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Read the investigative report Baltimore Sun outlined below…

In Baltimore’s Station East, developers have given new life to once-vacant houses. But not everyone is happy.

By Ian Duncan and Kevin Rector / Published October 24, 2019

It didn’t take long for Shawna Fredericks to be sold on Station East.

The East Baltimore redevelopment, she was told, aimed to put young black professionals like her into renovated rowhouses near Johns Hopkins Hospital without displacing longtime residents. It was leveraging millions in public and private funds to turn vacant buildings into livable homes at reasonable prices. Along the way, it was fixing up the rest of the neighborhood with facade repairs and new parks.

Other Hopkins employees had already bought into the effort with the help of “Vacants to Value” grants from the city, “Live Near Your Work” grants from Hopkins and historic preservation tax credits from the state. If she, too, took the leap, she could stop renting and put down roots.

“We’re all young, we’re all minorities, we’re all professionals — and it was an opportunity to have a slice of the pie, to all become homeowners,” Fredericks said, as several neighbors nodded in agreement. “It was an opportunity to be a part of a transition in a positive way.” 

The optimism was short-lived.

Fredericks is among more than a dozen residents who allege that shoddy construction has left them with major structural problems in their homes, including leaking roofs and flooding basements. Some also fault the development team’s use of a valuable state tax credit to finance the project, which they say shortchanged homebuyers.

“If I knew what I know now back then, I definitely would have chosen ... someplace else,” said Jeremy Brown, a 33-year-old Hopkins nurse who has dealt with major roof leaks since paying $206,400 for his house in 2017.

For its part, the development team — which includes general contractor Edgemont Builders, investor Ted Rouse and the Historic East Baltimore Community Action Coalition — has acknowledged some problems. The developers have made some fixes and promised more. But they also have pushed back against much of the criticism.

Jake Wittenberg, owner of Edgemont Builders, said some problems are to be expected when renovating homes built a generation ago. He stressed that Edgemont has offered to make repairs. But some residents are refusing the work, saying they don’t trust the company.

“Edgemont Builders wants an opportunity to fix any fundamental problem that exists in their home,” Wittenberg said. “We take a lot of pride in our work. We are proud of this project.”

Rouse said he wants to “bend over backwards to do more than would typically be done in the private sector” to resolve the issues. 

Not in dispute is that the redevelopment just east of Hopkins has helped transform the surrounding neighborhood for the better. Janice Jacobs Hudson, 62, who grew up there and is president of the Ashland Avenue Neighborhood Association, has only praise for the developers and the work they’ve done.

“The only way you can understand is to have lived through it,” said Hudson, whose family owns several properties that got exterior repairs through the project. The community, she said, “has come a mighty long way.”

The project has drawn notice far beyond East Baltimore. Backed by various government entities and by major institutions like Hopkins and the Abell Foundation, it is in many ways a showcase: a creative pairing of public and private funding to turn a neighborhood that was nearly 80% vacant into one full of young professionals, grassy parks and homes valued at far more than was imaginable just a few years ago.

Some homes in Station East are selling for upward of $300,000, compared with a median home price of just $74,000 in 2017. The development team pieced together the complex financing package to renovate homes that otherwise might have been razed.

City boosters watched excitedly to see if the financially risky endeavor could be made to work.

“With some of these row homes that have been abandoned for 10, 20, 30 years, the cost to renovate them is more than you can sell them for,” said Tonya Sanders, an associate professor of city and regional planning at Morgan State University.

Mac McComas, a Johns Hopkins researcher looking at urban development issues, agreed. “There are a lot of these empty shells that can be redeveloped. But until you go in and start tearing them apart, you don’t really know what you’re dealing with,” McComas said.

The project began after Baltimore’s spending board agreed in 2013 to sell the development team 28 vacant homes, appraised at $11,500 on average, for just $1,000 each. The deal was initially proposed as a way to support affordable housing, but that aspect of the project was later dropped. The city also partnered with the developers in demolishing about 80 other rowhouses in the neighborhood and moving the few displaced families to renovated homes within the project footprint.

The Station East developers cast a wide net for additional public support, receiving more than $2.5 million in state funding, including $672,000 in lead-reduction grants and $1.2 million in grants and loans from the Department of Housing and Community Development.

And they meticulously tracked their preservation of historic characteristics during the renovations, then worked with homebuyers to apply for tax credits covering 20% of qualified renovation costs up to $50,000.

Edward Sabatino, former executive director of HEBCAC, said it took an extraordinary effort to make the project financially viable. “But I suppose to some degree that’s why organizations like ours exist — to fill a void that the for-profit market could never fill,” he said.

Now, though, many residents who initially bought into the developers’ vision are upset. Elected officials have been bombarded by complaints, and the Maryland Attorney General’s Office has stepped in to try to mediate. The city’s Inspector General has begun investigating the homeowners’ complaints.

At least 18 residents told The Baltimore Sun they have experienced significant problems with their homes since moving in. Several hired outside contractors and inspectors who identified roofing and plumbing repairs that were needed within two years of purchase. Some took videos that show water pouring through ceilings and light fixtures

Fredericks, who paid $231,975 for her home, said the roof began leaking almost immediately after she moved in, and fixes offered by Edgemont under her warranty weren’t successful. She says a contractor told her neither the roof nor the tub was installed properly.

Stephanie Thomas, a 27-year-old nurse case manager who paid $245,350 for a rowhouse next door to Fredericks, said her roof leaked, too, and that water poured down her kitchen light fixture every time she used an upstairs shower. Julian Smith, a 27-year-old nurse who paid $205,710 for his rowhouse on a nearby block, said he could see sunlight coming through cracks in his bedroom wall from the vacant next door. Nicholas Miles, 36, who works for the U.S. Food and Drug Administration and paid $234,625 for a rowhouse next to Smith’s, said flooding in his finished basement ruined it as an Airbnb rental.

Asked to respond to the complaints, Wittenberg said each of the homes was inspected, checked for any problems, and shown to the homeowners before their final purchase so that they could point out any problems before closing. He said the homeowners also had the opportunity to outline any remaining problems toward the end of their one-year warranties.

All the recent problems related to the construction also will be fixed as long as the owners allow the repairs, he said, adding that his company has a reputation for quality work and he stands by its work in Station East. “We don’t represent ourselves as perfect, we just do our very best ... to get everything right,” Wittenberg said.

Rouse said he has replaced HEBCAC as the project manager, and is diligently working to resolve the homeowners’ problems — which he said have been caused by “unique underground rivers” in the area, historic rainfalls in recent years and the fact that some of the homes “suffer from being adjacent to either vacant homes or substandard absentee rental homes.”

He said he is “extending the length of the time period that the contractor would typically come in, in order to address the issues,” but that can only happen if residents make the development team aware of their problems. He said he is currently aware of just nine homeowners with repair problems.

Then there is the fight over the state tax credits.

The developers say the overall cost of Station East will be about $11 million. At the same time, they expect the sales of the homes to bring in only about $8.5 million. Filling the gap is the public funding — including about $700,000 in tax credits they secured for preserving the historic character of the buildings.

When the work was being done, such residential tax credits were available only to homeowners, not developers. So the developers worked with the Maryland Historical Trust and the Station East homebuyers to create a pass- through.

According to the developers and the real estate agent who served as the agent on many of the deals, the arrangement was that the developers would handle the preservation work and help the buyers fill out the paperwork to apply for the credit, and the homebuyers would agree in riders on their deeds to pass along the credit to the developers once they received it from the state.

Some buyers, however, note that they were told the credit would be used to reduce the price they otherwise would have paid for their houses and they question whether that happened. Several are refusing to pass along the credit, and others who have already paid the credit to the developers are asking for their funds back.

It’s unclear how or whether the complaints will be resolved.

“We want to solve it,” Rouse said of the problems and unhappiness. “But it takes some time.”