Cedar Rapids ROOTs homes hold value

CEDAR RAPIDS — Government-subsidized housing built in Cedar Rapids following the 2008 flood is retaining its value overall, although some pockets of town have declined and some residents fear new flood zone houses may lose value if the city can't get funding for flood protection.

About 750 homes have been built in Cedar Rapids through the Rebuilding Ownership Opportunities Together, or ROOTs, program, which uses mostly federal money to pay 25 percent of the cost of the home for low- to moderate-income people who agree to stay for five years.

'It actually worked out wonderfully because I got a house with a downpayment of 25 percent and built equity into a home I wouldn't have been able to afford otherwise,' said Amy Opperman, who lives on Muirfield Drive SW.

Another hundred homes are expected to be completed before the program wraps up at the end of the year.

ROOTs owners hope to make money

The owners of about 12 percent of the 750 ROOTs houses, townhomes and condos built since 2009 have sold their properties, according to records provided by the Cedar Rapids Assessor's Office. Some homeowners made as much as $40,000 in the transaction, while some people lost $20,000 or more. The median was a $4,985 gain from their original purchase price, records show.

'I would basically be paid to live here because I'll get $50,000 in equity,' said Melanie Jenkins, 39, about her ROOTs house, a 1,300-square-foot ranch on 29th Street NW.

Jenkins, a social worker, lost her Czech Village cottage in June 2008 when the Cedar River flooded 10 square miles.

Map by John McGlothlen / The Gazette

When Jenkins applied for ROOTs, buyers couldn't make more than the average median income (AMI) for the area. More than half of ROOTs buyers had to be at or below 80 percent of AMI. The cutoff for Jenkins, a single breadwinner with two children, was $63,100 in 2011.

'The only reason I qualified was because I was a single mom,' she said.

She bought the house for $179,700 in June 2011 and moved in with her son and daughter, now 15 and 21 respectively. Jenkins has had some issues with the house — patchy grass, settling under the concrete patio and flooring that is easily scratched by her dogs. But 'overall, I'm happy. When I sell it, I can pay off my car,' she said.

Donna Simons is considering selling her condo on Muirfield Drive SW, which she bought in 2009 through ROOTs. But she's worried it has lost value.

'About a month ago, I got a letter from the assessor,' she said. The assessed value of Simons's condo went down $4,400 from 2015 to 2016.

'It kind of upset me,' Simons said. 'They went by all the ones that had sold.'

Of the 13 ROOTs condos on Muirfield Drive SW to sell since 2009, the median outcome was a $5,095 loss, assessor's records show.

'Silver lining' for developers

More than $43.6 million in disaster recovery aid from the U.S. Department of Housing and Urban Development (HUD) has gone to the ROOTs program. About 80 percent of the money went to homeowner down payments. The rest paid for marketing, administration and land acquisition, among other things.

Many of the developers who qualified for ROOTs and agreed to the terms received free city-owned lots.

While about half the ROOTs houses built or allocated are in the 2008 flood zone, others are in suburban pockets on the edges of town. The reason is in 2009, flood-devastated houses hadn't all been removed, so there were no infill lots available.

'It went to the outskirts then it came back in,' said Randy Dostal, president of Thomas Dostal Developers in Cedar Rapids, which has built about 50 ROOTs houses all over the metro area. Right now, he's building ranch houses north of Highway 30 and west of Highway 151.

ROOTs helped developers — and all the businesses connected with building new houses — get through the Great Recession, Dostal said.

'It was the silver lining after the flood,' he said.

ROOTs resurrected Cedar Valley Habitat for Humanity, Executive Director Jeff Capps said. The not-for-profit's downtown Cedar Rapids office flooded in June 2008 and the agency was struggling to maintain its mission of building affordable housing for low-income people.

'We do not recoup our money at closing like a typical developer. We hold the mortgage,' Capps said. 'Having 25 percent of that back at closing was huge to us in stimulating additional building.'

Habitat has built about 70 ROOTs houses since 2009.

Developers wanting to participate in ROOTs must show they've got experience building affordable housing and can design homes that fit into the neighborhoods. Their profit is limited to 15 percent of total costs — which has held firm despite complaints from some developers about the rising cost of materials.

ROOTs houses initially couldn't cost more than $180,000, but rounds 2 and 3 required developers sell as least half their houses for $150,000 or less. All Round 4 houses have been $150,000 or less.

This is 15 percent higher than the $130,000 median sale price for all single-family homes in Cedar Rapids sold in the past year of arms length deed transactions, the assessor reports.

Flood zone

Building in the flood zone didn't start in earnest until late 2011. As such, most of those houses haven't reached the five-year threshold after which owners can sell without forfeiting part of the 25 percent subsidy.

But the handful of ROOTs houses in or near the flood zone that have turned over have sold for at or above their original sales price, assessor's records show.

'Infill was an untested market and we didn't know how it would work,' said Paula Mitchell, the city's housing and redevelopment manager. 'We have not had a problem with those units being sold.'

While ROOTs houses cannot be built in the 100-year flood plain and those in the 2008 flood zone must have flood insurance, being in a flood zone can affect property values.

Cedar Rapids still is waiting on $70 million Congress authorized for flood walls, levees and pump stations but never was appropriated. Mayor Ron Corbett said in February in his State of the City address that the city is in 'serious risk of never being funded.' The total estimated cost of the city's flood-mitigation system is $600 million.

Restoring the city

By filling vacant lots, ROOTs houses restored population to some of the city's most hard-hit neighborhoods and added to the tax base. Of 229 ROOTs properties built on infill lots, the average assessed value is more than double the pre-flood assessed value and nearly eight times more than the value of the properties immediately after the flood, the city reported.

In some older neighborhoods, ROOTs houses — many Craftsman-style bungalows with front porches and brightly-painted front doors — are noticeable among their more venerable peers. But in Cedar Rapids subdivisions, ROOTs houses, townhomes and condos are mixed with units not subsidized for low- to moderate-income buyers.

'It's a lot of young individuals purchasing these homes,' said Opperman, who works as a compliance officer from her condo near Kirkwood Community College. But 'there's an older population moving in as well, which is kind of an interesting dynamic.'

Although the federal money for ROOTs is gone, some developers would like to see the city continue subsidizing new housing. Cedar Rapids' apartment vacancy rate is 2.5 percent, which is about half what is needed for supply and demand to be in equilibrium.

'We'd like to see some sort of program replace this,' said Capps, from Habitat for Humanity.

Dostal wants the city to give $5,000 and tax breaks to developers who build houses priced at $180,000 or less. His plan calls for the state providing similar benefits.

Mitchell said the city is looking at what grants or federal funds might be available, perhaps focusing on home rehabilitation.

'We know there will still be housing needs when this program is over,' she said.

ROOTs program by the numbers

$43.6 million in federal disaster recovery money allocated for housing restoration since 2009

$73,590 in city funds spent

750 houses, condos, townhomes built — another 100 planned by the end of this year

58 developers participated

ROOTs still is accepting applications from interested homebuyers who meet income eligibility. For more information, click here.