Even before the first spade of dirt was turned for Washington Square, the community reaped some benefits from the housing development project.

People went to the run-down apartments that would eventually be razed to make room for new townhomes and hauled away water heaters, stoves,  air conditioners and furnaces, refrigerators, and washers and dryers for their own use.

The Lincoln Police Department’s SWAT team used the apartments for training. So did the city’s Fire and Rescue Department, which set fires inside to train not only firefighters but also a group of teens who someday might join its ranks.

The 1960s-era apartments are gone now, bulldozed months ago, and Sawhorse Construction, the general contractor, is pouring foundations for the 16-townhome project at 19th and Washington streets. The walls will go up soon and, if everything goes according to schedule, the $3 million project  should be completed by next spring.

Developer Katie Halperin and  Teri Ernst, her Realtor, hope buyers will start knocking on their doors. In a depressed housing market, it might be a hard sell, but the two women and their partners believe they have something people want: affordable contemporary housing in an established neighborhood in the heart of the city.

Washington Square, they say, should appeal to people who no longer wish to live on Lincoln’s edges and drive long distances.

Grocery and drug stores, restaurants, unique shops, a health food store and coffeehouse, a bus line, schools and even a small park are within walking distance.

“What surprised us was the neighborhood,” Halperin said. “Neighbors actually care. They’ve been watching the progress. They want improvements. They like their neighborhood … They like living here.”

Washington Square is in the Near South Neighborhood, an area comprised of mostly large homes — many of them historic — and smaller homes. Halperin said her development gives people who are interested in living close to downtown something in the middle.

“It gives them the option to start with something new — new housing in a well-established neighborhood,” said Mary Gerdes, president of Community Bank of Lincoln.

The bank got involved in Washington Square because it wants to help first-time homebuyers and revitalize the neighborhood, Gerdes said. The housing development project is the first one of its type for the bank, which opened in December 2007.

The three-story townhomes will start at $154,900. Some of the features: three bedrooms, two-car garage, maple floors, private balcony, fenced-in courtyard and a personal garden area. Square footage ranges from 1,500 to nearly 1,800.  A graduate class taught by Kim Todd at the University of Nebraska-Lincoln will design the interior courtyard and all of the green space.

A $40,000 grant from the federal government can be used to help first-time homebuyers with the down payment, Ernst said, if they meet guidelines. The townhomes are also FHA-approved. 

“Well, if it lives up to its promise of owner-occupied, I think it would be very beneficial to the neighborhood,” said Chuck deVries, who represents the area on the 19-member neighborhood association board.

 The tough economic times could have an impact on owner-occupancy, deVries said, but overall people who live in the neighborhood are pleased with the development. The only concern they had was the proximity of the townhomes to the street.

“They pushed the envelope of the building area,” deVries said, adding that the townhomes are closer to the street than any other frontage in the neighborhood.

This is not Halperin’s first attempt to develop a housing project close to downtown. In 2006, she and a partner abandoned their plans to develop the old K Street power plant into loft-style condominiums after they rejected the  City Council's counteroffer to buy the building for $5 million. After the council tacked on amendments, they said the project was no longer financially feasible.

Washington Square proved to be a difficult project to sell to the city, too, Halperin said. She had to get approval from the neighborhood association and variances  from the Planning Commission. She also got the impression that some people  wanted to see two homes built on the property instead of 16 townhomes.

 The biggest problem: “Lincoln does not know how to handle urban development projects,” Gerdes said. “There hasn’t been enough of it happening here.”

Said Carlson: Most of the city’s housing construction rules are geared toward traditional housing  being built around its perimeter — not in the inner city.

 “We’re essentially trying to shoehorn this project into rules that do not fit very well,” he said. “We need a process to deal with urban blight other than throwing TIF (tax increment financing)  at it.”

 Halperin obtained more than $200,000 in TIF for Washington Square, said Dave Landis, director of the city’s Urban Development Department. TIF is a common redevelopment financing tool that allows the higher tax value created by a private project to be captured to finance associated public improvements, such as streets.

Landis agreed that variances were an issue in the project but they were mostly caused by the density of the project.

“We’re replacing about 18 apartments with 16 townhouses and they don’t lay out the same way,” he said.  “In the apartments, you get that high-rise effect so the setbacks are easily met. Because you are building on top of each other, you have more space for traffic flow. When you spread that out and you use the same space for townhouses, it winds up having a more intense use of the footprint of land.”

Landis said variances would not have been a problem if the project only had six or eight townhouses.

 “It’s not because it’s a townhome. It’s not because it’s a core neighborhood. It’s not because we’re using TIF. It is an outgrowth of the density of this project. The density is related to the need for making an appropriate return on investment for the land,” Landis said.

Halperin said she had to fight the city on impact fees, reducing the initial $41,000 estimate by the city to $6,000. Halperin’s and Carlson’s argument was that many of the public improvements  that would be covered by the impact fees already existed in the neighborhood.

 “We had to re-engineer (the project) to lower the impact fees,” Carlson said.

 Halperin said she did get some help from City Hall, though. She and others credited Planning Department Director Marvin Krout and staff member Christy Eichorn, City Council members Robin Eschliman, Dan Marvin and Jonathan Cook, as well as Landis and NeighborWorks, a nonprofit, community-based housing organization dedicated to community revitalization.

Despite the obstacles, Halperin, Carlson and Ernst view Washington Square as a model for other developers to follow — and they hope that they do.

“A lot of people are watching this to see how it goes,” Halperin said.

Reach Algis J. Laukaitis at 402-473-7243 or alaukaitis@journalstar.com.