Cedar Rapids searching for nonprofit to own $6.9M affordable housing complex

CEDAR RAPIDS — The city of Cedar Rapids is launching the search for a nonprofit to take over the Wellington Heights building the city is turning into affordable housing.

Moving toward the March 2024 completion of a project to rehabilitate the blighted building at 1500 Second Ave. SE, formerly the Colonial Center building, the city is issuing a request for proposals to find a nonprofit to own and operate the 25 units.

Crews have removed mold and asbestos and continue work to turn the office building into affordable rental housing. The project is now known as The Heights, a name chosen in partnership with the Wellington Heights Neighborhood Association.

Twenty-two of the units will be one-bedrooms and three will be two-bedroom. Six will be fully compliant with the Americans with Disabilities Act, though all will be fully ADA convertible. There will be office spaces, a computer lab, meeting room, on-site laundry and a tenant storage area. A gas-powered generator will be installed.

Members of the Cedar Rapids City Council said Tuesday this project will help make progress toward adding sorely needed affordable housing stock. But there was some discussion over rents and what supportive services could be offered.

Housing Services Manager Sara Buck said the city is looking to rent to those making at least 80 percent of the area median income. A lien will be placed on the property to ensure rent affordability for at least 15 years, and there will be ongoing performance measures to ensure accountability.

A committee will meet in November to review proposals from nonprofits, which are due by noon Nov. 6, before the council ultimately considers and selects a proposal Nov. 21.

That review will assess owner capacity and experience with affordable housing as well as financial feasibility. The review panel also will look at the community benefit the project provides, with extra points awarded for serving a higher need population and providing additional amenities or services to tenants.

City staff would negotiate a development agreement this winter or in spring 2024.

Council member Scott Olson said the city should strive for a deeper subsidy on the rents. He said a developer wouldn’t typically be able to build this type of quality affordable housing and make low rents financially feasible.

“We have a very unique situation here, because we can go in and have a building provided to a nonprofit that has the experience,” Olson said.

Council member Dale Todd said it would be unrealistic to offer lower rents without accounting for an increase in operating costs with some supportive services element to serve populations with higher social needs.

“While the intent is good, my question … is what nonprofit would go into a project like this knowing they’re going to go into a risk or a loss and not have any supportive services component?” Todd said. “That’s a recipe for failure.”

Buck said the city could issue another request if the proposals turn out not to be suitable and emphasized the financial accountability measures that are in place.

The $6.9 million project will leverage four state and federal grants: Community Development Block Grant-COVID-19 funds provided by the Iowa Economic Development Authority; city CDBG funds; the HOME Investment Partnership Program, a U.S. Housing and Urban Development effort funded by the American Rescue Plan; and American Rescue Plan Act funds that came to the city through the U.S. Treasury.

Council OKs new incentives for ‘Rainbow Road’

The council authorized a financial incentive package for houses that will be built on a block known as “Rainbow Road” in the southwest quadrant after the project didn’t receive state workforce housing tax credits.

In May, the council approved a term sheet outlining preliminary deal points for the project — the first time that single-family homes featuring accessory dwelling units were awarded city tax incentives. But the council signed off on new incentives Tuesday for the rental homes, which will be painted the colors of the rainbow as a symbol of LGBTQ inclusion that is visible from Interstate 380.

D Taggart Holdings, led by local developer Eric Gutschmidt, is working to build five single-family homes with two accessory dwelling units on each property, a $4 million investment. Each would have three garage stalls and six off-street parking spaces.

The empty parcels are located at 920, 926, 930 and 940 M St. SW as well as at 1213 N St. SW. Other units are already complete or in progress on the block, with 10 properties overall on a block where homes were destroyed by the 2008 flood.

Under the new term sheet, Cedar Rapids will reimburse 100 percent of the tax increments up to a net present value of $400,000 or 20 consecutive annual payments. The project is expected to generate $1 million in new taxes over 20 years.

If construction has not started before the next deadline for state workforce housing tax credits, the developer would apply for the tax credits again. If those are awarded this time, the city tax reimbursements would be reduced based on the state award.

Construction would start by May 2024 and wrap up by May 2025. A development agreement is slated to come to council in November.

Olson said he will be excited to see how residents receive the concept of accessory dwelling units because it allows a higher density but still fits the neighborhood.

“It’s pretty exciting to have these lots infilled,” Olson said.

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