Housing incentive program is driving revitalization of Oak Hill

CEDAR RAPIDS - Retired auto technician Gerald Wheeland said he can feel the change in Oak Hill neighborhood every time he reaches for his wallet.

In 2009 and 2010, some 40 homes went up in a tree-lined area of Oak Hill between Mercy Medical Center and Metro High School as part of a neighborhood-turnaround experiment. The initiative has sent the value of Wheeland's 56-year-old ranch house climbing.

It seems a rising tide of new-home construction in an existing neighborhood can lift the value of older homes around it.

From 2010 to 2011, the value of Wheeland's place at 924 Ninth St. SE rose 12 percent. At the same time, residential property values citywide grew just 1.5 percent, said City Assessor Scott Labus.

From 2008 to 2010, residential values citywide increased 5.5 percent. For existing homes in the heart of the building spree in Oak Hill, values went up 10 percent, according to a review of about 100 older homes there worth more than $40,000.

Labus calls it the “principle of progression” - the general tendency for a spurt of new investment to increase the value of existing properties nearby.

With an increase in property values comes an accompanying increase in property taxes.

Even so, Wheeland, 69, who lives primarily on a fixed income, said the new homes in the neighborhood are a welcome change from just a few years ago, when these same blocks were littered with vacant lots and tainted with a sense that little would change. New homes, he adds, have a way of motivating those with older homes to spruce up what they have.

“One person starts, then the next one and the next one, and you start feeling guilty if you don't,” said Wheeland, an active member of the Oak Hill Jackson Neighborhood Association.

Strategic move to revitalize areas

The government-backed neighborhood revitalization program that is transforming the heart of Oak Hill - the blocks between Seventh and 10th streets and Ninth and 12th avenues SE - has been so successful that it is being duplicated in some flooded neighborhoods.

City Hall is using a similar housing-incentive program in west-side neighborhoods outside the 100-year flood plain beyond where a levee may go one day. Some 200 new homes are slated to go up where hundreds of flooded homes have been bought out and demolished, creating vacant lots.

The question is this, though. Can new homes intermixed with existing homes in older, moderate-to-low-income neighborhoods help increase the value of nearby homes and entire neighborhoods? Will the neighborhoods take on a new life and become more inviting than they had been?

That appears to be what is happening in Oak Hill.

Overall home values in 2006 in the heart of Oak Hill, where new-home construction has been focused, totaled $8.1 million. By 2011, the total property value on the same blocks had jumped to $12.44 million - a 53 percent increase, according to the City Assessor's Office.

The actual jump in value is likely higher.

City Assessor Labus, who breaks the city into 192 micro-neighborhoods and analyzes property valuations in each, earlier this month released 2012 property valuations. They showed property values since last year in Oak Hill were among the largest of the increases.

Labus quickly withdrew the neighborhood's 2012 values, however, and now says he needs to do a house-by-house, on-site analysis because home sales have not been numerous in the neighborhood and much has changed quickly.

Interestingly, the average cost to build each of the 40 or so new homes in Oak Hill was about $135,000, not counting the value of the lot. Yet nearly all those homes now are valued at less than $120,000.

Labus calls it the flip side of the principle of progression. New homes mixed into a neighborhood in decline can help increase the value of old homes, but the old homes can drive down the value of new homes, too. It's the principle of regression, he said.

A central reason for the housing incentives in Oak Hill and west-side neighborhoods - incentives that include a city-owned lot and down payment assistance to qualified buyers - is to help persuade buyers and bankers to invest in neighborhoods that neither have had an interest in.

The idea is that over time the entire neighborhood becomes a more desirable place to live, raising the values of all homes, including pushing the value of the new homes in line with the actual costs to build them.

A little history of the program

The recent history of Oak Hill, nestled near Mercy Medical Center and the busy commercial artery of Eighth Avenue SE, is a good story. Richard Luther, a former city development manager, recounts the tale, starting with accountant Robert Blythe and his Southeast Capital Co.

Blythe bought up inexpensive, dilapidated homes in Oak Hill, demolished them and held the vacant lots. He speculated that Mercy Medical Center and related medical offices would spill into the neighborhood and buy the lots at commercial prices, said Luther, who now runs his own planning and development firm, Creative Development Solutions Inc.

Blythe's dream never came to pass, Luther said, in part because the Oak Hill Jackson Neighborhood Association persuaded City Hall to keep commercial development from extending into the residential area of Oak Hill.

At the same time, neighborhood leaders like Luther Trent and city planning staff came up with an idea to buy vacant lots and offer them and other incentives to individual buyers willing to move into Oak Hill and build a house.

Then Mayor Paul Pate announced the new program - Housing and Neighborhood Development, or HAND - during his State of the City speech in 2004. It wasn't until November 2005, as he was leaving office, that Pate persuaded a majority of the City Council to put the program in place.

Blythe died in 2007, and the city bought his lots in a single transaction for the HAND program, Luther said.

It was hard, though, to find any takers.

Along came Brad Larson, a city planner, who was shopping for a new house. He and five others looking for a home investigated the HAND program in Oak Hill, but only Larson took the plunge.

“I was the first one in there, and all the neighbors came over and talked to me,” Larson said. “It's a great neighborhood.”

Even so, there was not a line of followers.

HAND was an idea sitting on a shelf when the Flood of 2008 hit, damaging some 1,200 homes - mostly in core urban-renewal neighborhoods, although most of the Oak Hill residential neighborhood was spared.

The Replacement Housing Task Force dusted off the HAND program, and homebuilder Kyle Skogman, president of Skogman Homes, volunteered to find income-qualified buyers, persuade some to move into Oak Hill and build some homes there.

Construction was complete on the first group of homes in early 2009. Over the next two years, Skogman built a total of 34 homes; other builders, about five.

“It's just nice to see the lots being filled up,” said Larson, who lives at 900 Eighth St. SE.

Neighborhood is evolving

Newcomers range from young professionals with young children to older couples and people in between. “It's livened up the neighborhood. People want to be where other people are at,” Larson said.

Long-standing neighbors agree the homebuilding has been a good thing, but they also question how qualified buyers were selected, said Dedric Doolin, president of the Cedar Rapids chapter of the NAACP. A few have been African-American, but most not.

Oak Hill had been mostly an African-American neighborhood.

“It's changed the diversity of the neighborhood quite a bit,” said Doolin, himself an Oak Hill property owner and member of the neighborhood association.

Jerry McGrane, 72, a leader in the Oak Hill Jackson Neighborhood Association for many years and a former City Council member, lost his house on Second Street SE in the flood and is among those who qualified for a new house in Oak Hill.

McGrane said the housing incentives have been life-changing for Oak Hill and property owners there. A neighborhood on the upswing means less crime and more property-tax revenue for the city, county and schools, he said.

“Do empty lots bringing in nothing (in property taxes) make sense?” McGrane said. “That's what we had then. This is what our dream turned into. We don't have empty lots any more.”

Luther said all those vacant lots had brought uncertainty that led to further decline of the neighborhood. The HAND incentives turned it around.

“A drive through the neighborhood reflects the hard work done by the neighborhood and the very positive and effective redevelopment program provided by the city,” said Luther. “I consider the work I did for this project to be one of the high points of my career.”

The city's Larson calls it a blessing that the city had something like the HAND program ready to go after the flood. It's helped replace houses lost to the flood, and it's helped bring Oak Hill back to life, he said.

“The (Oak Hill) neighborhood had sat for decades and decades and nothing (in terms of investment) was happening,” Larson said. “Personally, I don't feel anything in the neighborhood would have changed if the city hadn't stepped in.”