For 16 years, Carol Heatherly has called a 1,200-square-foot, two-story house with faded white siding on East Fifth Street her home.

She grew up in the same neighborhood, in a brick house a few doors down. She moved away, then returned in 2000, when she and her husband bought the house at 109 E. Fifth St. for $78,500, according to online state assessment records.

Heatherly, 71, is retired. She collects Social Security benefits. Her husband, a disabled Vietnam veteran, also receives compensation through the U.S. Department of Veterans Affairs.

“We don’t have too much, but we get by,” she said in an interview this month.

Twenty, ten, even five years ago, the entire street was lined with homes of similar size, occupied by people of similar means. In contrast with the larger, more ornate houses on Church, Second and Third streets, those on Fourth and Fifth streets were “the working people’s homes,” as Heatherly described it.

But times are changing, and so is her neighborhood — partly the result of a new residential development between East Fourth and Fifth streets. The four-floor town houses, with new brick facades, tower over more modest early-20th century homes around them.

After a lengthy construction period — including significant delays when the former developer abandoned the project after the national housing market collapse — the 49-unit development known as Townes at Maxwell Square recently was completed.

In 2013, Comstock Homes, a Virginia-based developer, purchased the property from the previous developer, Churchill Group. Settlements on sales for the final homes were reached last month, according to Matthew Sitler, a sales manager for Comstock Homes.

Most houses sold for between $379,000 and $490,000, Sitler said in an interview in August.

Billed by Comstock as “modern luxury meets historic charm,” the three- and four-bedroom houses are designed to appeal to empty nesters and families “seeking the walkable, urban environment of downtown Frederick,” according to information on the company website.

Many in the community, including some who live in the surrounding neighborhood, praise the project for its multiple benefits — replacing a long vacant and abandoned lot with new development, meeting the increased demand for downtown housing, boosting surrounding property values.

But with those benefits lies the potential for unintended consequences — that new development could push longtime residents like Heatherly out of a traditionally more affordable downtown neighborhood.

A catalyst for revival

The Maxwell Square development offered everything Donna Reid and her husband wanted when they decided to downsize from their last home in Gaithersburg. The empty nesters in 2014 bought their house at 36 Maxwell Square for $426,055, according to online assessment records.

In nearly two years since they moved, “I’ve loved every minute of it,” Reid said.

The enclosed development design provides her and her husband peace of mind to leave their home unoccupied when traveling. The community, with young families, newlyweds and retired residents such as Reid, offers a various opportunities to connect, from book clubs to exercise groups.

Reid walks with her next-door neighbor every morning, she said.

From a planning perspective, projects such as Maxwell increase downtown density, which means more customers patronizing downtown businesses, more eyes monitoring the community and more development, Joe Adkins, the city’s deputy director of planning, wrote in an email this month.

“It’s really going to revitalize the whole area, bring up property values and bring more people into Frederick,” Sitler predicted.

At least two other developers have started projects in that same neighborhood.

Ron Hemby, owner of Hemby Custom Homes, said his interest in the area was the direct result of the Maxwell Square development, as well as the North Pointe homes, which are closer to Seventh Street.

“I saw things there were starting to come up,” he said in a phone interview earlier this month.

For a builder, it was a great opportunity. He bought each of the three properties on East Fifth Street in 2014 for a little less than $200,000, according to online assessment records. He built two-story, 2,000-square foot homes on each of the lots. The homes sold in 2015 for $410,000 to $440,000.

He plans to build and sell a similar-style home on a fourth lot on the same street. Hemby recently purchased the vacant site at 107 E. Fifth St. from Habitat of Humanity for Frederick County after the historic but dilapidated log cabin on the land was demolished.

McWhorter Construction, of Clarksburg, Maryland, has also started in on plans to build a duplex on Maxwell Avenue between Fourth and Fifth streets. The city Historic Preservation Commission in August gave the second of two approvals needed for a new building in the Frederick Town Historic District.

Data: Increasing property values, median income

Wayne Six, who owns Six & Associates Inc., a real estate appraisal company, affirmed Sitler’s prediction for rising property values. In his experience as a real estate appraiser, he’s seen the same situation unfold in many other areas of Frederick, and other cities such as Washington, D.C., and Baltimore, he said in an interview last month.

It often spurs owners of existing homes to rehabilitate and renovate their homes, too, he said.

Sales prices, an indicator of home values commonly used among real estate professionals, have already increased in the neighborhood in recent years, according to the Metropolitan Regional Information Systems, an online real estate information service for real estate professionals in D.C., Virginia and Maryland. Six provided The Frederick News-Post data from the MRIS database.

The average sale price of homes in the neighborhood between Fourth and Seventh and between Market and East streets rose from $183,488 in 2010 to $314,928 in 2014. Not all of the 71.6 percent increase can be attributed to Maxwell Square development. Other factors, such as overall economic growth and an increased demand for downtown housing, likely contributed, Six said.

But compared with the much smaller increase in average sale prices for the city of Frederick as a whole during that same period of time — from $215,202 in 2010 to $243,161 in 2014 — the change in the Maxwell neighborhood becomes more significant.

“It’s definitely safe to say those Maxwell homes had a pretty positive impact on [property values in] the neighborhood,” Six said.

Median income also increased more in that time frame in the Maxwell neighborhood than in the city of Frederick. Median income in census tract 7501, which encompasses the neighborhood from Fourth to Seventh and from Bentz to East Streets, increased 35 percent. Median income rose from $45,529 in 2010 to $61,488 in 2014, to according to data published by the U.S. Census Bureau.

Within the same time, median income in the city of Frederick as a whole dropped slightly. Median income decreased by a little less than 1 percent, from $66,570 in 2010 to $65,967 in 2014, according to Census Bureau data.

The divide

“Unbelievable” was how Erma Lee described the difference in her neighborhood compared to five years ago.

Lee, 91, moved to her house at 119 E. Fifth St. in 1970. She sees the change as positive.

“It was like shacks before,” she said in an interview this month. “I see it as a great improvement.”

Asked how she felt about the $400,000-plus price tags on the new homes, compared with her own house, she gasped in amazement.

“They cost that much?” she asked. “I had no idea.”

Her home was valued at $141,300 as of July 1, according to online assessment records.

Lee is supported through Social Security benefits and her children and grandchildren. She said she couldn’t imagine paying that much for a house, or anything.

In that disparity lies the problem, according to Heatherly.

On a late Friday afternoon in September, she stood on the front porch, gazing west toward the looming shadow of the new town houses.

“They don’t really fit in with us,” she said.

She hasn’t seen anyone forced to leave, but even the idea that rising income levels and increased property taxes could force her and others out of their longtime homes was wrong, she said.

Marilyn Ketterman was already thinking about moving. Ketterman, who lives next to Heatherly at 111 E. Fifth St., was worried about how rising property taxes might affect her ability to keep the home where she’s lived since 1990.

“I’m definitely considering selling,” she said. “Even if it doesn’t get to that point, I don’t want to wait around and find out.”

Cities across the country are facing similar discussions over the process through which redevelopment of deteriorating urban neighborhoods pushes out longterm, less affluent residents, a phenomenon known as gentrification. It’s a hotly debated topic, controversial in its very definition, as well as its implications for segregating neighborhoods.

Two sides of the coin

The negative implications for gentrification depend largely on the policies and market conditions of the neighborhood in question, according to Mary Bogle, a senior research associate with the Urban Institute’s Metropolitan Housing and Community Policy Center. The Urban Institute is a social and economic policy research center based in D.C.

In a neighborhood with room for new development, gentrification can be a good thing, Bogle said in a phone interview this month.

“It causes income-mixing,” she said. “It increases density, allows room for low- and high-income people to coexist ... avoids what I call the ‘Starbucks on every corner’ phenomenon.”

Government policies like housing vouchers, tax abatements for existing homeowners and other incentives to include affordable housing in development projects help ensure there’s room for everyone, Bogle said.

The city of Frederick in 2008 adopted an ordinance that requires developers building 25 or more homes in the city to set aside 12.5 percent of those dwellings as moderately priced homes. Alternatively, developers can pay a fee instead of building the moderately priced homes, equivalent to $16,100 for each affordable home that’s required but not included in the project.

Plans for Maxwell Square, however, were approved by the city Planning Commission in 2005, prior to the ordinance, according to Adkins. The developer did not have to meet the ordinance requirements.

Bogle could not speak to the Maxwell Square neighborhood specifically. Generally, when there aren’t government policies tied to new development, lower-income residents may be more likely to experience the consequences of gentrification.

Six said he expected continuing increases in property value and changing demographics in the neighborhood, indeed, would force some residents to move out. He didn’t see it as a bad thing, though.

“We see it happen all the time,” he said. “You just got to find other neighborhoods to go to. There are other places they can go.”

But just as income-diverse neighborhoods benefit everyone, stratified neighborhoods that result when low-income residents are pushed out harm everyone, Bogle said.

In other words, what could be a win-win situation becomes one in which all parties lose.

Heatherly isn’t interested in playing the game, win or lose.

“I’m going to leave sooner or later,” she said.

Follow Nancy Lavin on Twitter: @NancyKLavin.

Nancy Lavin covers social services, demographics and religion for The Frederick News-Post.

(30) comments

gary4books

l would like to see pictures of the expensive homes. Floor plans, too. I may drive that way to see what is up. I see no reason to move out. I have neighbors with expensive homes and I am not leaving.

crikeyalmighty

Is 20,000 sq ft a typo?

public-redux

Gotta be. Prolly 2,000.

francesca_easa

A few comments.

1) Folks should never have to pay a higher property tax than the value of the home when they bought it.
2) What job growth and rising median incomes in Frederick? I make half of the median and in the 14 years I have lived in Frederick, I have only found occasional (low paying) part time jobs in Frederick.
3) The developer's contribution of $16,100 in lieu of building affordable units would not even buy a new home or make a dent in renovations for an existing homeowner. The fee should be more like $61,000 for each non-AFDU home. Either the fee goes to pay for a needy person to make a huge downpayment on a new home. Or set aside to a deserving home for renovations and repairs to their existing home (and with no tax increase for improvements).
4) I prefer new development like this that revitalizes decrepit neighborhoods instead of tearing up more farmland.

PLEASE DON'T TURN FREDERICK INTO ANOTHER MONTGOMERY COUNTY.

public-redux

Regarding your first point: why?

francesca_easa

Because they purchased a home for far less money and should pay according to purchase price. If they pay for upgrades or additions, then that can increase the property value on rhe initial purchase price. Very few people get a huge boost in income during the course of their careers. And most seniors live on limited incomes and cannot compete with higher priced housing and property taxes. When the time comes that they sell, that is when the higher sales tax can be collected.

gary4books

[thumbup][thumbup][thumbup][thumbup]

DickD

It was never my desire to live in Frederick, but it does seem strange that the City is now trying to drive out many long term citizens. And this is so the developers can make more money. Yes, the area looks nicer, but at what price to the current citizens? It is expensive to move and the cost of a new home can be expensive too. In most cases their new home will not be as good as their old one, more expensive and potentially greater upkeep.

TinaS

Nobody has to leave. The property tax increases are limited by law. If they do decide to sell, it's because they can make money on their home and yes, move. It won't be the taxes that will force them to move. It will be the expensive up-keep of the home and the new possibility of equity that can allow them to afford something better suited to their needs. Most people in the neighborhood thought the increase in property value was a good thing. This article is biased against the developers. This growth might help alleviate the vacant business problem downtown. This growth filled in gaps, leaving mixed housing throughout the area. This growth increases the tax base for the area. These are law-abiding owner occupied homes, who will help to improve the area if only to protect their own investment. Maybe we'll even get a grocery store some day.

public-redux

[thumbup]

Yeah, I've never understood the argument that becoming wealthier ought to be regarded as a problem for people of limited means. Quite the opposite, I should think.

DickD

Only if you can get substantially equal place to live at prices that are not higher. What makes you think you can, prices for most homes are lower in Frederick than surrounding communities, with the exception of some very nice parts of Frederick.

public-redux

You're assuming one will move. There is no need to move.

public-redux

Dick, it sounds like you are saying the city should have forced the owner of the vacant lot to use the land far less profitably. Whenever you go to sell your house, do you want your local government to limit the sales price? After all, if you sell it for too much, it could drive up the taxes on your neighbors.

DickD

It is all about the money, we both know that. But if you bought a place for $71,000, 15 - 20 years ago, are on Social Security and no other income what are you going to do as your taxes start to sky rocket up. You say no one is forced to move, but economics leaves many with no choice. If you can't afford the taxes, what mortgage you may have, maintenance and your living expenses, you have no choice. In Middletown I had a friend that had a very good business - not in Middletown. He sold some acreage and house and he and his wife down sized. Sure he had Social Security, might have had more too, but some how he went through that and he put up his house for a reverse mortgage and even with that, he was hurting. It got worse, but I am not going to go into that. No, the Sheriff will not come to your door and force you out, but if you cannot pay your bills you have very few choices.

public-redux

Property taxes "skyrocket" only when the value of your property skyrockets. So let's say that $71,000 property in now worth $200,000. Your taxes tripled. But you also have $130,000 of wealth you didn't have before. More than enough to pay the taxes.

Sounds like your friend didn't save enough and spent too much. Those darn developers!!!!!

So, anyway, are you willing to have your local govt limit how much you can sell your property for?

trwz

"There are other places they can go.” This statement reflects an insensitive, greedy attitude. I can't believe that anyone would make such a comment.

Dwasserba

People in their 70s, 80s, 90s who "can go" somewhere else had already made the decision to age in place. Moving is hard work, costly, disorienting. Gentrification is not new here. It would be nice to make your own plan, as the one retired couple did, than to feel forced to rethink your plan.

Reader1954

Maryland's Homestead Tax limit will protect those to a 10% increase on their property tax regardless of how high the assessments around them go up

Frayou

Since the completion of the Carrol Creek project which came about as a result of the 1972 flooding from hurricane Agnes, suggest there has been efforts by the political & real estate elite to create policies to revitalize downtown Frederick. Although these policies appear to be paying off for someone, (after years of stagnation) it is unfortunate it has been at the expense of ignoring other areas of the city such as the former Golden Mile area. Would question whether these efforts were in fact deliberate shifting undesirables from the the greater downtown area. Example: Old Bentz St. projects to Hillcrest?

gary4books

I hate to say it, but they may not have much desire for you either.

garden whimsey

What do ddegrangejr mean by "govt't abusers"? Do you mean someone like the 91-year old who has paid her dues and lived in her home for decades? Should she be run out of her home by people such as you? I hope the property assessment on the those older homes remains the same so they can still afford to pay the property taxes and remain in their houses as long as they want to. As for Mr. Six's statement that people can go elsewhere, where are they going to go? If the home of the current resident is assessed at $160K, where in the city will they find equivalent housing in that price range?

kimberlymellon

[thumbup] Spot on. I tearfully sold my little home on Carroll Parkway and left my dream of affording to live and play with my grandchildren in Baker Park in my retirement. As a rapidly sinking middle class, median income-described in the article- resident, it did not take much forward thinking to see that I could not sustain the rising property value assessment and taxes over the long term. Nor could my newly retired neighbor. We both moved to Washington County. We joined the majority. So when we are all gone, and all the in-lieu of fees are paid, who will provide the services to these new gentrifiers running off locals who have lived here for generations?
Why haven't the City's elected officials worked harder to preserve the community balance instead of caving, with stars in their eyes, to developers?

Dwasserba

Exactly.. And the older you get, the more you need amenities nearby. Everyone can't afford Homewood. Move people from their familiar chosen surroundings only once it is no longer safe for them to soldier on.

public-redux

The 71 year old and the 91 year old mentioned in the story can easily use their increasing wealth (growing equity in their homes) to pay any increased taxes. No need to go anywhere.

garden whimsey

You cannot use equity to pay taxes. The tax collector requires taxes be paid with real money, not "pretend" equity dollars.

gary4books

There are reverse mortgages and other financial transactions to get the same results. Relators can help.

ddegrangejr

I recently bought a home near this new development. I didn't want to live on the street that I bought my home, however the price was too good to pass. I bought it with the idea that these new homes would increase property value. I have met a lot of nice people that have just recently moved to the same area as myself and have the same hopes as me. I hate to say this, but you can definitely tell who the long timers and gov't abusers in this area are. So by all means, PLEASE keep building.

Dwasserba

Omg

gary4books

I guess a long timer is an older person, but who is a government abuser? You mean a retired government worker, like me? And what will you tell us?

ddegrangejr

Did I say old ppl? I grew up on 4th and had a lot of friends between 5th and 6th... A lot that were receiving gov't benefits are still there... and now with their kids older and producing more kids... I am talking about the kind of people you see having money smoking illegals in the park with their friends while there kids run around un-watched, leaving their trash all over. I have no problem with the older generation... Maybe my comment was without thinking because the ones I am talking about have landlords that will suffer because the gov't pays a good portion of the rent.

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