February 28, 1998
FOR A NUMBER of years, the Baltimore Housing Partnership was held up as a model of what a nonprofit developer can achieve in cooperation with governments and the private sector. It kept expanding and taking gambles. In the end, it overextended itself so badly it is now going out of business.
The partnership's collapse is a wake-up call to the nonprofit-development sector -- just like the demise of the City Life Museums last year was a red flag to the museum community. Being classified as nonprofit for tax purposes does not mean that an organization can live in defiance of fundamental economic laws.
The development business by definition involves unusually high risks. Nonprofit developers are not immune. Several of the city's leading nonprofit developers have gone through hard times. They have been forced to downsize and scrap projects that did not make money.
It is not clear why the Baltimore Housing Partnership did not act early enough to prevent disaster. Perhaps its board and staff failed to recognize the political changes since its founding in October 1984 as an extension of the Schaefer administration.
The partnership's executive director, Patricia A. Massey, came from a top job in the housing department. Her mission was to cut red tape, increase homeownership of existing stock, particularly in Southwest Baltimore, and show what could be done without federal aid.
As the years passed -- and Mr. Schaefer became a two-term governor -- the partnership's ambitions grew. Instead of concentrating on rehabilitation of modest rowhouses, it embarked on bigger and more visible complexes.
This was possible because the state seemed to have ample subsidies for new rental housing. Meanwhile, the partnership made lots of bad bets. It renovated houses that it could not sell or manage, leading to the abandonment of some 50 properties.
As the partnership's financial difficulties mounted, the state, under Gov. Parris N. Glendening, pulled the plug.
Baltimore needs to increase homeownership by rehabilitating older neighborhoods. But surviving nonprofit organizations must avoid the Baltimore Housing Partnership's mistakes.
Pub Date: 2/28/98
