Jackson said he had closed the door on the Clipper bid, but that didn't mean Clipper couldn't try knocking for admittance. The firm would need to explain in detail how it planned to keep the 46-building complex affordable at a purchase price that factors out to more than twice what residents currently pay.

"We remain convinced that we can provide the assurances that Secretary Jackson, and other officials, responsibly require. We agree totally that affordability is a defining core value at Starrett City. This will not change," a spokesperson for Clipper says. "We ask only that we be given a fair opportunity to present our fully detailed plan to achieve that goal, and we are grateful that the Secretary has said he will listen to our proposal. We are confident, that after appropriate scrutiny and review, the Secretary and others will join with us in believing that our approach is not only sound and achievable, but is also the right plan for maintaining the affordability, and the quality of life at Starrett City, that we all so greatly value."

The spokesperson tells GlobeSt.com that Clipper plans to present its full plan in the near future, but declined to specify what exactly that means.

Acorn's executive director of New York Bertha Lewis says in a statement that she expects Clipper to fight for its bid and warns that the federally subsidized complex is not "Out of the woods yet." She goes on to say, "From the beginning, it has been clear that there was simply no way that Clipper Equities could afford to pay $1.3 billion for Starrett City and still keep the complex affordable. By offering to pay a quarter of a million dollars per apartment, these developers were virtually guaranteeing that they will raise rents, cut services and build market rate housing in order to squeeze a profit out of their wildly inflated offer."

Government officials have condemned Clipper's high-priced bid by pointing out that the next highest bid was $500 million less. But a Starrett official familiar with the proceedings tells GlobeSt.com that of the seven bids that came in four were priced over $1 billion. Clipper's topped everyone's at $1.3 billion, followed by bids for $1.25 billion, $1.2 billion and $1 billion.

Starrett City Associates, the current owner of the complex, declined to comment on HUD's decision or the process going forward. CB Richard Ellis also declined comment; CBRE's Darcy Stacom and William Shanahan brokered the deal.