Federal housing officials think they can revive the troubled Clifton Terrace Apartments by selling the project later this month, but spokesmen for the tenants say they have overlooked their rights and made living conditions worse in the process.
The Department of Housing and Urban Development will open bids for the 285-unit Northwest Washington project on Wednesday in hopes of finding a private buyer who can make repairs and run the project as low-income housing with federal rent subsidies. HUD decided to stop making repairs at Clifton Terrace and other properties it owns throughout the country in 1981, choosing instead to sell the projects as is in an effort to speed up sales of its properties and save on the cost of running them. Under the policy, the new buyers would be required to make repairs after purchasing the projects.
In applying that policy to Clifton Terrace, HUD thwarted tenant efforts to convert the project to a cooperative and forced the tenants to live in buildings that have been cited for more than 1,400 housing code violations, according to the lawyer and housing consultant who represent the Clifton Terrace Tenants Association.
HUD's national sales effort is also under scrutiny from members of Congress, who are concerned that HUD plans to permit buyers of projects which now house low-income families to raise rents or convert them to condominiums. The House subcommittee on manpower and housing plans to hold a hearing on the subject this spring.
"I think it's a travesty," Clifton Terrace Tenants Association lawyer Horace McClerklin said. "The sale has been handled in a very cavalier and clinical fashion."
The debate over the fate of Clifton Terrace began in 1981, when HUD's Washington office recommended sale of the project to the tenants for conversion to a low-yield cooperative, which means cooperative members could not profit from a later sale of their shares in the cooperative.
The Washington office said HUD should repair the project before selling it and provide a mortgage for 100 percent of the purchase price. If the property was offered as is on the open market, it would have a negative value and might "never reach the intended user group," the office said.
The local HUD office said a tenant-sponsored cooperative was "the most expeditious and feasible means" to end the project's problems. In 1973, HUD acquired the project for the first time, when the nonprofit D.C. Development Corp. defaulted on its federally insured mortgage. HUD sold the project to P.I. Properties, a spinoff of Youth Pride Inc., but foreclosed and acquired the project again in 1978, amid charges that P.I. Properties had mismanaged the project and misappropriated project funds.
But before the tenants could respond to the HUD proposal, the local office informed them early last year of the new policy to sell projects without making repairs. The office said HUD would give the tenants the first right of refusal to buy the project but that they would have to finance almost $500,000 in required repairs, pay all conversion costs and put up one month's rent to show their interest.
Clifton Terrace Tenant Association Vice President Patricia Smith asked HUD to reconsider its terms. She said the tenants supported the cooperative proposal but needed financial help. She also questioned their ability to finance the required repairs. HUD wrote back in August to make its final offer. The tenants would have 30 days to put up a deposit of $61,000 to show their interest. The price would be $3.3 million, and HUD would provide a mortgage for only 75 percent of that amount at 12 percent interest. Tenants would have to pay an estimated repair bill that had increased to $765,800 as well as conversion costs.
"That final offer took everybody by surprise," said Thomas M. Zuniga, the housing consultant who helped the tenants negotiate with HUD. "When the tenants got the offer, Pat Smith was still inquiring whether they had reviewed her comments on the original offer."
"It's patently ridiculous to give the tenants 30 days to raise $61,000," McClerklin said. "It's political sleight of hand. It purports to offer something but, by virtue of the rigidity of the offer, it takes it away." He said HUD should have been more sensitive to the low-income nature of the project and should have complied with the local timetable for tenant conversions, even though it was not bound to legally.
Zuniga also questioned how HUD arrived at a minimum sales price to the tenants of $3.3 million, when HUD's Washington office said the project would have a negative value without repairs. HUD's invitation to outside buyers to bid on the project sets no minimum price. It offers more attractive mortgage financing for as much as 80 percent of the price at an interest rate as low as 8 percent.
Throughout the debate over the sale, the project has deteriorated. District housing inspectors reported finding 1,452 housing code violations last September, according to Zuniga. HUD's invitation to bid reflects the deterioration, stating that the new buyer will have to make repairs now expected to cost $808,000.
Zuniga and McClerklin concede the sale to a private owner with rental subsidies might stabilize the project. But they maintain a cooperative would be more effective and more desirable.
"The cooperative affords the opportunity to create a feeling of group membership that you don't have in a rental. It's a way to provide home ownership," Zuniga said.
For its part, HUD is looking forward to getting the property off its hands and makes no apology for how it handled the sale.
"We gave them a long time to put a cooperative together, but they never got it together. Our general policy is to give tenants six months, but in this case we exceeded that," said Stuart Davis, executive assistant to HUD's deputy assistant secretary for multifamily housing.