HUD, D.C. Entangled in Eminent Domain Case

The District of Columbia filed a legal motion last week to have a claim made by the U.S. Department of Housing and Urban Development dismissed, the Washington Business Journal reported. The dispute is over the city’s condemnation of a site in the Capitol Heights neighborhood.

It’s been more than two years since the city moved to acquire the site at 5800-5804 East Capitol Street NE via eminent domain, according to the Business Journal. The site was once destined to become a mixed-use development called the Capitol Gateway Marketplace, but the plans were foiled when Walmart pulled out of the project.

D.C. moved to condemn the site in May 2022 to eliminate blight and reduce food insecurity, as the arrival of a grocer was considered critical for the lot; Giant Food is tentatively slated to take Walmart’s place.

Last month, however, HUD successfully had the condemnation suit transferred from a D.C. court to a federal court, arguing it was necessary because the federal government had a financial stake in the project. HUD issued a $31 million federal loan to the project developers, earmarked for affordable housing.

The site’s developer is a joint venture between the landowning D.C. Housing Authority and an affiliate of A&R Development, which has fought against the District’s $14.5 million offer for the property. A&R signed a 99-year ground lease for the site.

The web of disputes is upending the possibilities hidden within the 11-acre site in D.C.’s Ward 7. The original project was expected to include more than 300 affordable apartments and 20,000 square feet of retail space, but the continued delays and litigation threatens to further imperil the site.

HUD hasn’t responded to the D.C. Attorney General’s motion yet.

— Holden Walter-Warner