D.C. Mayor Muriel E. Bowser’s ambitious plan to replace the notorious homeless shelter at D.C. General with a network of smaller, “dignified” shelters for families risks collapse under hurried assumptions about real estate costs and required approvals.
Persistent questions about Bowser’s plan threaten to undermine support from a city council and public that initially shared her drive to improve services for the city’s growing homeless population.
The chairman of the D.C. Council, who had previously committed to a vote on the plan in April at Bowser’s request, announced Monday he would postpone action.
To quickly close the dilapidated former hospital and maintain the mayor’s ability to spend money on other priorities, Bowser and her senior aides dismissed two options that would have driven down costs: using only city-owned land or selling the existing hospital building to fund the new shelters.
Instead, the mayor wants to lease private land for five proposed shelters in a city where real estate costs have skyrocketed - a decision that could cost taxpayers more than twice as much than if Bowser had chosen the cheaper route.
Her plan also calls for the city to pay landlords to build and run the dwellings and pay the real estate taxes on the properties - which would be turned over to the landowners when the leases expire.
Although Bowser took office determined to fulfill her pledge to end the desperate conditions for families at D.C. General, she and her team never analyzed the best way to pay for the new system, leaving them ill-prepared to defend a plan that has given even homeless advocates sticker shock.
Instead, Bowser decided to devote nearly all the $1.3 billion city borrows annually for capital projects to school construction and economic development. That choice forced the city to lease most shelter space instead of purchasing or building it.
Costs then became a distant concern because the District does not count rent against its borrowing limit for big-ticket items like new schools and stadiums.
Bowser and her top aides met weekly, focused first on securing homeless shelter sites in each ward — locations driven by politics as well as policy to ensure passage through the D.C. Council. Once sites were found, the administration also failed to fully plan the projects before agreeing to fully pay for them, city officials acknowledge.
In an interview, Bowser forcefully defended her strategy. “It’s not easy, nobody said it was going to be easy,” she said. “I think that we’ve put together a great plan and we think that the facilities will look awesome and operate really well and we’ll put together a package to get all the regulatory approvals,” she said.
Bowser also said her decision to lease the land and not to spend capital dollars to buy property was the best choice available.
“Cities like ours have to do a lot of things at once,” Bowser said. “Already, people are telling me we are not spending enough on schools. We also have to invest in our parks, we have to invest in our roads and bridges, so we don’t have the luxury of using our capital budget for one thing and one thing only.”
Dan Tangherlini, formerly both a D.C. city administrator and head of the U.S. General Services Administration, which manages federal real estate nationwide, said creating homeless shelters in one of the most expensive markets in the country is “really, really hard.”
Bowser and the council were hamstrung bythe cap on borrowing, he said. With constrained borrowing, the city is likely to pay more to lease shelters or other facilities, he said. At the federal level, leasing long-term can cost three times owning or renovating, Tangherlini said. As a result, the federal government has placed a high priority on purchasing sites instead of leasing them.
“What the city has done is impose a limitation on itself for something that it has a unique capacity to do, which is to go to the capital markets and make these investments,” he said. “If you can’t push the money across the table then you’re going to rent it. And you’re going to rent it at a much higher cost.”
In Ward 4, for instance, the District plans to lease a 34,000-square foot vacant brick apartment building at 5505 5th Street NW to provide space for up to 49 families as well as playground space and a computer lab. It will cost the District an estimated $36.1 million in rent payments over 20 years.
But two blocks away, at 809-813 Kennedy Street NW, the District owns a vacant lot that could allow for a 28,395-square-foot shelter. That’s 16 percent less space but could save tens of millions because a new building would likely cost $10 million or less, and the city would own it. D.C. has proposed the site for a separate housing project for low-income residents.
Non-profit shelter operators have sometimes found space at lower costs. For 25 years, So Others Might Eat (SOME) leased a 30-unit building at 1433-1435 Spring Road NW, paying $830 per unit each month in 2014, according to the former owner.
That year SOME, which did not return requests for comment, bought the building for $5.1 million, according to property records. Bowser’s site in the same ward calls for $14 million in capital up front plus $23.1 million in lease payments over 30 years.
The two locations where Bowser plans to build on District-owned land are budgeted to cost $10 million each and that estimate is above what it typically costs to build new 30,000-square-foot residential buildings, which can range from $5.3 million to $6.8 million, according to developers’ estimates.
The administration has said durable surfaces, and special program space for social services increase construction costs, but it has not made public any detailed documents to show why.
The administration also says operating costs will be higher because it plans to more quickly move families from shelters into affordable housing units, resulting in higher maintenance costs related to frequent turnovers in the shelters.
Bowser’s plan calls for borrowing $40 million, mostly for construction on the two sites it already owns, and then paying the five private landlords about $300 million to construct and operate shelters on their properties. The city’s leases would expire between 20 and 30 years from now, with no options to purchase the shelters at the end of those terms.
By contrast, if the city built all of the shelters, several developers interviewed by The Post said costs for building comparably sized residential spaces is $175 to $225 per square foot, or a total of $48.8 million to $62.7 million.
The city would still have to put the shelters on either land it owns or purchases. The five properties Bowser has proposed leasing are appraised at a total of $13.9 million, but would likely cost much more to obtain on the open market.
Even if the sites cost five times that, and the city paid directly to maintenance and operate the buildings, documents and interviews show that the city could pay roughly double to lease the properties over 20 years than to buy land and build them itself - and it would own the facilities in the end.
Administration officials said they never weighed how much the city could save if it made a bigger upfront investment and leased less or no land.
In fact, the administration never sought an independent analysis of the tradeoffs until after announcing the deals and facing weeks of intensifying criticism. This month, city officials solicited bids for outside consultants to analyze its approach but gave interested companies only one day to respond and a week to complete the job.
A Bowser spokesman said a company had been chosen but declined to name it because a deal had not been finalized.
In the meantime, millions of additional costs remain unknown.
The city has agreed to pay the as-yet-unknown property taxes that will be assessed on the new buildings. And the administration has pre-emptively agreed to limit some maintenance costs for landlords.
Bowser’s team has also downplayed an issue that now could become an Achilles heel of the entire plan.
Nearly all of the sites will require changes to their permitted use by the city’s Board of Zoning Adjustment. That process will add time and uncertainty to the plan because final approvals must come in a venue where determined opponents have killed or stalled previous applications for homeless shelters.
And that’s resulted in another cost: Bowser’s administration is preparing to hire private attorneys to win zoning fights.
Gaps in the mayor’s ability to fully explain costs have only fueled criticism from some residents who were opposed to shelters in their neighborhood in the first place.
At a Ward 6 community meeting last week, city officials tried to allay concerns but were instead shouted down by residents of a neighboring garden-style condominium complex who said they had no intention of letting the project go forward. In addition to a zoning change, the site for the proposed seven-story shelter in that ward requires approval from the Historic Preservation Review Board.
“Residents are going to walk out of their front doors and look up at this, this wall,” said Robert Hall, head of the Capitol Park IV Condominium Association. “Uh-uh. We have demanded answers. We have requested documents that are being denied, and we are going to sue you to get them, so you might as well start turning them over.”
Administration officials released a trove of documents online to counter concerns about transparency, but they included only thin analyses of costs.
The administration justifies the shelter leases by comparing them to the cost of other property the city rents, mostly for office space. But that’s a correlation even the city’s own consultant warned was faulty, according to the documents.
At the meeting in Ward 6, blocks from Nationals Park, Tommy Wells, Bowser’s director of environment and her appointed defender of the program for the night, tried to quiet the crowd. “I know everyone is upset, I know everyone is not happy. But please, let’s try to remain calm and have a discussion,” he said.
The reception hasn’t been much better elsewhere.
In Ward 3, dozens of community members walked out en masse this month saying the administration has not been forthright about the plan, which will require a zoning change from two plots for single-family homes to a dormitory-style shelter for 38 families along Wisconsin Avenue.
Ward 3 residents have successfully prevented the District from housing the homeless in their neighborhoods in the past. Of 54 District-backed shelters in the city, only three are in Ward 3; none of the District’s 2,607 emergency beds for families and adults are in the ward. One of the residents who spoke before the exodus at the meeting was an attorney who helped kill a shelter plan in the neighborhood two decades ago.
In Ward 1, a small group of protesters marched to a community meeting with signs accusing Bowser of enriching her political donors, who stand to profit from three of the proposed leases.
In Ward 5, where the city will argue it should be allowed to rezone a warehouse beside a bus depot and night club from industrial use to residential, attendees at another meeting balked when asked if the site should be surrounded by “ornamental grasses” or “dominant perennial” vegetation.
The community is not ready to talk landscaping, “but cost and location. Why here?” said the man who left without offering his name.
Despite the obstacles and pushback from neighbors, no elected leader has raised the prospect of continuing to house the homeless at D.C. General, which needs $50 million in renovations and also costs $17 million annually to operate. That building, Bowser says, remains a scar on the city since the disappearance two years ago of 8-year-old Relisha Rudd from the facility.