Low Appraisals: A Big Problem For Anacostia
Last week, GGW reported that developer William C. Smith would have to convert a chunk of the market rate units at the new Sheridan Station housing complex near the Anacostia metro into rentals, because the condos were appraised too low for buyers to secure mortgages that would cover the construction cost.
This week, Four Points Development had to get a two-year extension on its zoning application for Cedar Hill, the market-rate townhome project at W Street SE that was supposed to be on its way in late 2010. Developer Stan Voudrie tells me it's now on hold because of the same reason: Appraisals haven't been high enough for him to even get a construction loan, on account of neighborhood comparables being too low. "There’s some projects that are planned, and hopefully some of those will start to happen, but so far there’s not anything that is under construction or sold that is market rate for-sale," Voudrie says.
Despite low inventory across the District, even the stuff that is for sale around there has been moving very, very slowly. Darrin Davis of Anacostia River Realty tells me that he's tried everything to sell units in the brand-new Savoy Court condominiums: Offered a one-year break on condo fees, $5,000 towards a down payment, even a free Smartcar with the purchase of a condo. Even in projects where demand is strong—the Housing Authority says they've had lots of interest in their market-rate units at Sheridan Station—nobody can get loans to buy them for what they're worth if nothing else in the neighborhood costs much, and you can't sell units for less than they cost to build. "Until something happens with foreclosures and short sales bringing the prices down, I see it happening it even more," Davis says.
Of course, the upside is that non-profit housing developers can buy land cheaply to build units that are more affordable than anywhere else in the city. And maybe Four Points can just build the townhomes and rent them out—more people are renting these days anyway. But those choices, in turn, make it more difficult to finance market rate construction. If you care about mixed-income neighborhoods and bringing in people with some cash to spend, it's a vicious cycle.
Maybe this will change with the opening of the U.S. Goast Guard headquarters, as thousands of employees buy up foreclosures and invest in the neighborhood. But those employees will have to be heavily marketed to if they're going to overcome deeply ingrained prejudices to move to the ward to be closer to work.