Sheldon Oak Central, one of Hartford's main nonprofit developers of affordable housing, is at risk of losing half a million dollars in annual subsidies if it can't come up with cash to rehab one of its aging properties.
The organization, which owns about 400 rental units in Hartford, has pulled off several major renovations and rebuilds in recent years, from a block of historic "perfect six" buildings on Vine Street to the townhouses at Stonington Acres and Wyllys Lisbon.
But in that time, a handful of scattered buildings called Northeast Hartford Affordable Housing, or NHAH, have become a challenge for Sheldon Oak to maintain, causing the 47-unit project to fail its most recent Department of Housing and Urban Development inspection with a score of 42 out of 100.
By that measure, the 50-year-old Hartford institution now shares company with the former owners of Clay Arsenal Renaissance Apartments, Windsor on Main, Infill I and Barbour Gardens, four Section 8 projects that were likewise found in violation of their contracts with HUD since last spring.
HUD canceled its subsidy agreements for each of those projects after the owners failed their subsequent inspections. Some of the owners, such as Emmanuel Ku, have been dubbed slumlords by residents, community activists and elected officials who say they allowed their properties to languish in disrepair so they could profit off of taxpayer-funded subsidies.
But Sheldon Oak doesn't plan to face that same fate, which would cost the nonprofit about $500,000 in annual rental subsidies from HUD and trigger the relocation of its tenants from NHAH. The nonprofit intends to pass its next inspection, executive director Emily Wolfe said Friday.
"We're very different players in Hartford than those subsidy-investor landlords, whose business model is to extract value, to take the cash flow. That's their profit," Wolfe said. "We're mission driven. We're nonprofit. Every dollar of revenue goes back into the properties."
Wolfe said HUD will return to inspect NHAH next week. She's "cautiously optimistic" that all immediate problems have been fixed, and that Sheldon Oak will secure cash soon to make more significant upgrades.
She's asked the city for a tax abatement for the buildings, located on Garden, Martin and Nelson streets. In response, the city is considering allocating grant money to the project so Sheldon Oak can pay off its mortgage debt and free up money for repairs.
Wolfe said she's also talking with a lender about restructuring NHAH's loan, and considering financing energy efficiency improvements with state funds.
"Every big problem has a lot of little solutions and that's how we're approaching this," Wolfe said.
Low-income housing tax credits are another option for affordable housing developers, but projects can only receive those federal funds once every 20 years.
Because of that, NHAH won't be eligible to apply for them again until 2022 -- Sheldon Oak used low-income housing tax credits to rehab the project in 2002 when it first bought the buildings.
HUD is urging the city to move forward with its offer of grant money, which regional director Joe Crisaffuli said is "critical" to the project, according to a March 1 letter he sent to Hartford development director Erik Johnson.
If conditions continue to deteriorate, leading to multiple failed inspections, HUD may have to consider canceling its Section 8 contract and relocating tenants, Crisaffuli wrote.
"This would be disruptive to the residents and disastrous for the community and the sponsor Sheldon Oak," he said in the letter.
There are nearly 70 units in the NHAH buildings, but only 47 of them are subsidized, placing an extra strain on the owner as there's less guaranteed income to put toward property-wide improvements.
Those economics "make achieving any meaningful headway extremely difficult," Crisaffuli wrote.
Johnson, the city's development director, says a decision hasn't been made on allocating federal grant money to Sheldon Oak.
According to HUD, the property's decline is relatively recent. NHAH received an inspection score of 81 in March 2016, and Crisafulli noted conditions in October were not as bad as they'd been at Infill I or Barbour Gardens.
"The ownership and management have expended considerable effort to improve conditions at the project," he wrote.
Sheldon Oak has a strong track record in Hartford, having completed more than 700 units in the city and surrounding communities since 1969.
Its property manager, Schochet Companies, also has extensive ties to the area. The New England real estate developer operates 885 units of affordable housing in Hartford, including the Shephard Park and Capitol Towers apartments.
Rick Henken, president of Schochet, said its subpar score at NHAH is an aberration, and that problems get fixed when they surface. Units also get inspected once a year, he said.
"We do our best to stay on top of everything," Henken said.
That's possible because of the ownership, he added.
"They've been in the neighborhoods forever," Henken said of Sheldon Oak. "They're no absentee landlord. They're paying attention and whatever the problems are, they're coming back and fixing them."
"Schochet and Sheldon Oak included, there are lots of us for whom this is a mission," he added. "We're invested in the communities where we operate. We'll never be perfect, I wish we could, but we will always come back until it's right."
Henken explains, while some owners purposefully leave shabby properties to languish for years — cutting costs so they can maximize their profits — others make piecemeal, temporary repairs because it's all they can afford.
NHAH falls into that second camp.
"No matter how you boil it down, there just aren't enough resources, and until we find them, people are reacting to just the really horrible situations," like mold and infestations, he said.
"I really believe in my heart of hearts, you could remove the manager, you could kick out the owner, and if you gave those properties to somebody new for free, there still isn't enough money to fix the boilers and fix the roofs and replace the windows," Henken said.
