Reservoir Hill project draws HUD rebuke

The Baltimore Sun

Plans to put $300,000 condominiums on two key parcels in Reservoir Hill are on hold after the city received a stern reminder from the U.S. Department of Housing and Urban Development about building restrictions imposed when the properties were transferred from the federal government to the city nearly a decade ago.

Once the sites of low-income apartments, the vacant parcels across from Druid Lake may be used only for affordable rental units for 20 years from the date of the transfer, according to an April 16 letter to city housing Commissioner Paul T. Graziano from Mary Ann Henderson, HUD's Baltimore director of multifamily housing.

"I am taking this opportunity to reiterate several of the most significant terms and conditions of the transfer of ownership of the Lakeside Apartments site that will continue to govern the relationship between HUD and the City of Baltimore vis-a-vis the redevelopment of that site," Henderson wrote.

The city made no mention of those conditions when it put the properties out for bid in July 2004 -- part of one of the city's most important neighborhood revitalization efforts. Nor did the city mention them when it selected CIMG (Consolidated Investment and Management Group) to construct two mid-rise buildings with 20 percent affordable units and the rest market-rate condos.

Graziano provided copies of e-mails from another local HUD official, sent a year ago to city housing officials, saying that the restrictions applied only to a nearby apartment building and not to the two vacant sites. But the commissioner said he has since been told by HUD that the April 16 letter supersedes that e-mail.

"It would appear that there was certainly some confusion about the terms," he said Thursday.

Graziano said he first learned of the conditions in a meeting with local HUD officials last month on a separate issue involving the appraised value of the properties. He discussed the restrictions Wednesday at a closed meeting of the board of the Reservoir Hill Improvement Council, whose members regard the development of the parcels with condos as a signature undertaking that could boost home ownership in the neighborhood and spur additional investment.

Remington Stone, president of the neighborhood group, described the reaction of board members as "kind of a gentle, quiet amazement."

"We tried to listen and be respectful," he said. "It looks like it was a pretty big screw-up on [the city's] part. ... Three years have gone by, and what do we have?"

Others say the situation highlights problems of high-level housing personnel departures in recent years and diligence within the department.

"Housing has had a huge brain drain -- a lot of people have left," said City Councilman and mayoral candidate Keiffer J. Mitchell Jr., whose district includes Reservoir Hill. "They're in such a rush to put out RFPs [requests for proposals], the i's and t's aren't dotted and crossed. The problem is the community is left holding the bag."

A. Rod Womack, the CEO of developer CIMG, did not respond to a phone call seeking comment about the disclosure of the redevelopment conditions.

But in an earlier interview, Womack also cited staff changes within the city housing department as part of the problem for the project's delays. "Things get caught up and lost and fall between the cracks," he said. "Every time there's turnover, the process almost starts all over again."

At issue are two non-adjacent parcels in the 700 and 800 blocks of Druid Park Lake Drive, totaling about 1.65 acres.

HUD acquired the properties in 1997, demolishing the decrepit low-income apartments that were there and entering into an agreement to sell the lots to the city for $10 in September 1998.

As part of the agreement, HUD stipulated that for 20 years, 85 percent of the units of any redeveloped property must be rented to families making between 30 and 80 percent of the regional median income. The other 15 percent were to be made affordable to families with incomes of between 80 and 115 percent of the regional median income.

The agreement also stipulated that HUD receive 100 percent of the proceeds of any resale of the property that occurred within the first 15 years; 75 percent of the proceeds between 15 and 20 years; 50 percent of the proceeds between 20 and 30 years; and 25 percent after 30 years.

City officials and neighborhood leaders now fear that the "equity participation" provision could be construed as applying not only to the sale of the entire parcel, but to any individual condominium units, which they said would vastly diminish their desirability.

Reservoir Hill, developed in the late 1800s with spacious rowhouses and apartment buildings, was for decades a prime residential area. It began to deteriorate in the 1960s, with many rowhouses divided into apartments and others vacant. A mid-1970s attempt at revitalization made only limited progress.

Over the past seven years, the city has made a concerted effort to try recapture a modicum of the neighborhood's past glory.

In 2000, Reservoir Hill was designated as one of a half-dozen targets for a pilot Healthy Neighborhoods program to strengthen struggling communities. The community has been a prime locale for the SCOPE program, to market individual city-owned properties through private real estate agents. And in 2003, the city announced a major revitalization plan to return to productive use about 300 vacant properties.

There have been some signs of progress, with community leaders counting 100 properties in various stages of development.

The city's 2004 solicitation of bids for the Druid Park Lake Drive properties was a key component of the larger Reservoir Hill Revitalization Initiative. Besides making no mention of the HUD conditions, the request for proposals states: "Homeownership schemes including condominiums are preferred. ... The strong preference is for a market-driven development that includes an affordability component."

Graziano said he doesn't know whether those responsible for issuing the bid package didn't know about the restrictions, or whether they assumed or were led to believe that those restrictions did not apply. He said the individuals are no longer with the agency, but he dismissed criticisms that staff departures are harming the department's development efforts.

Even before the disclosure of HUD's conditions for redevelopment of the properties, the project had been held up by a difference on whether the proper price of the property should be its appraised value in its current state of $1.1 million, or its appraised value as a site for market-rate condos of twice that amount.

Currently, the parcel in the 700 block of Druid Park Lake Drive is a grassy patch with a small pile of mulch and a new sign that says "Building A Better Baltimore." The one in the 800 block is half dirt and half grass.

One option is for the city to leave the properties undeveloped until 2018, when HUD's restrictions expire -- though to some that approach would compound the problem rather than solve it.

Another is for the city to try to get HUD, through persuasion or political pressure, to ease the restrictions. HUD's April letter seems to leave open that possibility, noting "all housing units ... are to be rental units unless advance written approval is received from HUD to deviate from that plan."

While Graziano acknowledges that he is "very disappointed that there's this additional hurdle," he points out that at the highest levels of affordability allowed by HUD's restrictions, apartment rents could range from $1,400 to $2,000. "We're not talking about $300 to $400 rents," he said.

Housing officials will work with the developer to see what could be built under the terms of HUD's restrictions, he said, and report to the community next month.

John Ruffin, executive director of the Reservoir Hill Improvement Council, called it "encouraging that the city has committed to work more closely with the developer and community on the project."

"Most people feel these provisions should have been caught much earlier," he said. "In a perfect world, we would have known all of this three years ago. But you've got to take lemons and make lemonade."

eric.siegel@baltsun.com

Copyright © 2021, The Baltimore Sun, a Baltimore Sun Media Group publication | Place an Ad
72°