Waukee denied funding for affordable housing townhomes near Northwest High School

The city of Waukee is sorting out its options for completing an affordable housing project after it did not receive a low-income housing tax credit needed to move forward as planned.

"We’ve got some time to work out what our strategy is," Assistant City Administrator Nick Osborne said. But "I’m not going to sit on this."

Citing a need, the city wants to build affordable housing on a 13.5-acre parcel near Northwest High School at North Warrior Lane and Northeast Douglas Parkway. It purchased the land for $902,000 from Prairie Rose Waukee, which developed single-family homes in the nearby Prairie Rose subdivision.

The proposal calls for two 64-unit townhome complexes, one on each side of Northeast Douglas Parkway. The south end would have one- to four-bedroom units for families and the north, one- to two-bedroom units for seniors.

But there's been no construction at the site. The plan was for Wisconsin-based Northpointe Development to build the units, but the agreement between the city and developer was rescinded because Waukee did not receive a 9% low-income housing tax credit through the Iowa Finance Authority that would have reduced Northpointe's federal tax liability for 10 years.

Plans were drawn up for the first phase on the project, the south end units, totaling about $21.3 million. But not having the tax credit creates a funding gap.

City officials met with the Waukee City Council on Monday and discussed the possible options available.

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Why didn't Waukee get the tax credit?

Osborne said the city is committed to having affordable housing at the site, given the long-standing need in Waukee. Local employers have told city officials a lack of affordable housing has been a challenge getting workers, especially for entry-level positions.

He said it is frustrating not to get the low-income housing tax credit but heard from Northpointe and the Iowa Finance Authority that it's not unusual.

That's because the 9% credit has a competitive application process. Out of 24 projects across Iowa, 11 were determined eligible for funding and received it; 10 were determined ineligible for funding; and three, including Waukee's, were determined to be eligible but did not receive funding.

Osborne said the project itself — its density, attractiveness and amenities — earned full marks from the Iowa Finance Authority. But the city's application lost a small but crucial number of points on things like whether the city — as determined by federal census or housing authorities — has enough rent-burdened households or areas that are difficult to develop to merit extra consideration.

Waukee could continue work with Northpointe Development or partner with Greater Des Moines Habitat for Humanity

One option would be to resubmit the application with the project as plans stand now. The rental townhomes would be reserved for people who earn 30% to 60% of the area median income, which in 2023 is $21,950 to $43,860 a year for a single person or $31,300 to $62,580 a year for a family of four, according to the U.S. Department of Housing and Urban Development.

But there's no guarantee the proposal would fare any better a second time around.

Council members gave the city direction Monday to look at other available options. In an interview Tuesday, Osborne said one immediate priority is to see if Northpointe can lower the project's construction costs enough to make up for a $10 million funding gap that would be left by using a noncompetitive 4% low-income housing tax credit.

Another option would be to consider a proposal from Greater Des Moines Habitat for Humanity to build owner-occupied three- and four-unit buildings over three years. They would be reserved for people making 30% to 80% of the area median income. A single person who makes 80% of the area median earns $58,450 a year and a family of four, $83,450.

Habitat's proposal would still leave a $1.4 million funding gap for the project, but Osborne said the city could apply for a $1 million workforce housing tax credit to help fill the gap.

First, he has to address council members' concerns over homeowners' ability to afford maintenance, as well as whether the affordability of the properties can be guaranteed over time as owners sell them.

Habitat for Humanity does have a Home Preservation repair program to help low-income homeowners take care of repair, weatherization and accessibility needs including roofs, siding, furnaces, water heaters, windows, insulation, ramps and bathroom modifications.

Both options available to Waukee would only immediately address the southern part of the parcel. Osborne said the council wants the city to look at options that could simultaneously develop the northern area of the land and get housing online more quickly.

The workforce housing tax credit application is due in June, and the low-income housing tax credit application is due in April.

Osborne said he hopes to go back to the City Council within a month or two with more details about ways forward.

Phillip Sitter covers suburban growth and development for the Des Moines Register. Phillip can be reached via email at psitter@gannett.com. He is on Twitter @pslifeisabeauty.

This article originally appeared on Des Moines Register: Waukee looking at new plans after affordable housing funding denied