“It appears that no one will suffer consequences for this failed project EXCEPT the homeowners.”

by Prince Of Petworth June 27, 2016 at 2:10 pm 52 Comments

Photo by PoPville flickr user Jim Havard

“Dear PoPville,

A little over 4 years ago, I purchased a new townhome in NE DC. These townhomes are considered affordable housing and were financed in part through grants from HUD; as a result, purchasers must be first time homebuyers and make less than a certain percentage of the median area income. Additionally, homeowners are bound by a number of restrictive covenants including an equity share provision for the first 10 years of ownership, and requiring the homes to remain affordable for at least twenty years (which means they cannot be sold at market rate before then).

So what’s the problem? The original townhome community was supposed to be a total of 63 homes. In 2012, 24 of the 63 townhomes were completed and then construction suddenly stopped. For the past three and a half years, we have been living in a half finished community and on an “active” construction site (the unfinished portion was simply fenced in; some owners walk out of their front doors and are staring directly at said fence). Amenities that were promised us when we first signed our purchase contracts, like off street parking spaces for all townhomes (which is included in the purchase paperwork) and a children’s playground, have failed to be delivered. Reasons for the failure to continue the construction have never been fully explained; the initial excuse was that the real estate market wasn’t doing very well but as to be expected, we are skeptical of such a claim.

To say that we are frustrated is an understatement.

Over the past year and a half, we have had numerous meetings with the developers, our ANC commissioner, our ward council member, the mayor’s office, and even Eleanor Norton Holmes’ office and all we have achieved is the runaround and/or empty promises on when construction will resume (which never come to fruition).Inquiries to HUD (since they had a hand in this project as well) have all gone unanswered.

We even went so far as to FOIA the District’s contract with the developer, which outlines in detail the consequences if the developer were to fail to complete the project and yet, to our surprise, the District refuses to enforce the terms. Most egregious, however, was discovering within the documents that almost two years ago the District had advanced the developers almost $700k to begin construction on five additional townhomes for which, to this day, have not been started (and yet, that did not stop the developers from requesting an additional $300k advance).To add insult to injury, the District continues to award these developers other housing projects throughout the city, though we vehemently object (their response to us was that the developers will simply be tagged as “high risk”).

Many of us would like to throw in the towel, sell our homes, and simply move on but cannot do so without suffering serious financial consequences due to the covenants that are attached to the properties. We don’t know what to do; we feel downright trapped. We fear that the only step left to us would be the legal route but a short-lived fight could easily wipe out one’s entire savings.

Does anyone in PoPville have any recommendations on how we proceed from here? It appears that no one will suffer consequences for this failed project EXCEPT the homeowners. We are desperate to get something done but have exhausted all logical, low-cost routes.”

  • HaileUnlikely

    Is your ownership fee simple of do you have a homeowner’s association of some sort? If you do, the association might consider seeking the advise of an attorney regarding how to proceed. Aside from contractual restrictions on selling, I suspect that these homes might be difficult to resell for other reasons that you note as well.

    • OP

      We do have a homeowner’s association. However, it is severely underfunded (though not in the red) because the developers set the monthly rate on the expectation that we’d have the full 63 homes, instead of the third of completed homes we currently have. Even tasking our HOA attorney with taking on this issue would me a large special assessment fee on each homeowner.

      • Anon Spock

        Any major repair would be the same. After a couple years of only 1/3 completion, I’m shocked, fees haven’t be raised. The board just needs to vote.

  • SW 20011

    Hire a lawyer.

  • Shaw Guy

    You need to not be shy about using the developer’s name. We all should know who this is – and you need to shame them (and their political patrons) at every opportunity.

    Take this to Jonathan O’Connell at the Post and/or Michaell Niebauer at Washington Business Journal.

    Also Mark Seagraves at NBC Washington.

    • LittleBluePenguin


    • V


  • also anon

    I have no advice but I’m curious what developer this is and the community that the OP is referencing?

    • anon29

      My guess is Eden Place in Deanwood.

  • BK2h

    Let me get this straight, you got to purchase a house at a discount because it was deemed affordable and now you are complaining that you cannot sell the unit at market?

    • textdoc

      I don’t think that’s what the OP is complaining about — more that what was promised has not been delivered.

      • BK2H

        I’m not sure a promise is a legally binding argument. Was it written into the Purchase and Sale Agreement or into the condo bylaws?

        • textdoc

          The OP mentions that the off-street parking spaces were included in the purchase paperwork.

    • erin

      Let me get this straight: You think that just because the people affected here qualified to purchase a home at an affordable rate, they deserve to have lived in, and continue living in, an active construction site for years with no end in site, zero government oversight or accountability, all the while the negligent development company gets to keep raking in (literally) millions of dollars?

    • Anon

      Let me set you straight: the letter-writer never says he wants to sell his home at market. But those restrictive covenants will probably greatly decrease even the below-market sale price of these homes, which is already being depressed by the developer’s failure to complete construction (or, at a minimum, clean up the active construction site). So the writer is unable to even recoup his original purchase costs of his home. Of course, the actual market value of the homes are being depressed by these things as well. Pretty much any way you slice it, these homeowners are losing value in their homes due to the developer’s failure to deliver on promises it made to both the homeowners and the city. And this is despite the fact that these homeowners jumped through all the original hoops in purchasing these homes (income qualification is generally not simple and easy).

      Even if I didn’t sympathize with the homeowners here (which I do), I would still be pretty pissed that DC has provided subsidies to the developer, who has failed to do anything with those subsidies. What happened to the 700K? What are their plans for the additional 300K? That’s DC taxpayer money, and it’s currently being held hostage by a developer failing to deliver. That in and of itself is enough reason to be frustrated at the developer, not the homeowners.

      • erin

        +10000 This! If you’re a DC taxpayer, you should be angry.

  • anon

    Two things come to mind. Have you tried to see if the DC Attorney General’s office can help? And, while you may have an attorney for your FOIA requests, I’d think about getting an attorney (not necessarily the same one, but one who knows this area of law), whether you are fee simple or a homeowner’s association (as fee simple owners you certainly are a group of people similarly impacted by the situation). While you may not be able to sell your places for much right now, there may be some other remedies that can be explored, such as suits to force the work to be completed (I don’t know that any would work, which I why I suggest you get an attorney). Good luck.

  • DCPerson2

    I’d start with the HUD Office of Inspector General. If you can bring them your correspondence on this issue they are bound to follow-up on it. Their job is to ferret out fraud, waste and abuse.

    • Sad

      +1 Great idea

    • OP

      Thank you for this suggestion. I submitted this issue to HUD’s Office of the Inspector General over 3 months ago and never received any follow up.

      • textdoc

        Try checking back with them, and also contact the D.C. government’s Inspector General.

  • Sad

    UDCs Law School provides free assistance to low income residents. They may be able to help you sue the developers, the City and HUD; or at least bring enough public attention that one of them is forced to fix the situation. It’s worth a phone call.

  • anon

    Also, since I see you don’t have a ton of money for attorney fees (most of us don’t), check out the law schools that have legal clinics (probably all of them.) Being that you all purchased as having certain incomes, they may find your group a worthy project to take on pro bono. (Or perhaps not, as this is likely going to take years.) But the faculty running clinics may have some ideas for other resources for you to look into.

    • Anon

      Good advice on the clinics. Georgetown used to (may still have) a housing clinic and this would be right up their alley.

      • Anon Spock

        That’s more landlord tenant, but it may be worth a look to at least get on the right path.

        • Anon

          I thought Law Students in Court did L&T stuff, but there used to be a more development-oriented clinic a while ago. I seem to remember them working on a limited-equity coop deal with Jair Lynch where they used TOPA to keep tenants in a building that was going to be sold.

          • Anon Spock

            You’re probably correct, and I.got my clinics mixed up.

      • Shmoo

        Catholic University Law School has a clinic that can help out.

      • anon

        Here’s the clinic: https://www.law.georgetown.edu/academics/academic-programs/clinical-programs/our-clinics/HIHC/index.cfm

        Seems worth a shot! As for the poster below who said this may be over the head of law students, keep in mind that all the work is supervised by recent law graduates and professors.

        • [email protected]:38

          That’s the one, thanks for looking it up. Glad to see they’re still around. It’s not your usual clinic material, for sure, but they have fellows who do serious work in the field.

    • Admo_Anon

      DC Bar also has a free walk in clinic on I believe the last Saturday of the month. They’ll be able to at least point you in the right direction.

    • neighbor

      I’d say this is well above the heads of law students. A law clinic may leave you hanging on this. You have a pretty serious amount of money involved here and it’s a very complex transaction. I’d talk to some of the local housing non-profits and see if you can get pro bono representation from a local firm.

      • anon

        That’s a good idea, too. I wasn’t thinking the kind of clinic where you get one-off help one, or for a short time, from a student. I was thinking about the kind of clinics that take on difficult problems and work on them over time, sometimes years. The representation is by the faculty member(s) who use the students, who change every semester or year, for certain defined tasks. But there are clinics that take on sizable tasks with expert representation – they may even involved pro bono attorneys from firms – I’m just not familiar enough with the DC law schools to know which do what here.

        • Anon Spock

          Even in the one offs, an attorney and/or professor supervises all work. The dc clinics have taken on a number of cases, and if this was more than they could handle, they’d say so. Some professors are the attorneys from firms specializing in that area who teach part time.

  • Shawz

    I’m not sure what legal remedies you have as homeowners. Supposedly, if you wanted to sue based on breach of contract you could do so, although it seems the only damages you would collect are loss of value of the pool and parking, and even then it would be hard to show unless the contract you signed had firm delivery dates on those items which were missed, considering its still an ongoing project. The real issue here seems to be the city got ripped off my the developer, and it’s their option (or HUD’s) to take action on that. They almost certainly won’t, a lot of these developers are big backers of certain political interests in this city…

    • anon

      If this is the problem, that that’s where political pressure can help.

  • Do you know the name of the HUD program?

  • Chucky Finster
  • Guillermo Brown

    I’m confused by the OP’s assertion that the owners will suffer “serious financial consequences” if they move on. I understand there are covenants restricting owners from selling at “market rate” prices, but beyond that, is there an actual penalty for leaving the home?
    I’m in the home building industry and deal with these types of programs in every county surrounding DC, and the “out clauses” for folks trying to leave before the restriction period is not onerous at all: you work with department staff to come up with a sales price for your home that meets their affordability criteria, and the home practically sells itself (lots of people on the list for these types of homes). Isn’t that the same case in DC? Anything beyond that (for e.g. a punitive fine) seems unconstitutional.

    • OP

      In reference to the financial consequences, I’m speaking more specifically about the equity share covenant. If I were to sell my home tomorrow, after only 4 years of ownership, I would be required to turn over 60% of any equity received to the District of Columbia. I have no doubt they’d come collecting it too.

      We have asked the District on numerous occasions to waive this provision because of the circumstances and they state they cannot, as HUD will not allow it. They also refuse to negotiate with HUD on this provision on our behalf.

      • JS

        Is it 60% of any remaining equity after you recoup your down payment or is it 60% of the total equity remaining after paying off the mortgage (i.e. you’d lose a chunk of your down payment)?

        • OP

          It would be 60% of any equity remaining after paying off the outstanding mortgage. This means losing a portion of the down payment as well as any amount of the principal paid down while occupying the home.

          • JS

            Yeah, that’s terrible. I can see a case to be made for splitting a portion of the upside appreciation but going after the downpayment is awful.

          • textdoc

            Agreed with JS 3:41 pm.

  • neighbor

    This sucks.
    There’s a lot going on here and it probably won’t pay off to invest a lot of time/money as an individual. I would start by organizing the existing owners. Once you have a majority on board, have a few meetings and try to see if you can get some affordable housing non-profits to work with you. Before moving forward you’ll have to figure out more specifically what you want out of the situation: the development completed? the construction closed off and the development made into completed form as is? the removal of the covenants?
    I’m not sure what you paid for the units, but given the market in Deanwood right now, unless they were heavily, heavily subsidized, I’m honestly not sure if market rate would be greater than or equal to your “subsidized” rate.
    It’s going to be a long slow road to fix this, get your ducks in a row and try really hard to get free legal help;

  • Cassie

    That $1M probably went to Alexander’s failed re-election campaign.

  • Noma

    I would recommend contacting HUD OIG again. Just because you filed a complaint doesn’t mean they’ll open an investigation, but even if they did, you might not be informed about it. I would call their Region 3 office that looks to cover DC, in addition to filing a complaint online: https://www.hudoig.gov/report-fraud. Also encourage other homeowners to do the same. Lastly, contact DC OIG http://oig.dc.gov/. If it was me, I would plan to drop by there in person (with copies of all relevant documents) to file a complaint in person. Good luck!

  • andy2

    You need the HOA to litigate to force the developer to deliver on contractual obligations. Since you can’t afford that as an HOA the litigate in the press. Collect all relevant documents, draft up a summary of what has happened and what you’ve done and email all of that to reporter after reporter till you get a bite.

    Press on with the IG at HUD. And reach out to the appropriators on the House and Senate Appropriations Subcommittees on Transportation, Housing and Urban Development and related agencies. On the Senate side Sen. Mikulski is on that subcommittee – give her staff a call.

    • anon

      While this can be a good tactic generally (a lawyer in NY got an innocent man out of prison this way once, by going to a reporter, after all legal appeals on his behalf had failed), I’m not sure that even publicity would force a DC government agency and HUD to act – I think it would take a lot more than that, as this is not a problem with an quick fix. Publicity couldn’t hurt – though I suppose it might put off potential buyers who google if the owners do get permission to sell without handing over their equity to DC.

      • andy2

        Stealing $1M of taxpayer money on top of the economic impact of those working hard to secure housing in this market should be news. Plus with the culture of corruption with DC Gov and developers an ongoing problem – it should merit an investigative piece and those responsible should face civil and criminal penalties.

  • Mickey’s BFF

    The American Bar Association has a pro Bono program that you may be able to use. You would be assigned to attorneys who practice in this area of law.
    Do you know if DC housing bonds were issued in connection with the development of the property?

    • DCJoe

      No bonds would have been issued to the developer as this isn’t a rental property. Some homeowners may have used the bond program to finance their personal mortgages.


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