The housing bust has not been kind to the value of Bob Haines’ Germantown condo.
Haines and his wife bought a three-bedroom, two-bathroom home in a luxury development called the Ashmore at Germantown in 2006 for $378,000. Now he thinks it’s worth about $240,000.
But it’s not just the slow housing market that’s giving Haines headaches. He and other property owners at the Ashmore say Montgomery County has made their problems much worse by giving a nonprofit developer a $5.4 million loan to buy the 29 remaining units and turn them into long-term, affordable rental housing units.
“They’ve created a huge negative impact on the residents,” Haines said.
The developer, AHC Inc., is renting out the units to lower-income individuals and families at rates of $993 for two bedrooms and $1,124 for three bedrooms. To qualify, potential renters can’t make more than 55 percent of the area’s median income, which would be a cutoff of $54,120 for a family of four.
The controversy in Germantown is part of a broader, regionwide debate over how, when and where local governments should reach into the housing market.
Counties are struggling to accommodate public housing programs at a time of sharply constrained budgets, which have heightened competition for tax dollars, and declining home values, which have undermined the justification for buying or preserving low-cost living space.
Fairfax has been one the most aggressive jurisdictions in its affordable-housing ventures, spending millions of dollars to buy apartment units outright, or partnering with nonprofit groups to keep rents down. Since 2004, the county has preserved 2,240 units, partly through its “penny fund” that dedicates 1 cent on the real estate tax to affordable housing.
The Board of Supervisors is considering scaling back the penny for housing amid a $648 million budget shortfall for the coming fiscal year. That call has been intensified by new board members who question the county’s housing strategy.
“History tells us that having the government own housing units is not the best model,” said Supervisor John Cook, who was elected last month to fill a vacancy in the Braddock District. “A better approach is that, in those localities where there is a housing need, that government could be involved [but] it should be looking at ways to support private ownership.”
Instead of acquiring property, local governments would be better served to pump the money into housing vouchers, which would focus the assistance on the poorest people and grant tenants flexibility to move as their circumstances change, said University of Virginia economics professor Edgar Olsen, a housing policy expert.
“The evidence is, in the end, these programs that are tied to particular projects, the total cost of the housing — the amount the tenant pays plus what the government pays — is much larger for equally good housing than under the voucher program,” he said.
Since the housing crash, the prospect of large numbers of affordable rental units being converted into condos is far less realistic.
“We’re actually going in the opposite direction now,” Olsen said. “This is a response to something that has already happened and is being reversed right now.”
At the same time, local governments are scrambling to reverse a rampant home-foreclosure crisis, in some cases by opting to buy homes outright with the plan to revamp and sell them. Fairfax County was the first to announce such a venture, with its neighbors quickly following with similar plans.
Prince William, Loudoun, Montgomery and Prince George’s counties all have established programs to help residents move into foreclosed houses.
On Wednesday, Montgomery County Executive Ike Leggett said the county planned to loan an additional $2 million to AHC to buy, renovate and sell foreclosed homes in Germantown to low- and medium-income buyers.
But in Ashmore, Haines and other property owners said the county’s move has permanently hurt the value of their homes.
They say turning so many units into rental properties will make it difficult for prospective buyers to obtain credit — banks typically are hesitant to give mortgages in developments with many renters. And the stigma attached to affordable housing may scare off potential buyers who manage to get financing.
“There’s a real possibility that we’re not going to be able to sell [the condo] under any circumstances,” Haines said.
Ashmore condo owners said they were angry that they didn’t find out about the deal until after it happened and without a chance to voice their concerns.
“My own tax dollars are being used to my own detriment,” said Mical Owens, one of Haines’ neighbors. “And we had no voice.”
An AHC representative tried to allay some of the residents’ concerns at a meeting Monday night by telling them that his company conducts a background check on perspective tenants and looks for renters who will contribute to their community.
“These are not people with issues,” said Alan Goldstein, an AHC senior project manager.
Richard Nelson, director of Montgomery County’s Housing and Community Affairs, says he thinks the county’s purchase in Germantown will enhance property values because of AHC’s reputation for responsible management.
Fairfax County’s program, while popular among affordable housing advocates, has been plagued by missteps and controversies, mainly surrounding the 672-unit Wedgewood Apartments. Fairfax County officials in 2007 bought the Annandale property for $100 million; officials said it was at risk of being converted into condominiums.
The county realized that some tenants made too much money to qualify for the subsidized housing. Those people were evicted. Then, apparently struggling to fill the units, the county-contracted management company last month offered Wedgewood’s occupants a $200 referral bonus to find new tenants, infuriating county leaders who called the offer inappropriate.
And more than a full year after its purchase, the property still doesn’t have permanent financing in place.
Affordable housing programs are also being assailed by advocates for other core services. The county’s firefighters union, which has long complained that home prices are too steep for its members to live in the same county where they work, nevertheless favors halving the $20 million fund in an effort to avoid layoffs for firefighters and paramedics.
Leggett says he has made affordable housing — long a source of pride among county officials — one of his highest priorities and has proposed increasing funding for the programs in next fiscal year’s budget, despite a $520 million budget shortfall.
But Ashmore condo owners said the county was forgetting a group that now needs help as a result of the county’s actions — them.
“We’re the only ones who can’t seem to get any help,” Haines said.
