The day in April when Catherine Mallicote bought her first house, on the 400 block of Day Avenue, she saw a man calmly stroll across her yard and retrieve what she suspects was drugs he'd stashed under her shrubbery.

A friend told her if she bought the house on the edge of Old Southwest, she wouldn't come to visit.

Mallicote, 28, closed the deal on the big brick home a month ago. Since then, the insurance processor said, she's been threatened by neighbors, had the house vandalized, witnessed a police raid across the street, and had a contractor visiting her house solicited by a prostitute.

She knew that stretch of Day could be rough. It's dominated by run-down low-income apartments. But she bought there partly on the faith that a deal would be struck between the Christian Housing Fellowship, which owns almost the entire block, the city of Roanoke and the Roanoke Redevelopment and Housing Authority that would lead to a wholesale rehabilitation of her block.

This week, news came that the deal had come together, and Mallicote and other neighborhood advocates were rejoicing.

"I think it's going to be an amazing thing," Mallicote said.

According to the deal, CHF will give the 17 properties containing 70 rental units to the RRHA. The city will pay $344,000 to pay off outstanding debt on the properties. The housing authority and city will work together to get the properties returned to owner-occupied single-family homes or duplexes, and to build 50 new low-income rental units scattered around the city over the next seven years.

The city seized on the deal because it confronts multiple housing problems the city is trying to address in its housing strategic plan, including concentration of poverty in the city and a low homeownership rate.

"When we heard about it, we just jumped on it," said Assistant City Manager Rolanda Russell. "Just to make a difference in that block, it will continue to make a difference in the whole neighborhood."

Dana Walker, general manager of Christian Housing Fellowship, planned to donate the properties to either RRHA or Total Action Against Poverty. He approached the city with the idea of using the gift to facilitate building new low-income housing elsewhere in the city, so the mission of his company would be carried on.

City Manager Darlene Burcham quickly negotiated with Walker and the RRHA to make it happen because of the rare and timely opportunity it presented, Russell said.

The city has long been the primary host of the region's poor people. Nearly 16 percent of city residents were below the poverty line in 2000, according to the U.S. Census Bureau. That's about three times the level of neighboring localities. Ninety-seven percent of the region's subsidized housing is in Roanoke. At 56 percent, the city also has the lowest homeownership rate, compared with 68 percent to 88 percent elsewhere in the valley.

This one deal breaks up a cluster of low-income housing, creates new low-income units spread through the city, propels the rehabilitation of aging housing stock, and returns almost an entire block to homeownership.

Angela Penn, director of housing and community development for Total Action Against Poverty, believes the concentration of poor in the city is connected to the location of services in the city and their lack of transportation.

Russell said the city's plan is not to reduce the amount of low-income housing, but to stabilize it and when possible redistribute it so neighborhoods have a mix of people and housing instead of clusters of poor.

The city and housing authority hope to call on a mix of public funds and private help, such as low-rate loans from banks, to drive the rehabilitation of the Day Avenue properties, Russell said.

Some community development block grant funds will likely be used to build the low-income units, Russell said, but they hope to find other sources for that work, too. The total cost will probably be in the millions, she said.

The new low-income apartments address a serious need, Penn said. She's found that when families who hold Section 8 housing vouchers want to move, they almost always require more than a month to find a new place that's in their approved price range and will also pass a quality inspection.

She's concerned Roanoke might not have enough decent and affordable places to live, "places a mother would want to move into with her children."

During the 1990s, household growth slightly exceeded the increase in housing stock, according to the census. The housing increase in the Roanoke area was half that of the state, and for multifamily buildings, it was only a third.

Though rental housing is more affordable in Roanoke than in other small metropolitan areas in Virginia, a minimum wage worker in 2001 still had to pay 42 percent of his or her income for a one-bedroom apartment at fair market rent of $373, according to a Virginia Housing Development Association study. A single recipient of Supplementary Security Income paid 70 percent. The U.S. Department of Housing and Urban Development says no one should spend more than 30 percent of their income for housing.

That makes Penn wonder where the people who live on the 400 block of Day Avenue will go.

The housing authority probably will begin vacating them in September, but must provide relocation assistance as part of the deal with CHF.

Mallicote just wants them out of her yard. She looks forward to neighbors who own their homes, like she does. She plans to move into her house, which she's been renovating, this weekend.

"When someone becomes a home owner, their whole perspective changes." she said.

Deal highlights

• The Christian Housing Fellowship LLC will donate 17 rental properties in the 400 block of Day Avenue to the Roanoke Redevelopment and Housing Authority.

• Roanoke will give the housing authority $344,000 to pay off outstanding debt on the 17 properties.

• The authority will build 50 low-income rental units dispersed throughout the city.

The Day Avenue housing deal fits into Roanoke's goal to increase homeownership in the city. Here are some facts driving the city's plan:

HIGH POVERTY RATES: Nearly 16 percent of Roanoke residents are below the poverty level. That's more than twice as high as any other locality in the Roanoke Valley.

SUBSIDIZED HOUSING CONCENTRATED: Nearly all the subsidized housing in the Roanoke Valley is in the city -- 97 percent. Roanoke County has the remaining 3 percent. Salem and Botetourt County have none.

LOW HOMEOWNERSHIP: Roanoke has the lowest rates of homeownership in the valley -- 56 percent of its residents live in owner-occupied dwellings. Salem's rate is 68 percent, Roanoke County's is 77 percent and Botetourt County's is 88 percent.Source: U.S. Census Bureau