems as well. "Some people expect more to be done now than they did when this was a rental property," Simon contends. "Because of the lack of funds we haven't been able to do the kind of maintenance we've wanted to."
Most of the new owners problems revolve around this shortage of money. But keeping up their properties is just one of the difficulties they cite.
Other challenges have been the necessity to evict fellow residents for not paying monthly charges, the need to keep the buildings fully occupied and "burn-out" among overworked tenant leaders, who have to hold their organizations together in the face of great uncertainty about the future.
"After the euphoria wears off and the organization gets turned down for permanent financing, problems can arise," said William Hobbs, acting chief of the tenant purchase assistance division of the D.C. Department of Housing and Community Development. "Strains are even greater in the buildings because of the general economic problems."
The District government's program to help moderate-income tenants buy their buildings was begun several years ago, when interest rates were lower and there were more plentiful federal governments subsidies, especially from the "Section 8" subsidy program.
Families receiving Section 8 assistance pay a maximum of 25 to 30 percent of their gross income for housing costs. HUD makes up the difference between the family's contribution and the actual cost of a housing unit.
"In the original design of our program, we had counted on Section 8," Hobbs said, but the funds are drying up.
"We're trying to start a successful tenant conversion program in the worst D.C. housing market since the depression, when many of the large, formerly successful developers are going belly up."
The city and financial consultants working with the tenant groups are looking at several alternatives for the rehabitation and long-term financing of the conversion projects. Some of the tenant groups are forming limited partneships with outside investors who will pay large sums of money in exchange for the sizable tax deductions available on the projects. Tenant groups that choose this route give up their individual tax benefits, but the residents still retain management control of their buildings.
For other properties, the housing department is using its home purchase assistance program funds to bring down the price of apartment units for lower-income families, so that they are initially paying a maximum of 28 percent of their income. The residents are responsible for covering increases in operating costs, instead of receiving the same kind of on-going subsidy Section 8 provides.
This new technique works in a smaller range of projects than was possible with Section 8 assistance, according to Hobbs. Buildings with high purchase prices that are in need of extensive rehabilitation, or which have a large percentage of poor residents, are often infeasible.
Nearly half of the city-assisted tenant groups have overcome these major hurdles to obtain commitments for construction and permanent financing, Hobbs reported. Since the city made its first loan to the Tel Court Cooperative in 1979 five of the projects have completed rehabilitation. Six others are now undergoing renovation, and five more are expected to start rehabilitation work soon.
While the city has not lost any of the money it has lent to the tenant associations, one of the groups did fail earlier this year. The Belmont Cooperative, a 32-unit project of 18th and Belmont streets NW, received a $110,000 loan from the city in 1980. The co-op residents sold their property earlier this year after being unable to obtain long-term financing to pay off the primary loan on their building, an 18-month "balloon mortgage" from a Maryland S&L.
The tenants, however, paid back the loans to the S&L and the city, in full. A developer who bought the property will convert the four eight unit town house-style buildings to mixed commercial and residential use.
"The tenants could have walked away and left the city holding the bag, but they did not want that to happen," affirmed Belmont President Loraine Hutchins. "We wanted to see that the money was paid back, so that it could go to help other tenant groups. We cared about the city-wide issues even though our project had not succeeded."
Hutchins and other persons familiar with the Belmont list several interrelated causes for its failure. At the time the tenants purchased the building, there were 10 vacant units that needed to be repaired before they could be sold, and there were limited funds to carry out that work. The tenants were never able to rehab and to market those units, producing a constant financial drain.
Two-thirds of the residents were Hispanics, but there were too few persons who could help them communicate with the other, English speaking co-op members. "We never had enough bilingual people to communicate with (the Hispanics)," said Hutchins. "We never really got beyond the language problems."
The majority of the Hispanics were Salvadorans, and their most pressing concern was to help their relatives still in that country to flee the war going on there, according to Hutchins.
"The Salvadorans initially did view the co-op as another landlord," she said, "but their views did change over time, although they never came to have the same interests as the other members."
The co-op was unsuccessful in obtaining a commitment for Section 8 subsidies or for long-term financing that would have paid for the building's rehabilitation. Advisers to the project recommended that the tenants sell off one of the four building to create a subsidy fund for the remaining units.
In the other three buildings, however, there were not enought larger units for the families already in the co-op. Unwilling to accept a plan that would have meant deplacing some of the co-op's members, the tenants decided instead to sell the entire project.
Hutchins is still cautiously optimistic about tenant conversions.
"It depends on the building, the people, and the financing they can get," she commented. "If the polarities are big in income, life style and political values, you waste your energies."
The requirement for tenant groups who want to borrow funds from the District government have changed since the loan was made to the Belmont, Hobbs emphasized. Earlier on in the tenant purchase program, "it was q question of either make the loan or the tenants would lose the building," he said.
Since the 1980 passage of the D.C. Rental Housing Conversion and Sales Act, a majority of tenants in a building must vote in favor of its conversion. "Now the situation is different," Hobbs explained. "We ask the question, 'Will they lose the building for conversion?'; if yes, then today that doesn't necessarily mean they will lose their homes: They may stay in it as a rental property.
"Now, when it appears that the economics of conversion don't work, the consequences aren't so severe as they were earlier on."
The qualities needed in tenant leadership change with times, Hobbs has found. "Early on you need a person who can inspire people," he said. "Later that may not be the right style. You need a more methodical person, to handle numerous details of financing and documents."
There are several city-assisted projects experiencing organization problems, Hobbs acknowledged. "We're working with them to get them out of their problems," he said. "In several situations the (city) loans are overdue. We could foreclose on those loans, but that would defeat our goal of making people into homeowners and creating successful tenant conversions.
"We are asking the organizations to make some organizational chanes, to show the properties are being operated on a sound financial and management basis. I think we are going to solve those problems."
While acknowledging the importance of training and education, some people who have worked with tenant conversion efforts believe that the characteristics of each tenant group can be critical in determining associations' success or failure.
The most important of these attributes seems to be unity in the tenants' goals according to Rick Eisen, an attorney who has assisted with a number of low-income tenant purchases.
"The co-ops that are working are ones that have famililes have units that are two bedrooms and larger, and are not mixed income," said Eisen. "The other buildings, with smaller units, have upwardly mobile single people who are temporarily low income. They aren't as committed to the struggle as low-income families are.
"Efficiencies don't work and mixed incomes don't work. You just don't have the commitment to an efficiency as you do to a larger unit. People living in efficiencies can find other housing easily. People who live in larger units view their apartments as a long term commitment.
"It's more of a gut level thing for the families."
This high degree of dedication is what seems to keep many of the low income groups going in spite of all the problems that they face.
Robert Simon of the Benning Heights cooperative commented of his project: "It's a monster. Sometimes I just want to throw up my hands and walk away but I look at what potential it has.
"I've got something now that I didn't have before and that many other people still don't have." CAPTION: Picture 1, The People's Co-op at 2436 Elvans Rd. SE has begun rehabilitation with aid of city loan. By Sharon Farmer fot the The Washington Post; Picture 2, no caption, By Douglas CHevaller The Washington Post; Picture 3 and 4, Sponsors of the Oneida-Onondaca project at 147-149 R St. NE, received $404,060 in city loans to purchase and rehabilitate apartments, while the Beverly at 1736 Columbia Rd. NW, was completed without city money. The Benning Heights complex in Southeast, shown below, was one of the first large cooperative conversions by moderate-income tenants in the District., Photos by Sharon Farmer for The Washington Post; Picture 5, The Belmont project at 1801-07 Belmont Rd. NW. failed, but all loans were repaid. By Sharon Farmer for The Washington Post