Funding setbacks and the departure of the executive director are delaying development of an Abingdon project hailed as a model of affordable housing for the elderly.

Bernice Wilson, director of ElderSpirit Community phase two, left her position in November when changing federal regulations made it more difficult for the project to qualify for funding, she said.

The first phase of ElderSpirit opened last year and is the country's first mutual care co-housing retirement community. Built for $3.5 million, it includes 16 apartments and 13 town homes, and quickly had a waiting list of seniors hoping to move in.

Organizers hoped the project's second phase could draw on a pool of federal tax credits for which developers compete. The credits can be sold to banks and other lenders for cash to build affordable housing.

But that system favors large developments rather than the smaller model used by ElderSpirit, making it more difficult to qualify for federal assistance, said Dene Peterson, developer of the first ElderSpirit.

Without those credits, Wilson said she didn't think she could buy the land she needed to build a second development. So she went home to Tennessee, where she still hopes to gather a group and build a community similar to ElderSpirit.

"Dene always said, 'if I can do this, anybody can do this.' But Dene pulled off a miracle," Wilson said of Peterson.

The problems show the accomplishment of Peterson and co-founders who cobbled together funding from a half-dozen private and public sources to build the first ElderSpirit, Wilson said.

Gerontologists and others who work in the elder-care field have said ElderSpirit could be a model for improving quality of life for the more than 70 million aging baby boomers and saving taxpayer-funded programs millions.

It's a multifaceted concept that combines European-style co-housing -- environmentally friendly village living that de-emphasizes cars and encourages close ties among neighbors -- with affordable housing, mutual care among neighbors and spirituality.

Organizers had hoped to open the second community in Abingdon sometime in 2008. But because of the financial setbacks, the project has also lost its operating funds, which come from the Virginia Department of Housing and Community Development.

Peterson and Tim Carter of the Abingdon Housing Authority are filling in until Wilson's replacement can be found. And Peterson is working without pay out of her home in ElderSpirit 1 to find funding.

So far, Peterson said, she has about $75,000 in pledges from the Abingdon Town Council and Washington County supervisors to help restart ElderSpirit 2. Abingdon sets aside some real estate tax revenue each year for affordable-housing projects, Peterson said. Additionally, she hopes to receive state Community Development Block Grant money. The Abingdon town manager's office did not immediately respond to an e-mail and phone call seeking comment.

Eleven groups in other states are working with ElderSpirit to start projects, and a community similar to Abingdon's is planned in upstate New York.

More than 60 people interested in living in an ElderSpirit community in Abingdon have joined the waiting list, including Fred Kinnaman.

Kinnaman recently relocated from Charlottesville to Abingdon in hopes of buying or renting a home in ElderSpirit. He said he's willing to wait a year or more to move in.