Less than 10 years ago, the 134-unit Ellen Wilson Dwellings public housing development in southeast Washington, D.C., stood abandoned and resembled a war zone. Located on a 5-acre site just blocks from the U.S. Capitol, the garden-style apartment complex opened in 1941 as a family development. The design created more open and green space—a trend at the time—but the lack of internal streets set the development apart from the rest of the neighborhood, contributing to a sense of isolation for its residents.

By 1960 poor maintenance and lax management had turned the development into a slum, according to newspaper articles at the time. Five of the low-rise buildings on the site were demolished to make room for a freeway, adding to the community’s sense of isolation. In 1988 the District of Columbia Housing Authority (DCHA), which owned and managed the development, moved all the residents out. For the next 8 years, prostitutes, drug dealers, and squatters moved into the abandoned property. Neighbors of the site complained of street robberies, car theft, and panhandling. In 1996 DCHA demolished the project, clearing the way for development of the Townhomes on Capitol Hill, recipient of a recent Award of Excellence from the Urban Land Institute.

Recipient of HOPE VI funding. DCHA received more than $25 million in HOPE VI implementation grants in 1993 and 1995. HOPE VI, authorized by Congress in 1993, is a HUD program to transform deteriorating public housing. The program was developed as a result of recommendations by the National Commission on Severely Distressed Public Housing, which was charged with proposing a national action plan to eradicate extremely distressed public housing. The commission recognized a prevalent need for revitalization in three areas—physical improvements, management improvements, and social/ community services to address resident needs.

HOPE VI encourages communities to not only change the physical shape of public housing but also to establish positive incentives for resident self-sufficiency. It aims to reduce concentrations of poverty by placing public housing in low-poverty neighborhoods and promoting mixed-income communities. HOPE VI encourages public housing agencies (PHAs) to form partnerships with other agencies, local governments, nonprofit organizations, and private businesses to leverage support and resources.

For its initial grants, HOPE VI targeted the 40 largest U.S. cities and PHAs that were "management troubled," such as DCHA. At that time, the housing authority had scored 22.38 out of a possible 100 on its Public Housing Management Assessment Program score, which was used by HUD to monitor PHA performance. A score below 60 was considered failing. DCHA had a 19-percent vacancy rate and took an average of 223 days to turn a unit around for reoccupancy.

Making plans for the future. DCHA worked with Capitol Hill residents, neighborhood groups, and former residents of Ellen Wilson and residents of nearby public housing developments to prepare the HOPE VI application that proposed establishing a small-scale rowhouse appearance consistent with the historic pattern of surrounding residential development. The proposed development included 134 new townhome units and a community center, as well as new streets and other public infrastructure. Some neighbors of the development were skeptical whether enough middle-income families would be willing to move in and pay rent of up to $940 per month for a 3-bedroom unit. Others believed the development would be a success and would attract enough middle-income families to make it self-sustaining.

Creating a mixed-income community. The Townhomes on Capitol Hill has a cross-subsidization program in which higher income residents subsidize lower income residents, eliminating the need for annual operating subsidy from HUD and creating a self-sustaining community. A private real estate management firm manages the development. To create a mixed-income community, resident incomes are divided into bands, and the number of residents in each band is limited so that 34 of the townhomes are reserved for households with incomes below 25 percent of area median income (AMI), 33 for households with incomes between 25 and 50 percent of AMI, and 67 for households with incomes between 50 and 115 percent of AMI. The development is obligated to maintain these income bands for at least 40 years.

Every unit, regardless of the income band for which it is reserved, is built of the same material. Residents with different incomes are evenly distributed throughout the site. The Townhomes on Capitol Hill integrates the community into the neighborhood architecturally and through connecting streets. Because it is a historic district, the sidewalks are brick with granite curbs. The townhomes are single- and two-family buildings and vary in height from two to four stories. Of the 153 new units, 52 are one-bedroom, 95 are two-bedroom, and 6 are three-bedroom units. A percentage of units are accessible to people with disabilities. Each unit has carpeted floors, complete kitchens, and security alarms.

The community is composed of both cooperative and fee simple homeownership opportunities. Thirteen buildings, containing a total of 19 units, were sold at prevailing market rates and are not included in the cooperative structure. The cooperative units are the 134 units that replaced the public housing units formerly on the site. Cooperative owners in the replacement units represent a broad mix of income levels. Residents pay a fixed monthly housing payment to the cooperative, equal to 30 percent of income at the center of the income range in which they fall. To buy into the cooperative, residents were required to make a downpayment equal to 5 percent of annual income at the center of their band. Because the capital costs of the replacement units were paid upfront, the development was debt free.

Cooperative owners have all traditional homeownership rights, including the opportunity to earn equity. A limited-equity formula has been designed to allow for equity accrual and to ensure that families from a broad range of incomes can become members of the community in future generations. The cooperative, along with a private management firm, has day-to-day oversight of the development but does not have the authority to alter the fundamental structure of the community. Residents of the development buy shares in the cooperative and can sell them if they move or leave them to family members in a will. Project developers felt this structure gave residents the opportunity to build a limited amount of equity based on length of tenure and any improvements they make, giving them some of the benefits of homeownership without the risk.

Attracting residents. Neighbors and others who were skeptical about this venture were surprised that the highest income band was the first to sell out. Former residents of Ellen Wilson and current residents of two nearby public housing developments had priority over other applicants for the Townhomes on Capitol Hill. However, these families had to meet application requirements. They could not have a criminal record for violent crime or crimes against children, and they had to meet income requirements and have a good record of rental payments, employment references, and proof of a line of credit.

Today the Townhomes on Capitol Hill is a successful mixed-income community. No longer isolated, the residents are building equity in their homes.

For additional information, see: Urban Infill Housing: Myth and Fact, Urban Land Institute, 2001.