Iowa Affordable Housing Funding Gets Des Moines Developers Align
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Des Moines-based developers are ready to take advantage of new state funding that helps lower the cost of construction – and therefore monthly rent – and make housing more affordable for the workforce. the state.
Six project managers are looking to capitalize on additional funds allocated to the Iowa Workforce Housing Tax Credit program for new housing in Des Moines. Another request for funds in West Des Moines.
Gov. Kim Reynolds enacted a tax bill in June, part of which provides money to help close the growing gap in Iowa’s affordable housing supply. The legislature approved a $ 20 million increase in two existing tax credit programs, as well as an additional $ 4 million for the state’s housing trust funds. Housing Trusts are nonprofit organizations that help plan, build, and rehabilitate housing units for low to moderate income renters in all of Iowa’s 99 counties.
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The package included $ 30 million less than Reynolds proposed earlier this year in an affordable housing bill and does not include a program that would help some of Iowa’s lowest incomes – a tax credit for low-income housing which would cap rents for Iowans earning 60% less of the region’s median income. Reynolds’ spokesperson did not return a request for comment.
“It was a bummer,” said one of the promoters, Jack Hatch, a former state senator who was the Democratic candidate for governor in 2014. “And so next year, I hope that the affordable housing industry and local communities are urging the Legislature that there is even more for them to do. “
He said the “plus” includes finding creative solutions to housing shortages in rural Iowa and raising funds through President Joe Biden’s proposed US Jobs Plan, which targets to build and preserve 2 million affordable housing units.
Still, Ryan Moffatt, economic development coordinator for Des Moines, said the funding approved this year is a “welcome instrument in our toolkit to help reduce” rising construction costs, allowing developers to pass those savings on. on tenants.
And it comes at a time when construction costs are skyrocketing. The price of softwood lumber, for example, climbed 154% between May 2020 and May 2021, according to the Federal Producer Price Index. Steel mill products increased 76%.
“It helps keep costs down,” Moffatt said. “We’ve had (developers) who can’t get their numbers to work until the costs go down.”
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Stronger Workforce Housing Tax Credit Program Has Immediate Impact
In its seventh year, the Workforce Housing Tax Credit program grants developers up to $ 1 million per project. Each requires a city connection of at least $ 1,000 per unit.
Credits are distributed in the form of a refund of state taxes on sales, services, or use paid during construction.
Previously, the program was capped at $ 25 million per year, with the small town set aside at $ 10 million.
This year, the program will have $ 40 million, of which $ 12 million is earmarked for small communities. Over the following years, the program will have $ 35 million, including $ 17.5 million for small towns.
When it was first introduced in 2014, the program money was first come, first served, which quickly led to a backlog of projects in major cities.
“It’s effectively closed for cities since 2018,” Moffatt said.
This year’s funding allows the Iowa Economic Development Authority to clear that backlog, immediately allocating $ 13.3 million to 28 projects across the state. In Des Moines, four construction or rehabilitation projects of 186 housing units received a total of $ 1.5 million.
“We need to contract with these projects first before awarding further awards,” authority spokesman Kanan Kaplan said. “So after taking over the waiting list, we’ll have about $ 15 million to allocate for new credits.”
Applications, now awarded by competition, are due to the State on July 15.
Projects in the Des Moines metro for money
In Des Moines, the promoters of six projects are asking for $ 3.3 million that would help build or rehabilitate 368 units, including:
In West Des Moines, RE Development # 1 wants to construct a mixed-use commercial and residential building at 332 Fifth St., provided it meets the new requirements for historic buildings under consideration at Valley Junction.
Hatch, the former state legislator, is the developer of the Urban Campus Apartments at 1230 Sixth Ave., which would provide housing for young people aging outside of the foster care system. He said he is also asking for workforce housing tax credits for projects in Winterset, Cedar Rapids and Dubuque.
His company, Hatch Development, typically looks for five to nine revenue streams for a project to offset construction costs and keep rents affordable for tenants.
“It’s so essential,” he said. “And I thank the governor and the legislature for not being afraid to raise more state dollars for housing, because it also helps leverage federal and private investment.”
In addition to the Workforce Housing Tax Credit program, the legislature approved $ 15 million per year for the Gray Areas and Brownfields Tax Credit Program, which is available for developers rehabilitating older properties that have environmental problems, such as asbestos or lead paint. Solving these issues increases the expected cost of construction, often leaving properties vacant and off the tax roll.
These requests are due to the state in the fall.
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Increased funding for local housing advocacy groups
An additional $ 7 million will go to the state’s housing trust funds each year, up from an annual cap of $ 3 million, paid through the real estate transfer tax. The cap had been in place since 2004, when the trust funds were launched.
“It’s been a long time before we can finally remove that cap and have additional funding potential. It’s important,” said Tracey Achenbach, executive director of the Linn County Housing Fund.
The Linn County program expects to receive up to 40% more from the state over the next year, she said. The same will be true for the East Central Iowa Housing Trust Fund, which serves the counties of Benton, Iowa, Jones and Washington. The East Central Iowa Council of Governments administers the two trust funds.
The money goes to programs that create new units, preserve existing units, and provide down payment assistance for buyers and rental and deposit assistance for low- and moderate-income Iowans. For residents of Linn County, the annual income to qualify for the programs is capped at $ 50,050 for a one-person household and $ 71,500 for a four-person household.
Linn County received $ 347,910 last year. The East Central Iowa Trust Fund raised $ 247,489.
Both organizations spend their funds as soon as they are received by the state, Achenbach said.
“The money is used up right away,” she said. “I think housing trust funds play a very important role in trying to design programs that have local impact.”
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