The developer who had plans to purchase the 550 Madison Apartments no longer wants to buy the building from Housing Kitsap.

Mike Burns of Madison Avenue Development said in an email that he did not want to compete for a purchase of the property against Housing Resources Bainbridge or the city of Bainbridge Island and was retracting his offer of $2 million for the 13-unit apartment complex.

Madison Avenue Development was one of 13 entities to make an offer on the 550 Madison Apartments.

Housing Kitsap began efforts to sell the apartment building, one of three properties it owns on Bainbridge that offers housing to low- and moderate-income families, earlier this month.

Burns, who owns property adjacent to the 550 Madison Apartments, had submitted the highest offer for the complex. Madison Avenue Development said it would pay $2,031,000 for the building, and Burns and Housing Kitsap had already signed a purchase-and-sale agreement.

The sale needed final approval from the board of commissioners for Housing Kitsap, but at Tuesday’s board meeting, officials put the offer on hold for 30 days to allow Housing Resources Bainbridge and the city of Bainbridge enough time to match Burn’s offer.

Housing Resources Bainbridge had previously submitted an offer of $1.5 million for the property.

Burns spoke at Tuesday’s meeting of the Housing Kitsap board and told officials he had hoped to combine the 550 Madison Apartments property with his adjoining land to create on master planned development that would include affordable housing. He told the board he could combine work-force rate apartments with market-rate units in a new project.

In a letter to the board, Burns also said the new units could be managed by Housing Kitsap or Housing Resources Bainbridge.

Housing Kitsap — which supplies low-cost housing to more than 900 families across the county — has been considering a sale of property to raise cash to help resolve some of the housing authority’s financial woes. Commissioners repeatedly referenced the nonprofit’s dire money problems at their meeting Tuesday, and said the sale of property could help ensure the housing authority does not go bankrupt.

Officials said Tuesday they wanted to get the maximum offer possible for the 550 Madison Apartments, but delayed action on the offer from Madison Avenue Development to give Housing Resources Bainbridge and city officials more time to raise the money needed to match the offer from Madison Avenue Development.

Four other offers have been submitted to Housing Kitsap that are larger than the $1.5 million offered by Housing Resources Bainbridge. The Silverdale-based housing authority has received offers of $2 million; $1.8 million; $1.65 million; and $1.6 million.

In an Wednesday email to Stuart Grogan, executive director of Housing Kitsap, Burns said he was formally withdrawing his offer to purchase the building.

“It was never my intention to bid against HRB or the city of Bainbridge. When I submitted my offer it was based on the previous round of bidding when it was just private companies and individuals involved,” Burns wrote.

“I sincerely thought that what I had proposed in my offering statement would improve the present state of affordable housing on Bainbridge in both quantity and quality. I’m not driven by profits and I’m not a greedy developer as put forth in this morning’s meeting. My intention was to do something that would benefit the people of 550 and be a project the whole island could appreciate,” he said. “I was wrong.”

Burn’s decision followed a packed-room meeting Tuesday of the board of commissioners for Housing Kitsap.

At that meeting, commissioners agreed to postpone the sale of the 550 Madison Apartments to give Housing Resources Bainbridge 30 days to match the $2 million offer on the 13-unit apartment building that was made by a private developer.

The board voted 4-1 for the delay, with Commissioner Robert Gelder voting against the extension.

Commissioners, pointing to the dire financial condition of the Silverdale-based housing authority, said they wanted to get as much money as they could for the apartment building on Bainbridge.

Commissioner Rob Putaansuu, who is also mayor of Port Orchard, stressed that Housing Kitsap remains on a shaky financial footing, and recalled that agency officials had previously spoken with a bankruptcy attorney.

If Housing Kitsap was forced to file for bankruptcy, he said, it would not only affect those living in units owned by the housing authority on Bainbridge, but the more than 900 families who are tenants of Housing Kitsap across the county.

“I have to look at the big picture for the entire agency,” Putaansuu said.

“I know that I have to vote to get as much as we can,” he said.

Affordable housing advocates warned the sale of the property would mean the loss of affordable housing on Bainbridge, where rental units for low- and moderate-income residents are becoming increasingly rare.

And though Housing Kitsap officials have been talking in private about selling property to help ease the agency’s financial burdens, tenants of the 550 Madison Apartments were only told of the building’s potential sale earlier this month.

At this week’s meeting of the board of commissioners of Kitsap Housing, Bainbridge Councilman Matthew Tirman urged his fellow board members to postpone accepting the developer’s offer and give Housing Resources Bainbridge 60 days to raise funds to close the gap between its offer of $1.5 million for the apartment complex and the offer made by Madison Avenue Development.

A standing-room-only crowd packed the commissioners’ board room for the vote. Some brought cardboard signs saying “SAVE Affordable Housing!” and “WE NEED MORE Not Less!”

Burns also owns vacant property on Madison Avenue that surrounds the 550 Madison Apartments. He told commissioners he had approached Housing Kitsap in the past to explore ways of redeveloping the properties together, while keeping the same number of affordable units.

He also said the 550 Madison Apartments was in disrepair and had reached its “life expectancy.”

In a letter to the board, he noted his earlier discussions with Housing Kitsap’s executive director included the idea that Kitsap Housing could manage new apartments with “work-force” rate rents, or buy them outright.

Housing Kitsap has owned the property since 2001, and bought the apartment complex with a combination of grants and debts. The agency still owes $325,000 on the property, but restrictions that require the complex to remain as a low-income rental property expire July 21.

Commissioner Becky Erickson, who is also mayor of Poulsbo, repeatedly reminded her colleagues on the board that it would be premature to sell the 550 Madison Apartments, as well as another 6.3-acre property in Poulsbo, until an amended County Loan Agreement is approved by county commissioners.

Otherwise, Erickson said, any proceeds from property sales would go directly to the county, and not Housing Kitsap.

The 30-day extension, officials said, will not only give extra time to Housing Resources Bainbridge to submit a better offer for the apartment complex, but also allow county officials to update its loan agreement with the housing agency before any property sale is completed.

Tirman also called for the board to reject the offer from Madison Avenue Development, but that request failed on a 4-3 vote.