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“As sales have slowed, the team´s ability to start buildings - and public housing units - has slowed as well. Likewise, as the market heats up, construction of public housing will heat up as well. In the interim, the team is exploring strategies to improve production, even in this challenging market.”

When he announced the grant last week, HUD Secretary Steve Preston praised the project.

“This site has become a shining example of neighborhood revitalization and illustrates what can be done when there’s a commitment to make life better for the families who lived in these communities,” he said.

In his letter, Mr. Obama said the first phase of construction at the Stateway site “has proven successful thus far in contributing to the revitalization of the surrounding community.” He also cited nearby businesses, such as a Starbucks and a FedEx Kinkos.

According to a Tribune report on the Stateway project last year, those businesses sit on property tied to Mr. Davis and his family.

Obama aides said Mr. Obama created no conflict of interest in sending the letter. They said, and city housing authorities confirmed, that HUD grant money won’t go to Mr. Davis or his company.

“The request was made with the consultation of city officials, not the developers, and since the overall budget remains the same, the developers will not gain any financial benefit from the grant,” Mr. LaBolt said.

Obama campaign aide Valerie Jarrett also has ties to the project. She is chief executive of the Habitat Co., the federally court-appointed receiver in charge of overseeing several housing authority redevelopment efforts in Chicago, including Stateway. She is not a developer in the project.

Neither Mr. David nor Miss Jarrett returned e-mail or phone messages. An assistant for Miss Jarrett said she was unavailable for comment, but added, “She never spoke with Barack about this matter.”

Mr. LaBolt also said Mr. Obama and his staff never discussed the letter with Mr. Davis or Miss Jarrett, calling the letter “a routine request from Chicago´s housing agency to encourage the Department of Housing and Urban Development to provide funding for the second phase of a development that would create 1,300 units of affordable housing in the city, replacing a crime-ridden public housing project.”