A Philadelphia city agency is moving to take back hundreds of affordable housing units stuck in limbo by the scandalous breakup of a nonprofit nearly 10 years ago that is, improbably, still playing out.

The nonprofit known as Germantown Settlement was dismantled in 2009 amid revelations its director, Emanuel Freeman, had mismanaged millions in city funds meant for affordable housing and other services.

Despite the dissolution of the nonprofit as a direct result of Freeman’s actions, he walked away with legal control over hundreds of low-income units financed with low-income loans doled out by the Philadelphia Redevelopment Authority.

Today some units are vacant, others are in disrepair, and still others host low-income tenants. But Freeman recently resurfaced in a quest to convince the PRA he would repay $3.5 million in debts and repair the properties under his control – if the PRA forgave millions more in interest and penalties.

At a board meeting last week, the PRA rebuffed Freeman’s offer and will now seek to place the loans into default. The unprecedented step will force the agency to eat the outstanding debt and become the steward of 145 low-income units.

“Our main priority is to ensure that those tenants are taken care of. But we don’t 100-percent know what we’re getting and we don't know what condition they’re in,” said PRA director Greg Heller. “It was a difficult decision, but we felt defaulting the loans was the best way to achieve those goals.”

This was the third time the agency had considered a forgiveness proposal from Freeman, who now resides in Delaware. During presentations to the PRA board, he claimed to have secured investors to rehabilitate the languishing units – but had twice reneged on past pledges to repay his debts and provide repair work. He owes the city hundreds of thousands more in back taxes and utility bills.

Under the terms of default, Freeman still has 30 days to repay the loans. Heller said his agency would partner with the Philadelphia Housing Authority, the city’s largest affordable housing provider, to assist with transitioning the units out of Freeman’s control if he fails to do so.

In a phone interview, Heller said the decision would negatively impact future affordable housing projects.

“It’s always our hope and expectation that we will be able to recoup at least the principal on our loans and recycle them into new affordable housing projects,” he said. “We receive a fraction of the federal funding we got 15 years ago, so every dollar counts. That's why this was such a difficult decision – we have to write off that $3.5 million.”

Ultimately, the PRA board did not believe that Freeman would ever make good on his promise to pay up or resolve long-running tenant complaints of neglect, Heller said.

“It was tough for me driving around Germantown and seeing the condition of these properties,” said Heller. “Some are in horrific condition.”

Neighbors who had picketed Freeman at recent board meetings said they were heartened by the PRA’s decision, but pointed out that the former nonprofit director still held legal claim over more neighborhood properties.

Emaleigh Doley, who manages the Germantown United Community Development Corporation, suggested that Freeman may have won control over the properties through fraudulent circumstances. She said a group of concerned neighbors were working to identify other properties linked to the former nonprofit head.

“We are pleased with the PRA decision, but we just don't want it to stop there,” she said.

Freeman has not responded to multiple requests for comment.