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Washington St Neighbor Revite S DU~-@uE ~ck~ MEMORANDUM January 13, 2005 ; 1 TO: The Honorable Mayor and City Council Members FROM: Michael C. Van Milligen, City Manager SUBJECT: Washington Street Neighborhood Revitalization Strategy The Housing and Community Development Department administers a number of state- and federally-funded programs to encourage housing investment city-wide. Eligibility for all programs is tied to income limits. Staff has now developed a preliminary proposal for a program of concentrated activities to encourage more owner investment and housing rehabilitation in the downtown, and is recommending the Washington Street Neighborhood as the logical focus of this effort. There is a concern that the Washington/Five Points neighborhood area is showing indications of a decline in appearance and maintenance. This is substantiated by depressed property assessed valuations and high vacancy rates. The Washington Street Neighborhood is being defined as a 55 square block area bounded by 11th and 22nd Streets on the south and north; and by White and Elm Streets on the west and east. Information provided by the City Assessor's Office indicates that this area contains 312 single family residences and 147 duplex structures. Many of these duplexes have been converted from single family houses. Single family homes average $42,000 in assessed valuation; duplexes average $49,000. By comparison, the City-wide average for these types of housing is $111,000. The 2004 Assessor's Office data shows a vacancy rate of about 8% for single family units; Census data indicates an average 13% vacancy for all housing units in the area. The 2000 Census data shows that in this general area, fully 68% of the population reports income less than 80% of area median, considered as "moderate-income" or lower according to HUD standards. Income disparities between owner and renter households are significant. CITY OF DUBUQUE, IOWA MEMORANDUM 13 January 05 To: Mike Van~{~igen, City Manager From: David ~s, Housing and Community Development Department Re: Washington Street Neighborhood Revitalization Strategy Introduction The purpose of this memorandum is to summarize our planning for implemen- tation of a comprehensive "revitalization strategy" for the Washington Street Neighborhood. It is provided for your and the Council's review and for consider- ation of the Housing Department's request in the FY06 CIP for a 5-year commit- ment of $100 000 annually for increasing homeownership in this neighborhood. Background last summer a consultant was contracted by the City and DB& T to conduct a preliminary feasibility assessment for creating a "community development financing entity" (CDFI) in Dubuque. Paige Chapel conducted a series of interviews here in July, meeting with downtown business and lending leaders, Dubuque Initiatives, Dubuque Main Street and several developers of downtown housing. A "CDFI" is defined as a financial institution that works in "market niches" that are not traditionally served by other lenders, providing a wide range of financial services and products. CDFls include community development banks, credit unions, loan funds, venture capital funds and microenterprise loan funds. The consultant researched the potential for creating a CDFI entity in Dubuque, by talking with potential borrowers and investors and by identifying obstacles and opportunities to stimulate residential rehab and owner-occupancy in downtown neighborhoods. The study report findings and recommendations did not support creation of a CDFI. This conclusion was based on the perception that, while in need of stimulus and reinvestment, the conditions of Dubuque's downtown housing market do not require formation of a new lending entity. lenders interviewed expressed the opinion that existing financing opportunities are sufficiently available to meet the need. Quoted in the report, "As one banker expressed, 'There are lots of small gaps, but no gaping holes' in the financing market." Study findings included the following: 1. There is a need to stimulate renovation of residential properties in the downtown area and provide homeownership opportunities for moderate- income households. 2. The specialized nature of acquisition-rehab lending in under-performing markets and additional time and risk associated with it are typically beyond the normal scope of most regulated lenders. 3. There exists a general consensus that existing housing stock in the downtown and surrounding neighborhoods should be preserved and should result in mixed-income neighborhoods. 4. Citizens support affordable housing for low- and moderate-income house- holds but do not want to create a concentration of low-income housing. 5. Current market rents are insufficient to cover the full costs of acquiring and renovating buildings for mixed, i.e., housing and commercial, uses. This serves to explain the number of downtown buildings with vacant upper- story units. 6. There is a concern that the Washington/Five Points neighborhood area is showing indications of a decline in appearance and maintenance. This is substantiated by depressed property assessed valuations and high vacancy rates. 7. Developers believe that homebuyer demand could be increased if a "one- stop shop" approach was created that: a) prepares potential buyers for homeownership; b) helps manage the bidding and construction process; c) provides access to conventional capital; and d) assists in obtaining alternate (subsidized) financing for renovation. 8. Developers believe that a potential market exists in downtown housing from young professionals interested in "walking neighborhoods" with access to downtown cultural and entertainment amenities. 9. The City's current efforts in assisting rehabilitation and increased owner- occupancy are commendable, but are not on a scale sufficient to change market perceptions or contribute to long-term stability of neighborhoods. In particular, the Housing Department should target use of its funds in order to create more impact and encourage private reinvestment. 10. Two major obstacles make acquisition and rehabilitation of older downtown housing infeasible for low-moderate income households: a) combined costs of purchase-rehab exceed the borrowing capacity of lower-income households; and b) total costs can exceed market values, making conventional financing difficult to obtain. 11. To overcome these obstacles, "deeper" subsidy must be identified and made available, to fill the financing gap. This funding must obviously be from local government. If a realistic source of consistent funding cannot be identified, a strategy for enabling lower-income households to become homeowners is not feasible. Discussion In response to the issues identified in the report, staff have developed a preliminary proposal for a program of concentrated activities to encourage more owner investment and housing rehabilitation in the downtown. In particular, we have examined the Washington Street Neighborhood, noted in the report as an "area in transition," as the logical focus of our efforts. Proposed Revitalization Area The Washington Street Neighborhood, for purposes of this report, is a 55 square block area bounded by 11th and 22"d Streets on the south and north; and by White and Elm Streets on the west and east, respectively. At its eastern and western boundaries, uses tend to be more commercial, with the residential core located along Washington and Jackson Streets. Housing uses begin to intensify north of 14th Street; and become increasingly more concentrated toward the north end of the area. Scattered small businesses and institutional structures are located throughout the neighborhood. Information provided by the City Assessor's Office indicates that this area contains 312 single family residences and 147 duplex structures. Many of these duplexes have been converted from single family houses. Single family homes average $42 000 in assessed valuation; duplexes average $49 000. By comparison, the City-wide average for these types of housing is $111 000. 2004 Assessor's Office data shows a vacancy rate of about 8% for single family units; Census data indicate an average 13% vacancy for all housing units in the area. 2000 Census data at block group level is not exactly coincidental with the boundaries of the study area, but does provide reliable demographic comparisons. Fully 68% of the population reports income less than 80% of area median, considered as "moderate-income" or lower according to HUD standards. Income disparities between owner and renter households are significant. Renters comprise 95% of all households earning less than $10 000 and 84% of all households earning less than $20000. Conversely, only 5% and 16% of owner households, respectively, report lowest incomes. Renter households predominate, with 70% of all units tenant-occupied. Of all households, about 47% are occupied by "families," meaning by related persons. Of these, roughly 19% are female-headed households. This is about double the rate of this population, city-wide. The housing in the area is among the oldest in the City, with more than 86% of all units built before 1939. Asset inventorv The neighborhood is directly served by a number of churches, including St John's lutheran, St Mary's, St Matthew lutheran, St Paul lutheran and Immanuel Congregational. The Maria House transitional housing facility and adjacent lantern Center are located on the St Mary's campus. The Washington Tool Library and Dubuque Food Pantry have assisted neighborhood residents for many years. St Mary's, Audubon and Prescott elementary schools serve the K-6 population in the area. A planned replacement school at Prescott, budgeted at $9.3 million, will approximately triple the existing school size and is scheduled to be open for the 2006-07 school year. Small businesses are scattered throughout the neighborhood. The primary retail center is located at the Five Points, anchored by Eagle Country Market. Several banks and credit unions operate within the area. Fast food and convenience stores are situated at the north (20th -22nd Streets) corners of the neighborhood, at Elm and White Streets. The housing, while among the oldest in the City, has retained much of its historic character. Homes are generally quite small, built on narrow (25-50 foot) frontage lots. Rear alleys and garages provide some off-street parking on most blocks. There is a genuine pedestrian-friendly "feel" in the core residential area of the Washington Street Neighborhood. Current resources available The Housing and Community Development Department administers a number of State- and federally-funded programs to encourage housing investment, city- wide. Eligibility for all programs is tied to income limits. These include the First Time Homebuyer Program, offering $5000 low- or no-interest downpayment loans to low-moderate income buyers. Rehabilitation assistance programs are also available, offering up to $25 000 to homeowners, as 3% interest, 20-year loans for a variety of home improvement activities. The Department recently received another Federal Home loan Bank award, of $100000, to provide $4000 down payment grants to lowest-income (below 60%) first-time homebuyers. The lead Paint Hazard Reduction Program offered through the Housing Department offers $6000/unit grants to homeowners and landlords to remove lead paint from their properties. CDBG and HOME Program funds are utilized for rehabilitation assistance to landlords, with up to $20 OOOlunit available as 3%, 20-year loans. Beginning in 2003, a program of concentrated assistance to the "Five Points" area was initiated, using a combination of HOME, CDBG, HUD Special Purpose Grant and lead Pro~am funds totaling approximately $500 000. A square-block area bounded by 20 and 21st Streets, Elm Street and Washington Street was selected for an intensive rehabilitation effort. last year, a partnership was formed with the Four Mounds Foundation, the Four Oaks program and the Dubuque Community School District for purchase and rehabilitation of three derelict houses in the Five Points area. The "HEART' project was funded through an Iowa Finance Authority Housing Trust Fund grant, of $100 000, to Dubuque's Housing Trust Fund Commission. Much of the proposed area is within an Urban Revitalization District, meaning residential property owners can receive a 10-year tax abatement on valuation increases resulting from improvements. The current District boundary extends from 14th to 20th Streets. The area is also within the City's Enterprise Zone, meaning businesses adding jobs or developers building or rehabilitating housing are eligible for 10% Iowa tax credits. The Zone boundaries were recently approved to include expansion from 1 yth Street to 2200 Street. Opportunities The area was formerly served by the Washington Neighborhood Association, originally organized by Hank Waltz and Father Sigwarth. In the late 1980's, the former Catholic Worker House, on East 21st Street, was donated to the Association, becoming the Washington Neighborhood Center. This served for a number of years as the focal point for neighborhood organizing efforts in the area. The Center has ceased operations and no grassroots-Ievel organization currently exists to represent citizen interests in the Washington Neighborhood. An opportunity now exists for the City, through the operations of the Neighborhood Development Specialist, to assist in organization of a neighborhood association to help plan and direct City efforts to revitalize the area. The former Dubuque Casket Company is located at the center of this neighborhood. An imposing, multi-story, block-long structure, it has been occupied for many years by Boyes Auto Parts as a warehouse. A recent application by a local developer, to the Iowa Finance Authority for housing tax credits, proposes a $5.3 million investment for affordable housing, as part of an adaptive re-use of the 64 000 square foot building. Rehabilitation and re-use of this facility, either as housing or a mixed-use project, would significantly enhance other, private reinvestment efforts in this neighborhood. One of the achievements of the former Washington Neighborhood Association was placement of the "traffic islands. along Washington Street, to discourage large truck traffic. Many residents now feel that these barriers have served their purpose, and with the permanent closing of the "Pack," they are no longer necessary. An opportunity exists to open a dialogue about replacing these with smaller, more attractive islands. Removal of the large-cliameter concrete curbing, while retaining landscaping and the historic lighting, would ease traffic flow while still discouraging thru-neighborhood transit. A newly-formed neighborhood association could facilitate this discussion. Elements of a neiahborhood revitalization strateav 1. Encourage homeownership 2. Encourage a mix of household incomes 3. Target use of City purchase-rehab funds to this area 4. Consider amending rehab program policies, making some City funds available as forgivable loans to encourage borrower participation 5. Increase public improvement efforts as needed, i.e., streets, alleys, curbs, sidewalks, lighting 6. Encourage formation of a neighborhood association to promote grassroots-Ievel citizen participation. Development of a neighborhood- level plan for improvements could provide a consensus-built approach for a comprehensive revitalization strategy. Coupled with this is the importance of encouraging neighborhood leaders: perhaps a partnership could be established through the ISU-Extension Office to establish a leadership development program. 7. Work with a private developer for adaptive re-use of the Casket Factory building 8. Promote concept of the new Prescott as a "community-centered" school, encouraging parental involvement in school activities and providing school facilities for neighborhood and community uses 9. Increase housing and zoning enforcement to address problem properties as needed 10. Research availability of sources for "deeper subsidy" financing and encouragement of private reinvestment. These could include: a. Expansion of existing or creation of new downtown TIF district b. Expansion of the existing Urban Revitalization District c. The Housing Trust Fund Committee has directed staff to make application to the Iowa Finance Authority State Housing Trust Fund for another grant in this year's competition, pending availability of funding. The Committee has endorsed the concept of a revitalization strategy for the Washington Neighborhood. d. Apply to the Iowa FannieMae Partnership Office for American Community Funds assistance. The City hosted a FannieMae workshop on the ACF program in May. This funding source can provide large ($1-5 million), short-term (5-7 year), low-interest (2- 3%) loans to a municipality for housing improvement activities. e. Consider use of General Funds for capitalization of a reinvestment program 11. Work with a for-profit or non-profit developer(s) to acquire available houses, rehabilitate them and re-sell to qualifying homeowners. Gateways to Home and Habitat for Humanity are two potential non-profit partners. 12. Market this concept through lenders and realtors to enlist them in identifying and recruiting new homebuyers. 13. Encourage formation of a pooled lending program from local lenders, to offer first mortgage financing at discounted rates. 14. Work with Main Street Ltd to assist businesses located within its service district to access resources for property improvements. Main Street's area extends north to 22nd Street and to White Street on its eastern boundary within the Washington Neighborhood. 15. Work with advocacy organizationfDowntown Advocate" as listed in the recommendations of the Downtown Dubuque Master Plan, to implement action steps relating to improvements in the Washington Neighborhood. Initial Steps in Implementina a Strateav 1. Attract persons and families to purchase housing in the area 2. Assist current renters to become homeowners 3. Encourage existing homeowners and landlords to renovate their homes and rental properties 4. "Market" this concept, by: a. approaching neighborhood homeowners directly, door-to-door b. working with realtors to explain available financing incentives for prospective homebuyers c. working with lenders to set up the mortgage loan pool d. contacting landlords to offer "incentivized" CDBG rehab loan financing e. contacting/recruiting tenants, as potential homebuyers. ISU- Extension could set up a special homeowner counseling course for these neighborhood residents. 5. Recruit and fund small contractors to purchase and rehab homes, to be re-sold to qualifying families 6. Partner with the non-profit to purchase, rehab and re-sell Potential Inter-Departmental Participation The elements of this strategy that could include participation from other City departments include: 1. Neighborhood Organization. Organization of neighborhood residents is a long-term key to the success of any strategy we might propose. This initiative could be sponsored by the City Manager's Office, through the neighborhood development specialist. 2. Neighborhood Planning The idea of developing a "neighborhood-level" plan has proven successful in many communities. As Planning Services doesn't have staff capacity to achieve this at the present time, we have approached ECIA about contracting for planning services. A $4000 grant recently received by the Housing Department from the Iowa Fannie Mae Partnership Office could be used for this purpose. 3. Targeted Enforcement Another key to this strategy would be targeted enforcement, to be used in conjunction with the incentives to be offered for property improvements. This enforcement would come from the Housing, Planning (zoning), Fire (housing code), Building and Health Departments. 4. Additional park and open space We need to evaluate the possibilities for development of needed additional green space within the neighborhood. 5. law Enforcement The Community-Oriented Policing (COP) Program will be an essential partner in implementation of this strategy. 6. Small Business Assistance There may be a role for the Economic Development Dept to play in assisting small businesses within the area to grow, improve their appearance and create more jobs for neighborhood residents. 7. Public Improvements As part of this strategy, we need to evaluate what types of improvements - street, curb, lighting, alleys, etc - could be provided by the Engineering and Operations and Maintenance Departments, and programmed into a CIP timeline. Fiscal Year 2006 CIP Request Essential elements of a downtown revitalization strategy are to promote homeownership, and to encourage a broader mix of household incomes in our residential areas. While a variety of programs is available to assist low- and moderate-income families to purchase and improve homes, households earning more than 80% of area median income do not qualify for these financial subsidies. As a result, a significant barrier exists in promotion of downtown neighborhoods to these families. Since 1994, the Housing Department has administered a First Time Homebuyer down payment loan program, utilizing CDBG funds totaling $900 000. Additional grants from the Des Moines Home loan Bank have added $580 000 to these efforts. 243 low- and moderate-income families have purchased their first homes through these programs in the past ten years. Private investment totaling over $13 million has matched the City-provided financing. Approximately 35% of these families were classified as very low-income (earning less than 50% of median.) Proposed in the FY2006 CIP is a new 5-year program, capitalized with $100 000 in General Fund revenues, for down payment loans to families earning 80-100% of area median income. Guidelines would be similar to our existing down payment program, providing for low- or no-interest, short-term repayments of the $5000 loans. The program would operate in conjunction with the Washington Neighborhood revitalization initiative. Summary A long-term effort is needed to accomplish a neighborhood revitalization strategy. Optimally, this begins with a citizen participation process, ensuring adequate representation of differing interests and ownership of public actions taken to achieve neighborhood improvement goals. A shorter-term initiative can begin with a program of intensified marketing and financial incentives designed to encourage private housing investment. Over time, additional financial resources can be identified and additional partners recruited as part of the implementation effort.