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How state incentives could help Iowa neighborhoods transform blighted lots into new homes
‘You’re bringing in hope when you bring in that type of housing’
Marissa Payne
Apr. 7, 2024 6:00 am, Updated: Apr. 8, 2024 8:15 am
Esther Meuer-Valtchev and her husband often would listen to music on Fridays in Waterloo’s Lincoln Park and dream of what their future home may look like as they looked to permanently settle in the community.
After they moved from Madison, Wis., to Iowa in 2014, they lived above Basal Pizza in downtown Waterloo. But the historic Walnut neighborhood caught their eye. They’d take a walk to admire beautiful Victorian-style houses and get “the locals’ idea” of how life would be there in the neighborhood bordering the northeast edge of downtown.
“My husband and I were firm believers that we wanted to stay connected to the heart of Waterloo because we think that downtown is the heart,” Meuer-Valtchev said. “It just needs love and TLC. And there was so much energy that was in this neighborhood.”
After searching, the couple “fell in love” with a green Victorian-style house with a large, wraparound porch and a small yard that was built in the early 1900s. They began to know and love the neighbors there, and finally moved to the neighborhood in 2016.
“It was unlike something we’d seen in other neighborhoods,” said Meuer-Valtchev, a community development specialist with Child Care Resource & Referral of Northeast Iowa. “There was a feeling of connection.”
But walking around the neighborhood, Meuer-Valtchev said there were vacant lots and deteriorating homes. For over a decade, houses have been demolished because of decay while the properties still standing were increasingly in disrepair.
About the time Meuer-Valtchev moved into Walnut, Iowa Heartland Habitat for Humanity set out to work with the community, learn residents’ needs and desires and redevelop the neighborhood with historically preserved, affordable and mixed-income housing. Now, Habitat crews have built up some vacant lots from scratch and rehabilitated other houses in both Waterloo’s Walnut and the Church Row — located southwest of downtown — neighborhoods.
The nonprofit’s work has done more than eliminate blight, Meuer-Valtchev said. Habitat’s team took a “holistic approach” of understanding the Walnut neighborhood’s needs and helping it flourish in a way that was guided by residents.
Other Walnut neighborhood improvements have come about since Habitat’s revitalization efforts began. Last fall, the predominantly Black neighborhood lost its “food desert” status — meaning it lacked a supply of affordable, nutritious food options — after the approximately 29,000 square-foot All-In Grocers building opened with a grocery store, community center and other attached spaces.
“You’re bringing in hope when you bring in that type of housing,” Meuer-Valtchev said.
Given the impact Habitat’s work has had on these two Waterloo neighborhoods, Iowa Economic Development Authority Director Debi Durham has said she wants to expand these efforts across Iowa.
As Iowa grapples with a shortage of affordable housing, Durham has urged Iowa lawmakers to boost workforce housing tax credit funding from $35 to $50 million a year. These credits support developers’ projects that typically use abandoned, empty or dilapidated properties and turn them into housing that sells or rents below market rate.
In February, Durham shared with lawmakers her vision to earmark about $5 million of those funds toward a neighborhood stabilization pilot program to support efforts like Habitat’s Waterloo work. The pilot program isn’t planned for this year, but House File 240 still is alive to expand workforce housing tax credits.
To be truly “transformative,” she told lawmakers, the program needs to target neighborhoods on a broader scale rather than fixing up one house at a time. The endeavor would get properties out of the hands of absentee “slumlords,” expand homeownership and raise property values.
High interest rates and supply chain constraints have challenged new affordable housing construction nationwide. With that in mind, Durham has told The Gazette she’d like the incentive program to help communities buy older homes and flip them to “get them into the hands of young families or first-time homebuyers.”
“Between IEDA and (the Iowa Finance Authority), we're making a tremendous amount of investment in our cities for some downtowns in building upper-story housing, but oftentimes if you go one block off of that, it’s a totally different story,” Durham said. “You see dilapidated homes, you see more multifamily than you do homeownership. And we need to transform that.”
‘Catalyst’ to change neighborhoods
After Judy Marshall moved into Walnut in 2012 to pastor a church with her husband, the couple took over a vacant building for the church. But the rest of the houses “looked tired.” She and other residents started going on prayer walks, and she asked God: “Who would have a heart for this neighborhood to even help us?”
Then, Habitat stepped in. Now, many homes in need of windows, garage doors, front steps and roofs have been transformed. Through home dedication ceremonies, neighbors show up and give gifts to welcome new households.
“It’s been great to see a neighborhood develop and grow, and it feels safer,” Marshall said. “There’s something about a neighborhood — you get to know your neighbors, then as new ones come in and they become part of the fabric.”
It took resident engagement efforts, surveys and intentional listening to understand what residents wanted for Habitat implement a housing plan for the neighborhood — and one that not only calls for new construction, but reuses existing assets to keep the neighborhood’s historic character intact.
Ali Parrish, Iowa Heartland Habitat for Humanity’s executive director, said a neighborhood should be made up of about 65 percent owner-occupied properties.
Church Row lost households when the 1980s farm crisis took a toll on John Deere’s nearby facility, accelerating population loss and the neighborhood’s shift from 75 percent owner-occupied homes to a majority being rentals. In Walnut and other neighborhoods Habitat has worked in, the properties often are 65 to 80 percent rentals.
Old, rundown houses have been flipped into multiplex rentals, though they were never designed to be that way, as landlords looked to maximize profit. Racially discriminatory practices like redlining and disinvestment trends have blocked people from securing loans. All the while, property values have plummeted.
“When that happens, there’s a lot of transiency, there’s a lot of absentee landlords that aren’t invested in the community or the neighborhood who aren’t taking care of their properties, and it snowballs from there,” Parrish said. “... Without a neighborhood nonprofit partner like us, there was really a lack in solutions for Walnut residents as to what was going to happen with housing redevelopment.”
Since working in the two neighborhoods, Habitat has rehabilitated 32 homes and built 30 new ones. It’s helped make critical repairs — fixes on anything that would threaten a homeowner’s ability to continue living in the home — to 50 owner-occupied homes, ranging from wheelchair ramps and accessibility improvements to plumbing repairs.
“It’s been this catalyst to really see things moving forward,” Parrish said.
Repairs spur ‘ongoing’ neighborhood collaboration
In neighborhoods around Iowa that have seen substantial reinvestment, the repairs have fueled other new neighborhood developments, inspired residents to fix their own properties and helped neighbors rally around other causes that better their community.
The work in Waterloo has empowered neighborhood action teams to form, like one that Meuer-Valtchev serves on that is spearheading a project to put a park in Walnut. Landlords are roped into neighborhood discussions, too, and Parrish said she’s seen some taking better care of their properties.
Andy Conger, Habitat’s construction director, said proving one house is worth the investment makes hope spread and spurs other investment. Residents have fixed siding and roofs as improvements spread from one project onto another.
“I do believe it demonstrates to the neighborhood and the surrounding community that the community as a whole has value,” Conger said.
In Mason City, the IEDA in 2022 awarded a $1 million grant funded by the state’s share of federal American Rescue Plan Act dollars for the city’s Downtown West Neighborhood Revitalization Program. The city matched the grant with $750,000 of its own funds and is exploring other funding streams to tap when ARPA funds run out by the end of 2026.
The city provides a maximum grant of $50,000 per unit and the owner must match with at least 20 percent of the awarded sum. Owners are choosing to improve items such as windows, furnaces and roofs, while the city fixes streets, curbs and sidewalks and improves lighting in the neighborhood.
Rachel VanHauen, city grant administrator, said Mason City had 12 houses under contract to sell as of March. At least one had been completed. Several homeowners were in the process of verifying their incomes for a home, as eligible owners must earn at or below 80 percent of the area median income.
“The homeowners themselves have a lot of say in the project,” VanHauen said.
While undertaking this effort, Steven Van Steenhuyse, director of the city’s Development Services, said the city has contracted with Atlanta-based Lupton Center to support community capacity building in the neighborhood so residents can form a neighborhood association, help prevent crime and keep properties clean.
The Lupton Center worked with Waterloo’s Church Row and Walnut neighborhoods to survey community needs and identify improvements neighbors wanted. Cedar Rapids’ Wellington Heights Community Church also enlisted the organization last fall to begin to survey residents and draft action steps guiding the neighborhood’s progress.
“We want this to be an ongoing process so that the neighborhood works together,” Van Steenhuyse said, and continue the momentum the repairs started.
In communities where the work has been underway for years, the payoff of substantial renovations is clear.
Around Eastern Iowa, nonprofit Four Oaks has flipped dozens of homes over the years, purchasing them at a low cost to renovate and sell them at affordable rates to low- or moderate-income families. In more than a decade, the Affordable Housing Network — under the Four Oaks umbrella — has sold or rented about 50 properties in Wellington Heights, often in the $130,000 range.
Sometimes, families will transition from Four Oaks’ rentals into one of the homes the nonprofit flipped, said Danielle Rodriguez, director of the Affordable Housing Network.
“We’ve seen a shift in Wellington Heights with more property owners,” Rodriguez said. “We hope if you own the property and you’re paying for it, you have established pride in the neighborhood and you’re being a good neighbor and you’re cleaning up.”
Overall, she said crime rates have fallen in the neighborhood and its perception is changing for the better. Other organizations like Wellington Heights Community Church have sprang up to promote grassroots community development, transforming the former Paul Engle Center into a renovated community hub along the way.
In Dubuque, the Affordable Housing Network since 2020 has rehabilitated 11 single- and multifamily properties into for-sale or rental housing options. The single-family units weren’t sold for more than $160,000, and were typically less.
Those homes are ones the city of Dubuque has deemed abandoned or inhabitable, or had taken possession of because the owner hadn’t paid taxes. Four Oaks President and Chief Executive Officer Mary Beth O’Neill said the city has streamlined the process to turn the houses over to nonprofits to renovate or sell.
Cedar Rapids soon may see an expansion of similar redevelopment opportunities. The city last year launched a Saving Properties and Revitalizing Communities program to take ownership of empty, long-abandoned properties and repurpose them.
To keep sale prices low, a nonprofit has limited opportunities to purchase houses that are prime candidates for rehabilitation, O’Neill said. She was hopeful this program could expand affordable housing by allowing nonprofits to buy properties at a low cost.
Funding should be ‘tailored’ to communities
Every city and region is unique, so if lawmakers eventually opt to fund a neighborhood stabilization program, Meuer-Valtchev said it’s important that flexibility be given to communities and nonprofits. They already know residents’ needs and often are working to empower neighborhoods in the process.
“To be a sustainable solution, it has to be tailored to that community,” she said.
Significant funding gaps remain to do this work, even in Habitat’s case where there’s use of some volunteer labor, Parrish said. That’s where funding such as historic preservation or workforce housing tax credits can fill financing holes to make projects possible. Marketing Director Jenna Jordan said Iowa Heartland Habitat for Humanity has not yet pursued or received historic preservation tax credits, but is exploring doing so for some upcoming rehabs, and has received workforce housing tax credits.
Rep. Heather Matson, D-Ankeny, who was at the Economic Development Budget Subcommittee meeting where Durham shared her vision, said she appreciates Durham’s desire to expand the workforce housing tax credits with some funds used for a neighborhood stabilization program.
“I certainly hope we can get traction on additional support for neighborhood revitalization this year,” she said.
Rep. Jacob Bossman, R-Sioux City, who introduced the bill to expand workforce housing tax credits in the House Economic Growth Committee, said the program has proved effective. The bill awaits consideration in the House Ways and Means Committee.
“I introduced the bill because affordable housing is needed in my district and throughout the state and is one of the primary barriers to growth,” he said. “Employers already are facing difficulties finding workers to fill needed positions. That task is made nearly impossible when those potential employees can’t find affordable housing.”
Iowa needs to attract people to older neighborhoods, Parrish said.
“Families need to know that this is a good place to live and a place that people are investing,” Parrish said. “We need to have some mechanism to attract families back into these beautiful, old, historic and really important parts of town.”
Comments: (319) 398-8494; marissa.payne@thegazette.com