Warren Sherman Flats in default on 50 tax-credit homes

Deacon Zettie Williams, right, tries to encourage a Mayville Place resident to join a neighborhood group Thursday.

A foreclosure of more than 50 tax credit homes in Toledo has some longtime residents panicked that they could lose their housing.

“What's going to happen? Are we going to get put out of our homes?” asked Zettie Williams, who has lived in his house on Kent Street since 1997. “Does everything go out the window? All the money I've been putting into the home?”

Pennsylvania-based Susquehanna Home Finance LLC filed a foreclosure action against community group and nonprofit developer Warren Sherman Area Council and Warren Sherman Flats Limited Partnership. The documents filed in Lucas County Common Pleas Court in August state Warren Sherman Flats is in default for a payment of a note and owes Susquehanna more than $729,000, dating back to a 2006 promissory note, in addition to more than $40,000 in interest.

The court documents further state Susquehanna has the right “to receive and collect the rents” and asks for the court to appoint a receiver. An attorney for Susquehanna did not return phone calls.

The homes were built as part of a federal tax-credit program in which local developers can sell tax credits to investors, such as banks, to raise funds for acquisition, rehabilitation, and construction. A Blade investigation this year found vacant tax-credit properties blighting several city neighborhoods.

Of the 21 projects built in Toledo since 1997, six have vacancy rates of 25 percent or more. IRS regulations require the Ohio Housing Finance Agency to inspect the homes a minimum of once every three years, but The Blade found some had not been inspected in six years.

One Warren Sherman tenant who asked that her full name not be used said she and her neighbors have had no official notice of the court proceedings from their landlord, or anyone else.

“It's just been a lot of talk,” she said, standing in front of her home, decorated with hanging flower baskets and plastic pumpkins on the porch. She has lived in the home 12 years and is current in her rent payments, she said.

In the 1990s, Warren Sherman Area Council received $5.3 million in tax credits and $778,000 in state and local aid to build 55 mostly new houses in the near-downtown neighborhood close to Bancroft and Cherry streets. Today, many of the houses are boarded up. Some have been completely gutted by vandals, who have ripped out everything from electrical wiring to kitchen sinks.

The homes that are occupied, such as Mr. Williams', are homes for low-income renters. Tenants such as Mr. Williams are supposed to be able to live as renters in the units for 15 years and then have the option to purchase the home. Mr. Williams said he and other tenants are still paying their rent to Warren Sherman.

Margaret Brown, Warren Sherman Area Council's executive director, did not return calls seeking comment. In a previous interview with The Blade several months ago, Ms. Brown had said the poor economy was to blame for nearly 40 percent of the houses developed by the organization being vacant.

“These are hard times,” she said. “People are losing their jobs, having their wages cut, and that impacts how they pay their bills,” she had said.

In a letter to the editor of The Blade several months ago, Ms. Brown said Warren Sherman Area Council has contacted the city of Toledo and the state for help, both financial and technical. Furthermore, “Warren Sherman Flats has been the victim of crime, just like other housing owners, including arson fires, vandalism, and illegal dumping. We have struggled to use scarce resources to maintain current units and repair others.”

Toledo officials have said they are seeking to take control of some of the developments plagued with the most vacancies from the community groups that developed them and turn them over to more capable property managers.

In regards to the foreclosures, “Our concern is making sure [the tenants] remain housed and preventing further vacancy in that area of the city,” said Jen Sorgenfrei, spokesman for Mayor Mike Bell. “The last thing we want is people being evicted who are paying their rent only for the houses to sit vacant.”

Arlyne Alston, a spokesman for the Ohio Housing Finance Agency, which administers the tax credit program, declined to comment.

Contact Kate Giammarise at: kgiammarise@theblade.com or 419-724-6091, or on Twitter @KateGiammarise.