Chris Auth, executive director from 2009 to 2011, blames Interfaith's troubles on a flawed business model: Insufficient fund-raising led to cash shortfalls, which it plugged by selling off properties or taking on debt.
With the 2008 housing crisis, "the model stopped working," he said.
Interfaith reported an operating loss of $286,037 on revenue of $336,615 for the fiscal year ended June 30, 2011. The year before, it lost $181,291 on revenue of $430,042.
Over the last decade, the group has gotten more than $7 million in loans, grants, operating funds, and contracts from the county. But in September, with Interfaith's losses mounting, Bucks officials froze its access to public funds and canceled a $60,000 grant to be put toward annual operating costs.
The county released the funds in February after Interfaith started working on a recovery strategy. "They had to stop, take toll, and come up with a plan," said Vitor Vicente, director of Bucks' Department of Community and Business Development.
But if the Bridgewater project does not materialize, he added, the county would expect to be repaid.
Bud Johnson, a retired pharmacist and volunteer at Interfaith who became chairman last August, said that even with a new course of action, it may take "at least two years to get things back to where they were."
In efforts to right itself, Interfaith has reduced staff from nine to four, closed a warehouse for donated furniture, and lowered its vacancy rate from nine rental units to two. It owns 85 rental properties, scattered through Lower Bucks, and a 20-unit apartment house in Sellersville.
Johnson said the group also had "improved communication" with banks and local officials. The county, he added, will resume providing the $60,000 annual grant for operations in August.
Interfaith is a critical "spoke in the wheel" of affordable housing in Bucks County, said County Commissioner Diane Ellis-Marseglia.
Through the U.S. Department of Housing and Urban Development, Bucks County got a HOME grant of $1.2 million last year to fund the building of affordable housing, provide families with rent assistance, or help them buy a first home.
Of that sum, 15 percent had to be set aside for so-called community housing development organizations - nonprofits certified by the federal government as builders of affordable housing.
Philadelphia, which last year received $14 million in HOME funds, deals with 35 such groups, including the well-known People's Emergency Center in West Philadelphia.
Bucks has only Interfaith.
The group's problems have come at a time when the need for affordable housing is rising in the county and across the region.
"There is something very wrong in Bucks," Auth said. "In one of the most affluent counties in the state, there is a lack of affordable and available rental units for extremely low-income households."
When he joined Interfaith in 2009, Auth said, he did not realize the extent of its problems. The situation was so bad, he said, that the board was trying to raise cash by evicting tenants and selling properties. Residents protested, and the practice stopped.
After the county froze its funds, Auth said, he wanted to go public with a "Save Interfaith" campaign that included aggressive fund-raising. Instead, the board replaced him in December. Asked about it, Johnson declined to comment, saying it was a personnel matter.
Auth said the board did not support him or his strategy. "I was told I wasn't dealing effectively with the county," he said. "I wanted to fight to save the place. The county had cut off our funds, and I felt we had to tell the world."
Interfaith was founded in 1987 by a peace-activist minister from Levittown, the late Alfred C. Krass. Concerned about homelessness in such a prosperous county, Krass pulled together a coalition of faith-based groups to renovate homes for the poor.
Today, about 25 religious organizations provide some level of aid, Johnson said. But most of the revenue comes from rents and development fees. Since 2002, the county has given it annual contracts ranging from $250,000 to $600,000 to acquire and rehab 10 to 20 properties.
From the start, the Bridgewater Road project faced problems. Originally planned as 20 townhouses to be sold to lower-income families, it was scaled back to nine. But since the two-acre lot is zoned for single-family homes, the township twice blocked the plan.
Johnson said that on July 18, Interfaith will submit another development plan for five new homes to the Bensalem Planning Commission.
"We've worked with the township to come up with a plan we believe will be approved," he said.
Another Interfaith development is the five-home Edgely Court in Bristol Township, with a projected cost of $1.5 million. It has been on the drawing board since 2005.
The county lent the project $150,000 from its Housing Trust Fund and from HUD. The township separately committed $550,000 in federal funds, allocated by the state. Interfaith, however, needs to secure an additional construction loan.
"That's the missing piece," said Thomas McDermott, Bristol Township community development administrator.
Vicente, the county housing director, said Interfaith "was moving in the right direction." But, he added, they "are still not where we'd like them to be."
Contact Jennifer Lin at 215-854-5659 or email@example.com, or follow on Twitter @j_linq.