WASHINGTON (AP) — In the rapidly gentrifying nation's capital, real estate investors aren't the only ones flipping houses for profit. The city's public housing authority is getting in on the action — moving aging tenants out of homes where they've lived for decades, renovating them and selling them to wealthy buyers.
The renovations, at a cost of more than $300,000 per home, are outfitting the houses with luxury amenities, and some of the houses have sold for nearly $900,000. Others, however, have sat vacant for a year or longer after tenants were forced out.
The housing authority plans to use the profits to renovate existing subsidized rental units and build new ones. But most of that work hasn't started, and none of the money has gone to new construction yet, according to the agency. Meanwhile, sales have been slow-moving and haphazard.
Some elderly tenants and their children have asked for an opportunity to purchase the homes, only to be rebuffed, even after spending thousands of dollars maintaining the rental properties.
The homes are known in public-housing circles as "scattered sites" — single-family properties around Washington that are rented to public-housing tenants. Many are in desirable neighborhoods, including Capitol Hill and Shaw, where median home prices have more than doubled in the past 15 years to $500,000-plus.
The District of Columbia Housing Authority once had more than 300 scattered sites and has been slowly selling them off since the 1990s. But in 2010, when the city's real-estate market began to rebound after the Great Recession, the agency started treating the properties as real-estate investors would — gutting, rehabbing and selling them for as much as the market can bear. Previously, the homes were sold to low- and moderate-income buyers or to nonprofits that maintained them as affordable housing, a practice common to housing authorities nationwide.
One home, on a well-kept block in Capitol Hill, has been vacant since late 2013, when the longtime tenants — Lula Brooks, 81, and her husband, Sonny, 82 — were abruptly moved out. Brooks and her son said the housing authority threw away many of her belongings — including a washing machine, furniture, clothing and personal documents. The authority disputes this account, but Brooks' next-door neighbor, Jon Wadsworth, told The Associated Press he watched as employees threw the belongings away.
The house wasn't renovated. A year later, it was put on the market for $400,000 — unusually low for the neighborhood. It eventually sold for that price after higher offers fell through, but the housing authority asked its title company not to sign over the deed. The sale is tied up in litigation.
The rest of the houses the authority has sold in recent years have gone for market value. Others sit empty because the authority can't afford to renovate them.
A year ago, Levant Graham, 84, was moved out of the five-bedroom home in Shaw where she'd lived since the early 1970s and raised seven children. The housing authority plans to flip the house, but so far it hasn't been renovated or listed for sale.
"I thought the house was already sold. I thought it was on the market. So, I don't know what the big rush was to get me out of the house," Graham said.
Graham petitioned housing officials to buy the property with her children's help. Instead, she was moved into a one-bedroom apartment in a new building for low-income seniors. The building is in a gentrifying part of Shaw not far from her old house, but she says she doesn't feel safe because of a shooting nearby and rarely goes outside.
"The money that I paid there for the 42 years I was there, I could have had the house paid for," Graham said. "I thought I had a good chance of getting the house, but I guess I didn't."
District of Columbia law gives tenants of rent-controlled or market-rate buildings the first crack at buying them if they're placed on the market. But the law doesn't apply to the housing authority or its tenants because the agency is independent, leaving residents with no legal recourse to argue against being moved.
The housing authority is an independent agency that gets most of its funding from the U.S. Department of Housing and Urban Development. The authority took over management of the scattered sites — originally intended as an alternative to conventional public housing — from city government in the mid-1990s when the city's financial struggles prompted a takeover by Congress. Since then, it has been selling them off gradually with HUD approval.
Sunia Zaterman, executive director of the Council of Large Public Housing Authorities, said housing authorities nationwide have been "chronically underfunded" by the federal government and use creative financing strategies to maintain their properties — including selling their scattered sties and using private-sector investment to fund renovations and new construction. But she said she wasn't aware of another agency that's flipping homes the way the District is.
The agency applied to HUD in March 2013 to sell Graham's and Brooks' houses and 24 other properties. Agency officials said they can't afford to maintain single-family homes when larger complexes need upkeep and renovation. Selling the homes is a responsible way for the agency to manage its assets, housing authority spokesman Richard White said.
Because the authority hasn't been maintaining the homes, some tenants have picked up the slack.
Brooks and her son said they painted her home, replaced faucets, installed vinyl flooring and fixed the roof. They said they weren't reimbursed for the thousands of dollars in work because they didn't save receipts. Housing authority spokesman White said he could not respond to "anecdotes" about tenants doing their own maintenance.
The agency told HUD that selling the 26 homes would generate $8.3 million, with $1 million financing construction of new units. The authority has a funding arrangement with HUD in which it doesn't have to stick to its budget proposals line by line — it's free to spend money where it finds the greatest need. So far, the housing authority has spent $1 million renovating one complex and $500,000 on prep work for redevelopment of another site.
Of the 26 homes, 14 have been sold. Nine others have never been listed for sale, and three were listed briefly before being taken off the market.
Two rowhouses in Capitol Hill, half a block from the bustling H Street, Northeast, corridor, sold for nearly $900,000 apiece. They were duplexes when controlled by the housing authority, but renovations transformed them into spacious single-family residences. One of the homes has a basement apartment; the married couple who bought the home is renting that to a friend. The rear of the other home is surrounded by an 8-foot privacy fence, with a Porsche in the driveway.
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