The city could lose $1 million in low-income housing funds it has failed to spend in the past two years, the U.S. Department of Housing and Urban Development has warned Baltimore's housing commissioner.
In response to the warning, City Housing Commissioner Robert W. Hearn has sent HUD a list of housing projects lined up for the money that would more than cover the $1 million.
The money comes from one of the few remaining federal housing programs for the poor, called the Rental Rehabilitation Program, which is designed to help landlords renovate rental homes for low-income families.
A spokeswoman for HUD, Rheba Gwaltney, said the federal government will evaluate the city's response and decide within a few weeks whether to order the city to return the money.
On Nov. 16, HUD's Baltimore manager, Maxine S. Saunders, wrote to Hearn, noting that HUD granted $1,152,000 to the city in March 1989. By Nov. 1 of this year, the city had "committed" only $101,421, or 9 percent, of the money to developers, Saunders pointed out.
Saunders wrote that HUD would take back the $1 million on Jan. 7 so that the federal agency could give it to another city to use for low-income housing.
Her letter also said that HUD would consider decreasing the amount of money to be returned if the city could prove it is about to use the money for specific housing projects.
Hearn wrote back to Saunders last week, listing 11 housing projects that the city has slated for rehabilitation with the federal funds.
In August 1989 the city had to return $563,000 to HUD from the same program because the city failed to spend the money within a two-year period.
This week, the city's development director, David K. Elam, said the Rental Rehabilitation Program is a "cumbersome" program for developers, who must combine the federal money -- in the form of grants or low interest loans -- with private funds.
Until recently, developers were allowed to use low-interest mortgage money from the state's Maryland Housing Rehabilitation Program in combination with the federal money.
But now, for legal reasons, developers can't use the state money and must look elsewhere for financing, Elam said.
The program "took a nose dive when [the state funds] went out," said Elam, who noted that it takes the city six to nine months to put together financing for a housing project under the federal program.
He cited problems with moving tenants while renovation is going on and with following federal Davis-Bacon regulations that require contractors to pay prevailing union wages to construction workers.
Hearn's letter to HUD estimated that the projects on the city's recent list would take $4.7 million in federal funds to renovate 1,052 apartments.
In addition to the $1 million from 1989, the city has on hand $1 million granted for 1990 and $300,000 in income from repaid loans on previous rehabilitation projects, according to HUD.
Hearn's letter asks for an additional $1.9 million to cover the city's proposed projects.
The projects include the continuing renovation of the former Sarrill apartments in Northeast Baltimore -- now called Strathdale Manor -- which is in receivership. The city has already pumped $1 of federal rehabilitation money into the project and plans another $1.8 million to complete the 667 apartment complex, Elam said.
The city also plans to spend $950,000 to help rehabilitate the old Congress Hotel downtown on West Franklin Street.
Although federal guidelines for the rehabilitation program are aimed at helping large families, the Congress Hotel will have only one- and two-bedroom apartments.
"I'm quite sure, given the market, they will be singles or for parent and child," said Elam.
Federal guidelines for the program specify that 70 percent of the money must be used to renovate homes that have two or more bedrooms.
Also in November, HUD sent a report to the city saying the housing department was incapable of managing its Community Development Block Grants and threatened to place sanctions on the city that could jeopardize the $21 million program.
HUD especially criticized the city for funneling federal money to the private Council for Equal Business Opportunities without confirming that the funds are being spent to eliminate urban blight or to create permanent jobs for disadvantaged people.