Matthew 25’s $2.5 million Cedar Rapids housing project pioneers method to expand homeownership

CEDAR RAPIDS — Nonprofit Matthew 25 was awarded city of Cedar Rapids financial incentives this week to support a $2.5 million investment in new housing units in the Northwest Neighborhood that will offer a new way for lower-income residents to access homeownership.

Through the purchase of city-owned property at 1021, 1027 and 1033 Eighth St. NW, Matthew 25 is looking to redevelop the flood-devastated land into new owner-occupied housing that will keep the residential units affordable in the long run. In doing so, Matthew 25 is trying out a shared equity model intended to expand homeownership opportunities and address the community’s affordable housing shortage.

The Cedar Rapids City Council on Tuesday signed off on preliminary deal points and financial incentives for the project. Each parcel consists of three units — one single-family detached house and two accessory dwelling units, three garage stalls and six total off-street parking spaces.

Matthew 25 Executive Director Clint Twedt-Ball said the shared equity model allows homeowners to purchase these homes with a low down payment. This will help Matthew 25 sell the houses to buyers who are not otherwise eligible for conventional loans — a 10 percent down payment versus the standard 20 percent. He said they’ll be sold similar to a condominium.

“The homeowners will be limited on the equity that they are able to gain when they sell these homes so that over the course of many years, that equity will slowly be pulled out to keep those homes affordable for the long term,” Twedt-Ball said. “We are excited to pioneer a homeownership vehicle in the Cedar Rapids area that will increase home opportunities for people that might not otherwise qualify.”

For example, Twedt-Ball said, if a homeowner purchased a unit for $250,000 — a number used as an example, not the price of the unit — when the owner sells the property back to Matthew 25, they would be limited to a 1 percent annual increase in the value of the property. If the property appreciated at 3 percent per year, in two years it would be worth $265,225, but the sale back to Matthew 25 would be limited to $255,025. He said the savings in the sale price back to Matthew 25 is then passed along to the next homebuyer, so they are essentially now purchasing the home at $10,000 below market value. That affordability grows over time.

In the first phase, Matthew 25 will work on the lot at 1021 Eighth St. NW starting May 1, 2024 and wrapping up by Dec. 31, 2024. The other two lots will be complete in the second phase, starting Dec. 1, 2024 and finishing by Dec. 1, 2025.

The homes are designed to each have its own porch area and a separate entrance. The street-facing unit on each parcel is designed in a way that will give the appearance of a two-story single family home, Twedt-Ball said. They also will be situated to allow for shared amenities such as gardens and outdoor gathering spaces.

These will be net-zero homes that are entirely electric with healthy materials used for the interior and exterior of the homes, Twedt-Ball said. Each will have two electric vehicle chargers.

“They'll be a small (carbon) footprint home that's good on the environment and good for the neighborhood,” Twedt-Ball said. “As you can imagine, doing something that's as forward facing as this requires a little more funding than your traditional housing.”

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The city will sell 1021 and 1027 Eighth St. NW for fair market value as determined by an appraisal. Cedar Rapids will sell 1033 Eighth St. NW for $1 because of the financial gap and because it meets goals outlined in the Community Climate Action Plan.

The city will provide a reimbursement of 100 percent of the tax increments up to a net present value of $360,000 or 20 consecutive annual payments based on the demonstrated costs tied to achieving the Department of Energy’s Zero Energy Ready Home Certification — the measures taken to achieve high levels of energy savings, comfort, health and durability.

The developer will apply for state workforce housing tax credits in 2024 for the second phase of the project. If awarded the tax credits, the city will reassess the gap in financing and potentially adjust its incentives.

“From a housing standpoint, this could be an interesting experiment to see how this works,” council member Scott Overland said. “And if it is successful, we would be able to build on this for a lot of additional housing units for folks that are having difficulty through the traditional mortgage method.”

Matthew 25’s Healthy Neighborhoods capital campaign over the last three years has helped to revitalize a six-block stretch of the northwest area with 47 vacant parcels that were devastated in the 2008 flood. The campaign so far has supported the opening of the nonprofit Cultivate Hope Corner Store, rehabilitation of several houses, construction of new housing and now will help work on infill housing. This project will in part be funded by this campaign.

Twedt-Ball said Matthew 25 wants to build attractive housing that aligns with the historic character of the Northwest Neighborhood and maintains long-term quality affordable housing in the neighborhood.

“Allowing these three homes to come into a neighborhood that's often not given attention in terms of creating a diverse ecosystem for economic diversity is critical to the improvement of our city,” said Paul Desmond, founder of architecture firm Form Functions Studio, which has been working since 2020 with Matthew 25 on the project.

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