Study indicates need for affordable housing in Decorah, Iowa

 
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Note: this copyrighted article appeared in the Decorah Public Opinion, article by Sarah Strandberg.
There's a need, but is it feasible?
After learning Decorah could utilize an additional 171 affordable housing units, the Northeast Iowa Community Action Corporation Board of Directors authorized a feasibility study on the conversion of East Side School into apartments.
The NEICAC Board met Monday night and reviewed the results of the marketing study paid for by Heartland Properties Inc., an Alliant Energy Company, and a potential partner in the East Side project.
"We consider this a very strong indication of a need and demand for additional apartment units in Decorah and Winneshiek County. Although a market study is not an exact science, the indication of need and demand for an additional 171 units makes a 28 to 30 unit development very feasible," commented Russ Kaney director of housing investments for Heartland Properties.
While she had anticipated the study would show a need for affordable housing, Humpal was surprised at what type of units are in demand.
It called for 99 one-bedroom units, 55 two-bedroom units and 17 three-bedroom units. Since they are difficult to find, Humpal said she frequently hears about the need for three-bedroom units.
The Board has authorized the "next step," according to Humpal. Architect Tom Gardner of Strawberry Point will complete more detailed drawings of East Side as an apartment building, and a feasibility study will be conducted.
The work is to be completed by the Board's Oct. 28 meeting. If the project "pencils out," Humpal said the funding in the form of housing tax credits through the Iowa Finance Authority would be applied for by the Nov. 25 deadline.
"We won't apply if it doesn't make sense financially. If we can't generate enough income from various funders to do the renovation correctly, we won't proceed. We need to have enough units that the rent will meet the loans we have and the operational costs of running the building," Humpal explained.
Constructed in 1897, East Side was closed by the state fire marshal in 1999 for failing to meet state fire code. Since then, about 200 students have been attending classes in portable units, which cost $111,500 per year to lease.
Historic tax credits
Humpal stated that although converting an older building into affordable housing is more expensive than new construction, there are incentives for investors.
Since the building is listed on the National Register of Historic Places, NEICAC will apply for federal historic tax credits, should the Board decide to pursue the project.
"Historic tax credits are very advantageous to a tax credit deal. The investor utilizes them all in one year, not over 15 years as with standard, low-income tax credits. We get more money for those tax credits," Humpal said.
Congress has set aside a certain portion of funding that allows agencies that construct affordable housing to deduct the cost of the building from their income taxes.
Since NEICAC is a non-profit agency that doesn't pay income taxes, it can apply for the tax credits and sell them on the open market, making as much as 85 cents on the dollar.
In the case of the Woolen Mill project, Heartland properties paid NEICAC $914,256 to receive $1,132,291 worth of income tax credits.
A statement showing the school district's commitment to allow East Side to be converted to housing would need to accompany any application for tax credits.
A school bond referendum is set for Oct. 8. Voters will decide whether to issue up to $6.1 million to help pay for a new Middle School. School officials have recommended that East Side be made available to the community for uses other than a school.
Humpal said Gardner believes the way the windows are set up in the school offers flexibility in converting it to housing. The architect said there could be at least 26 apartments in the building.
Misinformation
Humpal said there has been misinformation spread about the costs of converting the former Woolen Mill into affordable housing. The project, in the building that most recently housed Decorah Tire is nearly complete.
She said some people have stated it cost $40 to $60 per square foot to renovate the building, but it actually was more than $100 per square foot.
Architects estimate new construction at about $75 per square foot, Humpal said.
The materials used in historic preservation are more costly, Humpal said. Wood-framed windows are used instead of vinyl. Woodwork has to be torn out, then installed again.
"These are the types of things that make it much more expensive to do than new construction. The good news is that we are preserving part of our history," she said.
If historic tax credits were utilized, the project would need to abide by requirements of the Federal Historical Society.
Humpal said the tin ceiling in East Side might not have to be maintained throughout the building, but would likely need to be retained in common areas.
"We'll have to take them down, put double sheet rock up and then put them back up again. Those are the type of things that we run into with historic preservation to meet fire code," she said.
But Humpal said she enjoys preserving history.
"I find it challenging to take a building like that and turn it into something that will stand for another 50 years at least. Finholt Construction did a nice job at Woolen Mill," she said.
The public will have the opportunity to see the Woolen Mill Oct. 30. There will be a ribbon cutting ceremony at 11:30 a.m. and tours will be given from noon to 4 p.m.
If the East Side project is undertaken, it will be NEICAC's fifth project in the county. NEICAC serves the seven-county area.
"I'm very pleased with my board being willing to do one more project in Winneshiek County ... we haven't done any housing projects in the other six counties, but they felt this was a project they couldn't walk away from if the numbers work out."

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