City urged to retool rehabbing program Housing: Saving deteriorated houses often costs more than the structures are worth. Baltimore officials admit a need for tighter controls.

December 15, 1997|By John B. O'Donnell And Ronnie Greene | John B. O'Donnell And Ronnie Greene,SUN STAFF Contributing to these articles: Michael J. Himowitz, electronic news editor; Genice Owens, editorial assistant for electronic news; and news researchers Jean L. Packard and Paul McCardell.

The City Council president eyed the proposals -- $1 million to renovate six houses in Sandtown Winchester, another $1.6 million for nine nearby on Gilmor Street -- and blinked.

From his seat at the city Board of Estimates, Lawrence A. Bell III wondered if it all made financial sense.

"At what point," he asked early last year, "do we say we could construct twice as many houses with the same amount of money as we are spending to renovate them?"

But as on other days at City Hall, as with other questions about the high price of Baltimore's low-cost housing, the answers came in words, not action.

The projects Bell questioned are part of a city rebuilding campaign that aims to remove blight from depressed neighborhoods while providing homes for the poor and working middle class.

But a seven-month Sun investigation found that the $300 million effort has frequently faltered in a system that mixes public money, loose guidelines and inexperienced developers.

The results include unfinished projects, construction delays and budget overruns.

So, how can the city improve its program to rebuild neighborhoods? Suggestions come from recipients of public funds to bureaucrats to urban experts -- and, belatedly, from the city's Department of Housing and Community Development.

Simply, they suggest, it's time for Baltimore to rebuild its rebuilding campaign.

Some ideas:

Consider setting limits on the amount allotted to repair houses, adjusted to size and scope. For years, the city set loose guidelines but consistently exceeded them. By enforcing a strict cap, as the state does in one rental housing program that limits costs to $65,000 per unit, Baltimore would begin to rein in runaway budgets eating away its housing dollars.

Last week, after Sun inquiries about the city's high rehab bills, Housing Commissioner Daniel P. Henson III took a step in this direction, issuing guidelines that limit the amount of money his agency will provide for construction projects.

Require developers to bring more equity to the table. Sometimes, public sources provide more than $9 of every $10 spent, a ratio experts say may signal that the developer is financially unstable and invites ballooning budgets or collapsing projects. On Brentwood Avenue, public sources funded 99 percent of the budget. On Arlington Avenue and Mosher Street, 94 percent. Each time, developers encountered problems.

"It's real common sense: When you're spending public dollars, the more they can leverage private dollars, the better off you typically are," said Sandra J. Newman, a Johns Hopkins University housing expert. The public portion, she said, should be "the icing on the cake -- with most of the investment coming from the private sector."

Hire fewer first-time developers. Even when they finish a job, success often comes after miscues that require costly help from taxpayers. A developer working on his first new construction job, for instance, ran well over budget while building modular homes in Cherry Hill.

Tighten requirements on loan recipients so companies such as the Brown Group -- headed by a convicted felon with a 30-year arrest record -- do not receive city money. The company got nearly $80,000 but repaid none of it and failed to finish the job repairing two city rowhouses.

Just last week, Commissioner Henson made clear it is time for the city to curtail the high costs of its rebuilding campaign, opting for demolition when "rehab costs far exceed value." He made his comments while announcing several reforms in the way his agency issues public housing money.

"Let me further stress this point," he told a public forum. "We can no longer put what may result in extraordinary funding into one-, two-, three-, four- and five-unit rehab projects without having a comprehensive plan for the entire block."

The public record shows the city has consistently supported such small-volume, high-dollar budgets.

Three months ago, Henson's agency won approval to pay a nonprofit organization $866,411 to restore seven vacant rowhouses scattered among other boarded derelicts on Guilford Avenue, East 23rd Street and Homewood Avenue. The average per-house cost came to $123,773 for homes that would be sold with first mortgages of less than 50,000.

On North Broadway, the city is pressing ahead with plans to rehab two rowhouses into four apartments at a price of at least $186,000 per house.

And on North Gilmor Street in West Baltimore, the city helped finance a rehab of 10 vacant houses and construction of two more on a budget that grew to $1.8 million.

These high costs have eaten away at precious housing dollars, tripping up a vital city program.

"Many of the people I talked to made it clear that dealing with all of the problems will take much more money than is available out there," said Hopkins' Newman, who is studying Baltimore's housing market.

"Which makes it all the more important to have a careful plan and a strategic plan in how these dollars are spent."

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