'Simply Unsustainable': D.C.’s Affordable Housing Crisis Deepening As Unpaid Rent Mounts

Directly across the Anacostia River from RFK Stadium, a complex of 51 three-story brick buildings has become the latest symbol of D.C.’s worsening housing crisis. 

E&G Group has owned Meadow Green Courts for more than 25 years, and most of its 435 units are reserved as affordable to low-income residents. The Northern Virginia-based, mission-driven housing provider has spent decades operating and preserving affordable housing in D.C., but it is now hanging on by a thread. 

The tenants at the 12-acre complex have racked up more than $6M in unpaid rent, an issue plaguing housing owners across the District. E&G principal Tom Gallagher said he and his partners have paid more than $4M out of their own pockets to pay the bills. But they have now run out of money. 

“My net worth has been wiped out,” he said. “My partners’ net worth has been wiped out. The liquidity has all been put into the properties.”

Lenders have filed notices of default on at least three properties E&G owns in the District. Meadow Green Courts is scheduled for a foreclosure auction March 12. If the foreclosure goes through, the protections that keep rents affordable for residents making 60% of the area median income could be removed.

Rental arrears have continued to mount at apartment complexes in D.C. even months after emergency legislation was passed aimed at forcing more tenants to pay their rent on time. Five of D.C.’s largest housing owners — Enterprise Community Development, WC Smith, CIH Properties, Donohoe Cos. and E&G — provided data to Bisnow showing they are sitting on more than $30M combined in total rent delinquencies. 

Enterprise, a nonprofit housing provider, owns 3,000 units in D.C. and was owed $7.3M in back rent at the end of the year — a number that has quintupled since 2021. 

“Mission-driven housing providers like Enterprise are funding operating deficits at levels that are simply unsustainable,” Enterprise President Janine Lind said in a statement. “As a result, affordable housing communities are in danger of default and foreclosure, which would mean affordability covenants disappear, and low-income residents lose their homes.” 

This rent delinquency issue stems from pandemic-era policies that allowed renters to stay in their units without paying rent as long as they had a pending rental assistance application. Applications for the funding more than doubled from 2023 to 2024, Bisnow previously reported.

Tenants were allowed to avoid eviction despite piling up tens of thousands in past-due rent. As a result, landlords say their incomes have dropped below the level needed to cover mortgage, insurance and tax payments — putting them at risk of losing assets to foreclosure. 

The District passed a law Oct. 1 to address the eviction case delays, and it has diverted $80M that was previously planned to fund new housing developments to instead stabilize distressed properties. But that money still hasn't been sent to property owners, and the backlog of eviction cases in D.C. courts hasn't shrunk.

D.C.’s actions came after the abrupt shutdown of 25-year-old affordable housing firm Neighborhood Development Co. and after a Bisnow investigation first detailed the crisis facing housing providers across the city. 

At the time, advocates and lawmakers said the new law, dubbed the Emergency Rental Assistance Reform Emergency Amendment Act of 2024, was just the first step and that more comprehensive legislation would be required to stabilize D.C.’s housing system. But the council hasn’t passed any additional measures, and landlords say the action taken thus far hasn’t solved the problem. 

The law reformed the Emergency Rental Assistance Program, which has existed since 2006 but was amended in 2022. The program had allowed tenants to receive automatic stays in eviction cases simply by showing they had applied for assistance — even if they weren’t eligible, owed far more rent than the aid would cover or there were no funds available. The emergency legislation gave more discretion to judges. 

Many cases that were previously stayed due to pending ERAP applications have been scheduled for a hearing to determine whether they should be granted another stay or proceed under the new standard, a spokesperson for the D.C. Superior Court told Bisnow.

Those who have their stays lifted are scheduled for another hearing to determine the outcome — including potential evictions — but the spokesperson, Doug Buchanan, said the courts “have a finite number of hearing slots available.”

“Because of the backlog, it should not be at all surprising that the situation would be the same (or worse) before it gets better,” Buchanan wrote in an email. 

A report by the D.C. Apartment and Office Building Association last summer found eviction cases were taking between 12 and 16 months to reach resolution, up from three to five months before the pandemic. 

“Housing providers are unable to get timely justice in the D.C. landlord-tenant court, and there seems to be little change in that,” CIH Properties CEO Michael Huke said. “The court appears to be comfortable with those timelines in spite of the accelerating collapse of the affordable industry.”

While landlords wait for the court process to accelerate, they also haven't yet received any of the $80M in funds from the Department of Housing and Community Development after it released a request for proposals in August. An administration official said the agency has finalized its selections and plans to make them public this month. 

“With this RFP, the goal is to ensure existing affordable housing remains available in the District and that the city remains a place where affordable housing developers, lenders and investors want to participate,” a DHCD spokesperson said in an email. 

The D.C. Housing Finance Agency, a separate, quasi-government entity, launched a $10M Portfolio Stabilization Grant program in December and has since disbursed $6.2M to 30 projects, a spokesperson said. 

Several housing providers tell Bisnow they have applied for DHCD money and expect these programs will help keep thousands of affordable units from going into foreclosure. 

The rescue funds are targeted toward income-restricted housing with subsidies, but tens of thousands of naturally occurring affordable housing units aren’t eligible. These properties face the same issues with high rent delinquencies and a lack of cash flow to pay their bills, owners and advocates say. 

“The situation is dire,” AOBA Senior Vice President of Government Affairs Brian Gordon said. “We’re genuinely at risk of losing a whole chunk of the naturally occurring affordable housing portfolio. We can’t afford to let that happen.”

WC Smith, a 50-year-old D.C.-based company that owns a large portfolio of naturally occurring affordable housing in the city’s lower-income areas, wrote off $7.2M in bad debt and has a $9.1M balance in accounts receivable, with 80% of that coming from past-due rent at affordable properties, President John Ritz told Bisnow in an email.

“Collections have not improved,” Ritz said.

CIH Properties, a 50-year-old company that owns a 2,000-unit portfolio of naturally occurring affordable housing in D.C.’s Wards 7 and 8, ended last year with $4M in delinquencies outstanding from existing tenants, on top of the $5.5M in past-due rent it had written off from prior tenants, Huke told Bisnow. Those figures at the end of 2019 stood at $148K and $550K. 

“We’re on the ropes and getting pounded in the ring,” Huke said. “Every day our delinquencies get worse as more people figure out they can stay in place for a year and a half without paying rent.”

Donohoe Cos., a 140-year-old local firm, manages around 9,000 Class-A and B apartments that CEO Chris Bruch said are pricier than naturally occurring affordable housing. But the firm is seeing the same issues with unpaid rent: Its total delinquencies have reached $5M, Bruch said, 10 times higher than prepandemic levels. 

Donohoe, Enterprise, WC Smith and CIH all said they have avoided defaulting on loans for any properties.

But a wave of defaults may be coming. 

A survey conducted by the D.C. Small Multifamily Owners Association and shared with Bisnow shows that 12% of its members reported being behind on mortgage payments. Around 23% of the survey's respondents said they are “not confident” they can pay off their mortgages this year, with another 16% saying they are “somewhat confident.”

The survey’s respondents, who own smaller buildings and portfolios, said their tenants had unpaid rent last year totaling $14.8M.

“Our rental industry is in a state of crisis,” SMOA CEO Dean Hunter said. 

Dozens of owners — and some of their lenders — have been talking with brokers about bringing distressed properties to market, said Nigel Crayton, a senior director at Greysteel who represents sellers of apartments in D.C. He expects to see more distressed sales and foreclosures within the next two to three months. 

“We’re still at the precipice of it,” he said. 

Many of EagleBank’s multifamily borrowers have high rent delinquencies, but none have defaulted, said Chief Real Estate Lending Officer Ryan Riel, who manages hundreds of millions of dollars in loans on D.C. apartments for the bank. He said some owners are putting in their own money to cover the bills. 

“We have had warning signs from some borrowers saying, ‘I don’t have unlimited resources here,’” Riel said. 

E&G Group has already reached its limit. 

The company, which owns 1,701 apartments in D.C., was founded in 1982 by Gallagher and Jim Edmondson, who previously worked together in consulting. They added Melissa Steele and Josh Dworken to the ownership group in 2017, and over the last few years the four have invested at least $5M of their personal savings to pay their properties’ bills. 

They hoped that funding would help fill gaps until the rent delinquency situation improved, but that doesn’t appear to have worked.

Gallagher said the company has received notices of default from lenders on the 300-unit Eagle’s Crossing apartment complex in Ward 8 and on a scattered portfolio of roughly 120 units. He said the defaults are all due to unsustainably high rent delinquencies at the properties, combined with a sluggish eviction process. And other struggling E&G properties could follow.

“You can be a slumlord in this environment, but you cannot be an honorable housing provider in this environment,” Gallagher said.

E&G has applied for funds from DHCD and is awaiting a response to see if the money can help save its portfolio. 

“We’re losing assets,” he added. “They’re being taken away from us by lenders.”

If properties are sold at foreclosure auctions, he expects they will be taken over by “a different type of housing provider” that doesn’t have a mission to maintain properties while preserving affordability.

AOBA's Gordon said D.C. benefits from having longtime, local housing providers like E&G, CIH and WC Smith that maintain the city’s naturally occurring affordable housing stock without requiring subsidies. But that business model is becoming unsustainable. 

“Particularly with the delinquency challenges we’ve seen at the lower levels of rent, it’s not economical to continue operating those communities as naturally occurring affordable housing,” Gordon said. 

“So there is absolutely the possibility that new owners will come in and reinvest and reposition those properties to serve higher levels of area median income. It doesn’t necessarily represent a loss of overall housing stock, but it does represent a loss of affordable housing stock.”

The brokers marketing Meadow Green Courts for auction have received interest from local and national investors who have a range of business plans, said Stephen Karbelk, a partner at Century 21 Commercial New Millennium.

He said it could sell to a mission-oriented firm that wants to preserve it as affordable housing, or it could go to a developer that wants to reposition some or all of the 12-acre property to achieve higher rents. MainStreet Bank, the lender foreclosing on the loan, declined to comment. 

“This sale is going to be a barometer for the health and future of D.C. affordable housing,” Karbelk said.

CORRECTION, FEB. 11, 4:30 P.M. ET: A previous version of this story misstated the number of years Donohoe Cos. has been in business. This story has been updated.