Rehabilitation at painful price Housing: Baltimore seeks to restore vacant homes, create jobs in construction, and provide homes for the poor. But the cost often outstrips the success

Rebuilding Baltimore

December 14, 1997|By Ronnie Greene and John B. O'Donnell | Ronnie Greene and John B. O'Donnell,SUN STAFF

The house on High Street is typical Baltimore. Three stories. Brick exterior. A simple house in a city dotted with thousands like it.

Typical, that is, until you consider that taxpayers paid nearly $400,000 to turn this once vacant shell into housing for nine homeless men - in a neighborhood where sales often go for $80,000.

The transformation of the house near Little Italy is one brick in the foundation of a $300 million rebuilding of Baltimore. Endowed with public money, this neighborhood improvement campaign has been spearheaded by Housing Commissioner Daniel P. Henson III and Mayor Kurt L. Schmoke.

The effort arises from a public-spirited goal - eliminating blight in Baltimore's most distressed neighborhoods while providing decent, affordable housing for the poor and working middle class.

To be sure, the program has transformed some city blocks. Boarded-up houses have been hammered into homes. Barren warehouses have become handsome apartments for the elderly. Community centers have risen in neighborhoods that needed them.

Yet for all the millions spent, progress has been frustratingly erratic.

In its second investigation of city housing policies this year, The Sun found an effort repeatedly crippled by risky loans, scant accountability and inflated costs.

The large house on High Street is just one example.

There are many, many more, involving dollars big and small. The $1 million spent to transform six rowhouses in Sandtown-Winchester. The nearly $80,000 handed to a company headed by a convicted felon with a 30-year arrest record. The $181,000 spent helping a high-powered Washington lawyer repair one rowhouse.

These cases emerge from hundreds examined by The Sun - construction projects that, combined, received more than $300 million in public money since Henson took office in 1993.

The newspaper's review encompassed four years of minutes from the Board of Estimates, the Schmoke-controlled body that approves city transactions. It included examination of thousands loan records on file at the courthouse, coupled with thousands of computerized building permits, among other public records.

And the study included a review of internal Department of Housing and Community Development files for 40 renovation projects obtained under the Freedom of Information Act.

These 250,000 documents, coupled with 70 interviews conducted over the past seven months, show:

* The city has often handed money to companies new to construction. The mayor's and housing commissioner's belief that small, novice companies deserve a chance to develop their skills on public construction has often resulted in shoddy craftsmanship, steep cost overruns or endless delays.

A well-intentioned nonprofit organization working on its first rehab project near the state prison misspent public money on salaries, delaying an already slow-moving renovation. A

developer trying to repair three rowhouses stopped work as his fledgling construction firm filed for bankruptcy. The convicted felon with the long record headed a company that was lent money just two months after it incorporated - then failed to repay a penny.

* With no limit on costs, rehab budgets have ballooned, leaving less in the public till for other projects.

In an analysis of renovation costs for more than 100 gutted houses scattered throughout Baltimore, The Sun found the average budget exceeded $130,000. The sampling included a range of projects and prices, from the $80,000 per house cost of a nonprofit to the $355,000 per house cost of a for-profit company.

Often, rehab budgets are double what the refinished house will sell for. Public sources financed most of these costs.

* Consulting fees, legal bills, developer's fees and other so-called "soft costs" fuel these runaway bills. In a review of budgets for about $25 million worth of projects, these costs ate ++ up nearly $5 million, an average of just under $2 for every $10 spent.

In some cases, these fees exceeded $3 of every $10. For instance, the gutting and rehabilitation of two spacious rowhouses in Mount Vernon included soft costs of $113,000 per house. That's more than most city homeowners pay for a home.

In a Cherry Hill modular home project, these costs also accounted for about 30 percent of the budget. The developer in that project, asked to explain some of the costs, replied: "I'm pleading ignorance."

Two experts who examined projects for The Sun said costs appeared excessive. One questioned the soft costs in the Cherry Hill modular home project, the other the construction costs in a West Baltimore rehab.

"Are there any guidelines or standards in place to control costs in these type of projects?" asked the second, Wayne G. Norris, a professional home inspector retained by The Sun. "Was the best price obtained for the work done? Is there enough oversight of the construction expenditures to hold costs down?"

He is not the first to raise questions about the high prices of Baltimore's low-cost housing.

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