Home rehabilitation programs help maintain Iowa’s aging housing stock, expand homeownership access

IOWA CITY — Natalie Odilo OP has never wanted to live anywhere besides Iowa City. In her view, it’s the perfect size town, with nice parks and streets where you can walk and ride a bike safely. Her four siblings and mother are all within a 15-mile radius.

“I've got that family support and structure,” said Odilo, 56. “The roots are pretty firmly attached for me.”

Odilo moved to Iowa City when her dad divorced her mom in the 1970s. She and her mom lived in a house on C Street until eighth grade when her mom remarried and they moved near the Johnson-Iowa County border.

Eventually, she came back to Iowa City to earn her bachelor's in biology and later her master’s in biomedical engineering and electrical and computer engineering at the University of Iowa. She’s been there ever since.

Degrees in hand, she raised her children in a house near Lucas Elementary on the south side of Iowa City. After her husband left, Odilo said she hung onto that house until her boys graduated, but she struggled to afford it.

At the same time, she began to experience nerve pain, missed a lot of work and applied for disability. She had no income during that two-year wait to receive disability money and lived off retirement savings. Eventually, she sold the house and moved into a rental duplex on Taylor Drive.

When her mom came to visit, she went for a walk down Sandusky Drive one day, where she saw a “for sale” sign and a website with information about Iowa City’s South District Home Investment Partnership Program.

Under the program, the city of Iowa City uses federal funds to purchase, rehabilitate and sell duplex units in the South District. The effort looks to keep aging housing stock in good shape, spur reinvestment in the area and expand access to homeownership for low- and moderate-income residents.

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The high — and increasing — costs of renting wouldn’t be feasible in the long run for Odilo and her mother on their income from disability and Social Security, respectively, she said. Now, as a homeowner, she no longer worries about that stability.

“We just loved the house at first sight and we kept wanting to come back,” Odilo said.

Preserving housing key while building new units

As Iowa communities grapple with aging housing stock, Iowa City’s South District program is among the endeavors cities and the state are undertaking to keep older residential units in good shape and on the market.

Cities are racing to build new units but can’t keep up with demand, so while they pursue new construction, rehabilitating older existing units helps address the critical need for housing.

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Ashley Jared, communications director for the Iowa Finance Authority, said Iowa’s housing stock is the eighth oldest in the U.S. with a median home age of 50 years.

“Our attention needs to turn to not only developing new housing units for our growing workforce but really preserving our aging housing stock,” Jared said.

A 2022 Western Economic Services study predicted Iowa will need an additional approximately 42,000 housing units by 2030 — nearly 33,000 of those being owner-occupied units.

Solely building new “gets us nowhere” toward meeting growing demand, Jared said, “if we don't also focus on preserving our aging housing stock.”

Cities can take on direct rehab role

In Iowa City, officials created the South District program in 2019 focusing on the area around Taylor Drive and Davis Street, where rentals made up 89 percent of the properties and property values were stagnant compared with other parts of the city.

To fuel reinvestment in surrounding properties and provide homeownership opportunities, the city has purchased six properties so far to rehabilitate and sell using federal funds — showing the direct role cities can take to maintain older housing stock.

Neighborhood Services Coordinator Erika Kubly said Iowa City has invested more than $2.5 million in acquisition, rehabilitation costs including climate action and energy efficiency improvements, as well as down payment assistance for the South District program.

“We focus on code compliance and updating major systems as needed so that the new owner won't have to worry about those expenses in their first few years as homeowners — so if the furnace, water heater or roof, for example, are nearing the end of their life cycle, we would prioritize replacement of those items,” Kubly said.

Homeowners directly benefit from rehab funding — a $35,000 loan that's included in the purchase price and will be forgiven if they live there for 10 years. They also may receive up to $25,000 in down payment assistance through federal HOME funding — another potentially forgivable loan if they remain in the house for a certain time period.

The homebuyer must be at or below 80 percent of area median income, complete a homebuyer education course and be approved for financing to cover the remaining cost of the home after the other assistance is factored in.

There are many benefits to maintaining housing stock for a community, Kubly said. The program has transitioned long-term renters into homeownership, she said, and it helps keep residents in proximity to jobs and other amenities.

“We find that preserving existing housing is generally a more cost-effective strategy than new construction, and so for affordable housing projects, we can often assist more units when working with existing property than we can with new construction because what subsidy is required to make the home affordable,” Kubly said. “Housing and land are expensive in our city, so it's important to preserve the lower-cost housing opportunities.”

Odilo and her mom moved into the house in April 2020. In the basement, she has an open area where she set up a sewing and craft space. She has ample space to cook and bake. There’s room for her bookshelves filled to the brim with books and for her cats — an “endless source of amusement” — to lounge or jump around.

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City staff made a number of fixes to the house before Odilo and her mother moved in, adding new doors, basement flooring, kitchen cabinets and appliances and siding. There’s a new privacy fence and solar panels that help reduce energy costs.

In her neighborhood, Odilo said she loves to hear children laughing and having fun playing together, running around her neighbor’s hilly yard.

“I love the house,” Odilo said. “ … I could not be more happy to be owning rather than renting. It's difficult to be a renter, I think in any city … You don't have much control over the condition of the home you live in. It's up to your landlord to decide if, when and how they will repair or maintain things.”

Home rehabilitation spurs area growth

Other Iowa cities have also invested in efforts to rehabilitate older housing stock to keep core neighborhoods stable.

Neighborhood Finance Corp., which operates in Des Moines and Cedar Rapids with support from those municipalities, helps low- and middle-income residents access homeownership in core neighborhoods targeted for reinvestment.

In addition to assistance with the down payment and closing costs, the organization provides a forgivable loan of up to $15,000 for home repairs in Cedar Rapids and $10,000 in other lending areas.

The organization has moved into other Des Moines suburbs since starting in 1991, working to preserve affordable ownership of houses that would often become rentals after a family moved out. It expanded to lend in West Des Moines in 2000, Windsor Heights in 2011 and Urbandale in 2020.

After a family moves out, those houses typically need updates to the kitchen or bathroom, for instance, executive director Stephanie Murphy said, which is where Neighborhood Finance Corp. often comes in with funding for home rehabilitation.

Neighborhood Finance Corp. home rehab lending

From the last five years of available data spanning 2018 through 2022, the organization has provided 326 loans to 307 borrowers in Des Moines for $8.88 million and 55 loans to 52 borrowers in Cedar Rapids for $1.45 million toward home repairs and exterior improvements. Other loan programs, which also include renovations, total $10.65 million in Des Moines and $2.39 million in Cedar Rapids in that time frame.

“Our program works well because it provides an opportunity for that new first-time homebuyer to come in and know that they have some subsidy and a loan product,” Murphy said. “ … The other is the person that's bought this as their first home, they love the neighborhood, their kids are happy at the school, but they need more space. They need to do some updates and they want to stay, and so we're a way that they can do that.”

When Neighborhood Finance Corp. reached its 25th year in operation, before it had expanded to Cedar Rapids, Murphy said Ashley Balius — then a graduate student and now Linn County’s community outreach and assistance director — did a study that evaluated the impact of the organization.

Murphy said the study showed Des Moines’ core neighborhood property values increased at a greater rate compared to other cities such as Cedar Rapids, Davenport and Sioux City.

The Woodland Heights Neighborhood on the west side of Des Moines is one part of town that has transformed with the amount of lending Neighborhood Finance Corp. has done in the area, Murphy said.

“Some neighborhoods have taken off to the point that people don’t always use us because the values work and it’s a more stable place,” Murphy said. “I can definitely see the impact.”

State partnership fuels local investment

At the state level, the Iowa Finance Authority’s Local Housing Trust Fund Program receives most of the funds allocated annually to the State Housing Trust Fund to divvy up among groups certified as a Local Housing Trust Fund.

Jared said the program provides flexibility to these local entities to put state dollars toward local housing priorities such as owner-occupied rehabilitation for aging housing stock.

Additionally, Gov. Kim Reynolds used part of a $100 million federal American Rescue Plan Act allocation toward an investment in housing to create the Home Rehabilitation Block Grant Pilot Program. The cities of Burlington, Grinnell, Mason City, Keokuk and Washington were awarded $4 million combined toward the rehabilitation of 131 owner-occupied and rental homes.

“It's great to do one-off one or two homes on a block here or there to help a homeowner, but to revitalize a whole block would really make all the economic difference for a neighborhood and a community,” Jared said of the program.

Washington received $400,000 to rehabilitate a minimum of 12 owner-occupied homes in the area surrounding the downtown business and commercial district. The city is supplementing state funds with an estimated $105,000 for the project from its low- to moderate-income set-aside funds, City Administrator Deanna McCusker said.

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McCusker said funds will be used mostly for exterior repairs and some interior fixes that extend the life of the property and make an impact to the neighborhood — improvements such as siding, windows, doors and porch repairs.

The income-based program will add to the city’s strides toward improving the downtown area through building renovations and the addition of upper-story housing, she said.

Such a partnership will help Washington provide a sorely needed range of housing options, McCusker said, to recruit workers and attract residents. As some residents move into newer homes that come online, it’s important to keep existing housing stock in good shape for newer residents, she said.

“I think people will understand and see that we're not just interested in improving our downtown, but our whole community, because we're trying to attract people to Washington,” McCusker said. “It shows the public and tourists, visitors to Washington that the city of Washington takes pride in everything, including how our houses look.”

To meet Iowa’s massive demand for housing, Jared said it’s important for cities to show they support housing for all income levels through strong zoning policies, financial support and employer partnerships.

“The housing demand in the state will not be resolved with public or private alone,” Jared said. “It’s going to take innovative thinking and partnerships to resolve it.”

Comments: (319) 398-8494; marissa.payne@thegazette.com