D.C.’s Designated Affordable Condos Are Great—Just Don’t Move Any Time Soon
MANNA Up: Jim Dickerson and Frank Demarais say the city’s stiffing affordable condo owners.
Tanya Davis spends most of her hours on the couch, watching cable television shows depicting graphic surgeries and other invasive medical procedures.
It’s not that she’s lost her job or depressed. She’s bed-ridden, waiting for her baby—“Ella” is the chosen name—to be born, and the due date is in December.
Pregnant for the first time at 40, Davis’ delivery anxiety is driving her TV habits: She wants to familiarize herself as much as possible with health care jargon and hospital-speak. Fortunately, that particular worry will fade; the real stress point is what happens after the baby comes.
If Davis feels imprisoned in her apartment now, she suspects the sense of entrapment will only grow. These two bedrooms, this living room nook, and this open linoleum kitchen in her condo are sufficient—for the moment. But three years down the road, her toddler will be running around bumping into things, and Davis and her husband might want another child. Then what? Move?
That may not be option. Davis lives in a designated “affordable” condo in Kenyon Square in Columbia Heights. According to the rules and regulations she signed on to, she’d need to stay in it for 11 years to walk away with at least half its appreciated value.
Sell now, and she’ll leave with barely anything—no nest egg to purchase another house. Worse, she’ll have used up any first-time homebuyer programs available to her, meaning she’ll actually be at a disadvantage heading back into the real estate market.
“You’re not getting anything from it, and the person in the unit is financing it. Here you are trapping them,” says Jim Dickerson of the housing nonprofit MANNA, Inc.
Kenyon Square is one of several relatively new condo buildings with designated affordable units, priced below market rate and geared toward buyers making below the area median income level. Others include the Solea and Union Row near 14th and U Streets, and City Vista in Mount Vernon Square.
MANNA helped qualify buyers for City Vista. “We’re not for anyone making a windfall profit,” Dickerson says. “But we are for someone making equity on their investment.”
From a practical standpoint, the units are often better-suited to people who don’t plan on changing their lifestyles for decades. For the first 20 years after its purchase, the unit must be first marketed to someone “in the same income class as the Affordable Dwelling Unit Owner,” according to Kenyon Square’s condo rulebook. So it’s not as if Davis—who earns 40 percent of the area median income—could turn the keys over to a lawyer pulling in six figures and walk away with a sweet profit soon.
But finding an eligible buyer is a challenge, says MANNA’s Frank Demarais. He and his co-workers heard from thousands of people interested in affordable condos at City Vista. But after running credit checks and the like, sales reps there “still didn’t find enough buyers to fill 89 units.”
If Davis can’t find a buyer in her income bracket, she can sell to a market-rate buyer. But she can’t recoup any of her condo’s appreciated value within the first three years. Over time, she’ll receive more: 20 percent after six years; 40 percent after nine; 80 percent after 18.What’s left over goes into a city fund supporting future affordable housing.
MANNA reps think that buyers should be entitled to the normal market-rate appreciation, according to Shiv Newaldass, director of advocacy at the nonprofit. So if the market rate value of Davis’ condo increases by $50,000 over three years, she should recoup exactly that amount, along with the original cost of her condo.
“If there’s been a drop in the real market value, we don’t think you should be entitled to anything,” says Newaldass. “It’s part of being a homeowner.If your house has lost value, it’s not wise to sell. So don’t sell.”
Davis says that, even before she bought the condo, she “knew the time would come” to leave it. But when she heard Ward 1 Councilmember Jim Graham announce during a community meeting that affordable units would be coming onto the market, she jumped in and signed a contract.
That was 2005, when Davis lived only with her dog. She had called Columbia Heights home since the late 1990s and felt connected to the neighborhood. And she’d already looked into other nonprofit, moderate-income housing opportunities, to no avail.
Four years have passed, and Davis isn’t so single anymore. She lives with her husband and an elderly woman with dementia whom she met at church years ago, then invited into her home. Add the baby—and the dog—and that makes five. “A small townhouse in the city would be nice,” says Davis.
The city says it expects owners like Davis to continue living in their homes, not rent them out.
But some people—reasonable people, even—say they plan to cheat the system, because it’s the only sensible way to own an affordable unit and still go on living your life without suffering major consequences. One City Vista resident told Washington City Paper that he intended to sublet his condo to a family member whenever he outgrows it. (Naturally, he asked that his name not be published.)
The city’s new inclusionary zoning rules, which went into effect in August, now force developers to set aside a number of units deemed affordable. Prior to that, most of the rules binding people like Davis were negotiated individually by the city.
The new rules should ease sellers’ burden, said Sean Madigan, spokesperson for the deputy mayor for planning and economic development. People like Davis can search for qualified condo buyers on the new website DChousingsearch.org. The city also plans to “establish a list of qualified buyers,” as people sign up for future affordable condo lotteries.
The new rules also created a different policy for re-sale restrictions involving a complicated equation that factors in the 10-year compound annual growth of the area median income.
“It does make sense to stay longer,” Madigan says of affordable condos. But, these days, few short-term owners are reaping big benefits on their properties anyway. “Back in the go-go days of the real estate market, you’d flip a property and get a 40 percent return, and that’s just not going to happen anymore.”
MANNA’s Newaldass talked his own sister out of getting a City Vista unit, convincing her she would regret the decision because she might want to sell before it made financial sense to do so.
“I see it as the lesser of two evils. People can either leave the District, or move into these units with heinous restrictions. Still, it means more for these people to be in their community, to stay in D.C.,” he says.
Dickerson, who is also a pastor, compares the whole process to marriage. “I don’t really counsel people before the marriage; I counsel them a year later, when the stars in their eyes are gone,” he says. “It’s the same with home ownership. It’s hard to hear some of the tough facts. But then they’re very susceptible and vulnerable.”
This story will appear in this week's issue of the Washington City Paper. Image by Darrow Montgomery.
7:57 am
The current restrictions sound absolutely reasonable and appropriate. Why should someone possibly profit from the difference between market rate and what they paid (in the first years of their ownership), when they have the opportunity to purchase a heavily discounted unit?
The affordable housing units are not intended to be a "get rich quick" scheme, which it would be if the rules were changed as suggested in the article. As currently administered, this is a good program for keeping lower income residents from being pushed out of a neighborhood. These restrictions are in no way "heinous."
9:53 am
T- You are mistaken my friend. In this article, it doesn't sound as bad, but are "heinous". What you state in your comments is a common misconception. The owner of an affordable unit is never entitled to that "discount" they received when they initially purchased, this gets repaid back to the City. No one disagrees with this and no one wants this to change. What happens is the normal market appreciation above the discount price, that gets restricted as well. So if you purchased an affordable unit for $250k (yeah, affordable I know), but the market value of the unit at that time is $400k, you will never ever be entitled to that $150k worth of "hidden subsidy". This covenant is permanent, so you will never be able to receive this "profit". Now anything above the $400k should be yours. You take on just as much responsibilities as a typical homeowner and you should be entitled to any regular market appreciation. This isn't the case for persons living in an affordable unit. They have to resell their units to a person in a similar income bracket, so in 7 years, when they need to sell for whatever reason, they can't sell it on the open market. So, the unit, now worth $450k, will not reap you a $200k profit, but rather, a $15k profit ($150k back to the City and you only get 30% of the market appreciation or $50k). How is this fair?
The average American sells their homes ever 7-8 years. How many of them then become renters again? Many of these individuals, who by circumstance, not choice, had to purchase an affordable unit initially. How many of them will then be able to purchase a market rate unit.
This isn't a good program to keep low-income residents from being displaced. It's a program that entraps them into perpetual poverty. DC has the lowest homeownership rate in the Country (somewhere around 44%) while the rest of the US is at 66%. These restrictions aren't going to change this.
Ask yourself, if you in their position, with their resources, and their limited options for economic mobility, would you purcahse a unit with such restrictions. Would you advise your love ones to do the same? Do you think that real life doesn't happen during a 20 year period? Marriage, kids, college, retirement, divorce, a death in the family. What happens then.
1:48 pm
if you can'gt afford rent, how the hell can you afford to buy? isn't this what got pg county into the mess it's in-cab drivers and welfare mamas buying 400k houses when they couldn't even afford the $850/month/all utilities included place they were in? if you can't afford it you can't have it! deal with it! i;'d love a penthouse apartment in downtown (someplace clean like bethesda) but i can;'t afford it and i know it. i'm not looking for ahandout, i know my limits, thats what makes me a RESPONSIBLE ADULT.
3:14 pm
Jay- I don't know why I feel the need to comment to such a close-minded idiot, but I'm between fares and the welfare office is closed, so I have some time.
First off, what makes you think we can't afford rent? If we can't afford rent, we are not going to attempt to buy. We aren't getting these apartments for free. We have to go out and get a mortgage like everyone else. And, if you really care to know, we weren't the ones that made up the majority of subprime borrowers. Middle Class, white americans, living in the suburbs were. Also, though I suspect you would give a flying fuck, in the District, low and moderate-income buyers, who participated in a program like HPAP or a pre-purchase homebuyers education class, have a less than 1% foreclosure rate. Many of the us who purchase an affordable unit, fit this bill, not yours.
I don't want to live in a penthouse but I frankly do not wish to live in Bethesda or PG either. I want to stay in my neighborhood. However, unlike you, I did not have the same opportunities growing up and though driving a Cab pays the bill, I didn't have mom and dad helping me with college tuition.
Also, do you why there was even the chance for properties to reach $400k plus. It was through subsidies. Not the ones I get but very similar. Developers were given huge incentives to build and as a result, my neighborhood became too expensive for me to purchase on my own. I don't see you fuming outside of Donatelli, Douglas, Banneker's offices for the subsidies given to them to do projects they couldn't afford on their own.
I am a responsible adult as well, facing the same problems that we all face. Yet, I have to face bigots like you because of your misunderstood notions of superiority.
3:38 pm
My covenant lasts for 20 years and after that I have to split the money 50/50 with the city.
5:04 pm
That suck balls creative. 20 years and then you have to give up 50% of your loot? I hope you're like paying like $100 a month, cause you're getting reamed. Fucking Fenty.
6:40 pm
The District gives developers tax-credits; property tax abatement, and forgives their loan repayment obligations.
The city then forces the low-income buyer to forfeit 50% of his/her equity to recoup some of its hand-outs given to wealthy developers that are friends and associates of the mayor. Fentyism at its best!
7:03 pm
Booo hoooo. These affordable units should be apartments rather than condos. While the city may have a limited obligation to ensure some housing stock is affordable it's a farce to suggest the beneficiaries also deserve appreciation windfalls.
9:33 pm
Wait-- this woman got an 'affordable' unit, knew what that deal was to get it, and now wants people to pity her because she is knocked up, living with a crazy non-relative, and her husband in one of the best locations in town? Are you kidding? Just like every other welfare wannabe-- they want handouts when they are given and then want an exception to the rules when they don't want them to apply anymore. I say-- she knew what she got into, now she is stuck with it. Poor baby--
11:31 pm
You tards don't understand this stuff because you don't take the time to understand it. Yet, you throw stones at this woman because you think she wants your pity? You think she wants to flip and make a profit. None of you have ever been in a position like hers. She worked hard and became a responsible homeowner. She's never missed a mortgage payment and makes due with what little she has. She's even taken in a stranger out of the goodness of her heart. Now, because she's married and pregnant, years after purchasing the unit, you fucking lowlifes want to make her out to be something she's not. I work for a legal clinic in the City and come across people like her all the time. She simply wanted to be in the City she was born in. She's done everything right thus far and now because of a short-sighted policy, she's stuck in a bad position. It isn't the end of the world for her and she's grateful to have a roof over her head. She would like to do what any parent would like to do for their children one day and that is to give them a better life. I don't understand why this is so hard for you all to see.
Maybe if she's wasn't black and poor, you all would be more sympathethic or at least less presumptious about her.
Walk a mile first...
11:38 pm
dcav8r- So let me guess what you're advocating for. A bus boy and poets in every neighborhood, big bear on every corner, and low-income blacks in Anacostia or PG. That great neighborhood that she lives in was a fucking war zone a decade ago. You weren't there. She was. And I guarantee she'll be there long after you and your yuddies (yuppy buddies) high-tailing out. She got just as much of a hand-out as the developer did, except he can drive away to potomac in his benz while people like are financing his projects.
12:21 am
B Jay, you read that racist white punk. These white Queens move to D.C. from some small town in America and they think they are God's gift on this earth and they want to look down on longtime D.C. residents or natives. This is why I will not be voting for corrupt Adrian Malik Fenty in 2010. Fenty's in bed with the white wealthy developers and Fenty don't give a shit about middle class blacks.
8:57 am
@politician - you're full of shit. I spent 10 years working hard and living with roommates to keep my rents low so that I could pay off my student loans and save a downpayment for a place. Low income people don't have a monopoly on working hard and sacrifice.
This woman has been afforded the opportunity to live in a nice new building next to metro and can benefit from the mortgage interest tax deductions. She's also presumably building equity with her mortgage payments. But the gravy train isn't good enough apparently. You want her to be able to sell the unit for market rate so she can profit and move up the property ladder. Nevermind that removes one affordable unit from the housing stock. You'll try to have your cake and eat it too. Profit off transfering YOUR affordable unit to market rate but ream the politicians for not providing enough affordable housing when the very people the program was intended for don't care if the units remain affordable after they outgrow them...
10:16 am
Jason- Because you choose not to understand how it works for her and instead bash her because of your own personal hang-ups, there really is no point trying to explain anything to you, but I'll try.
She will never be entitled to a huge market rate profit, even if these restrictions weren't so long. The discounted amount she paid for the unit will have to be paid back to the City no matter what happens. So if she purchased for $250k, but it was worth $400k at the time, she will not walk away with this $150k at any point. Any appreciation above the $400k should be hers. You and these Politicians don't believe so. So, if by some miracle, the value increases in that area and her property is worth $500k in 10 years. She's not going to walk away with $250. She repays $150k to the City in addition to 60% of the appreciated equity. So, in total the City collects $210k from her. Even though she may have been paying her mortgage consistently for the last 10 years, on most 30 year fixed mortgages, this only goes towards interest and will continue to do so until year 22. However, even this situation is better than what the covenants will actually allow her to do. She is first required to sell to someone in her income category at the time of purchase. Meaning, she will not be able to sell it for much more than she paid for it.
This system as is creates more dependency and within a decade, when these same individuals are not able to move up the economic ladder, what do you think will happen to the housing stock? The Affordable HOMEOWNERSHIP stock is 1/20 of the total affordable housing stock in the District. So, loosing a unit eventually, will not have as dramatic as effect as you claim. Additionally, this means one less person in the system. It's a way out.
Now obviously all of this stuff is hand-outs to you anyhow, so you wouldn't really care. But, you at least had the opportunity to go to College and I'm sure you have some mobility in your career. I am certain you do not understand the dynamics of poverty in the District and probably would not care anyhow. She's just part of the problem to you.
She doesn't want to flip this property and make a huge profit. Yes her situation has changed and she needs a larger space, and because of this, she's attacked for being poor. Why further penalize people in these situations. You think they choose to be on welfare and to need government subsidies?
10:31 am
Jason is just bitter that his daddy made him pay for some of his college bill and room with three other yuppies in Logan Circle. He thinks that working hard means metroing to a office job on the Hill every weekday from 9 to 5. He's responsible because he can take that additional money from his arduous job and set it aside every month. He has it bad. He's cut back on starbucks- three days a week now and eats out at Nando's only a few times a month. His life is very rough and he doesn't see why all of you ghettofied people are complaining. Pull your boots up, you welfare cry-babbies... Be a real man like Jason.
10:53 am
Actually, I live in NE, we don't have a coffee shop, gym or any of that mess. I bought my house knowing the terms, and Manna actually built a two unit townhouse next to me. I actually lived in Columbia Heights when there was nothing but crack whores and crack heads. So, Benny, YOU shouldn't judge. The 'war zone' you refer to is a few blocks down from hers, mine is right outside my front door. No one told this woman to take in a stranger that obviously belongs in a mental home. She knew the terms when she bought it, she has to live with it. Poor her, living right next to Target, and all kind of shops. We don't have any of that in Ward 5 (well, we are getting a Forman Mills ya-hoo). And its a two bedroom-- if she tosses out the basket case, then her and her husband and new child have a perfect place. Additionally, that is a great area to raise a kid, not to mention because of the housing requirement, it will afford stability in their kids life during the growing years. If you ask me, she should be thankful she is stuck there.
10:54 am
Jacks making stupid decisions alwaays want a bail out.
11:05 am
@A Realist - I understand the economics and that she won't earn the 150K that was part of the subsidy in your scenario. But I see no reason for her to benefit from the appreciation above that amount if it means selling at market rate. If she outgrows the unit and needs to move on then the unit should go to the next wave of people who need a low income unit of this size. To me affordable housing is about providing housing that won't break the budget of the individual - not a wealth transfer.
@BennyRed - My father has been dead since I was three. I worked 40 hours a week as a grocery clerk while I was in high school and worked at Sbarros during college. Apparently your just an intellectual dimwit since all your responses are belittling commenters rather than focusing on the actual topic...
11:58 am
Jason- Why shouldn't she be entitled to any appreciation? She took on all of risks like anyone else, maintained a responsible mortgage, paid her utilities, condo fees, etc., like everyone else did. She doesn't want to be in the situation forever and by purposely limiting what she is entitled to earn, is just wrong. The problem with affordable housing policies is that there is so much emphasis on the units.
Do you guys ever think what it's really costing the City to maintain these units over the long run? By restricting what she can do with the appreciation, she has no real incentive to maintain the home. Normal wear and tear will result in a property that is substandard (these units aren't up to the regular market to begin with). What will the City do then? It will fall back on her, so she will in effect be subsidizing the unit for the City.
Uneven housing policies is the reason why many minorities in the US have a tenth of the net worth of white Americans. The effects of redlining devastated generations of blacks in the US while empowering generations of whites.
I just don't see the hang-ups on trying to allow people like her to move up the economic ladder and out of poverty.
Just to note, Columbia Heights is not going to maintain these levels of value for long. So, even though, she might have gotten a "discount" at the height of the boom, she would have been better off purchasing a non-restrictive unit today for the same price.
12:32 pm
>> ? By restricting what she can do with the appreciation, she has no real incentive to maintain the home. Normal wear and tear will result in a property that is substandard (these units aren’t up to the regular market to begin with). What will the City do then? It will fall back on her, so she will in effect be subsidizing the unit for the City.
That's ridiculous. Kenyon Square and City Vista are new buildings. Very little maintenance is required on a new unit and the condo fees will pay for the maintanance of the common areas and structural systems. If affordable housing owners are going to trash the inside of their condo simply because they don't have the economic incentive of appreciation gains then it just shows they have no pride.
2:03 pm
I'm not talking about now man. I'm talking about in the future. I'm not implying that they will tear up the place and it's pretty sad that you interpret like that. It has nothing to with the pride of ownership. It has to do with the economics of it all. They are restricted from using their equity. If something breaks down the road in their unit that isn't covered by condo fees, they can't go out and take a Line of credit to fix it like a regular homebuyer.
You're married to this notion that these individuals are taking advantage of this situation, and should be grateful for what they have, even if it's not something you yourself would (this implies choice) do. So as much as this doesn't make financial sense for anyone, especially the owners of these units, it's impossible to reason with someone who just simply does not care.
Separate but equal was a policy that many held to be true and beneficial for people not like them. This seems to be true in this case as well.
2:12 pm
Jason- you're a fucking dick and the sooner you know this, the better off the world will be. All this bullshit your spewing about your personal struggles while at the same time bashing the fuck out of others for their struggles, doesn't make you right either. You sound like a prick, regardless of your upbringing, and that won't change son. So keep up the hard work and the close mind. I need companions.
2:23 pm
@A Realist - what future? Under your system she'd sell to a market rate buyer now.
@BennyRed - something tells me you have a very small dick. Your way of coping with your anger about over this shortcoming is acting like a big tough man on the internet.
2:35 pm
It's not just her that's affected by this. Everyone who lives under these restrictions have uniquely different situations. The only thing that is consistent is the fact that they do not have the freedom that others do whenever a pressing situation comes up. I guarantee you that she wouldn't be able to sell right now, not even to a Market rate buyer. And I'm not advocating for no resale restrictions at all. I think there should be some; 20 years is just way too long. Average American is in and out of a home every 7-8 years. Why limit a person to such a lengthy period. 10 years is more than reasonable and it ensures that this person is "commited" and not a "flipper". And if the goal is preserving the unit, after 20 years, it's gone anyhow, so what difference does it make if you reduce the time to a more reasonable period.