Developers could face more hurdles to qualify for state tax benefits that help build affordable housing projects in Iowa.
Among its new requirements, the Iowa Economic Development Authority will expect developers to have 60% of funding lined up for projects submitted for workforce housing tax credits, which require the projects to be priced affordably for entry-level workers, seniors and families.
Workforce housing typically is reserved for households that earn 60% to 120% of the area median income. In the Des Moines metro, a family of four earning $68,700 a year is living at 60% AMI, according to the U.S. Department of Housing and Urban Development.
City officials presented the IDEA’s changes in workforce tax credit applications to City Council members during a work session on Monday, March 9. Officials also talked about the city’s own role in the process, which will require it to be more selective about projects it supports.
Des Moines, which has submitted dozens of letters of support over the past five years for developers submitting their projects to the state, is now only allowed to support up to four projects each year, Deputy City Manager Matt Anderson told City Council members. City staff said they now want to use a ranking system to help determine which projects would have the best chance of qualifying for the incentives.
Over the past five years, Des Moines has seen an average of 10 to 11 applications per year, city economic development coordinator Whitney Baethke said. The city issued resolutions to support 45 projects during that time, and 22 projects were given IEDA money, Baethke added. Of those, five were not built.
Last year, two projects in Des Moines received an award. The Telus Condos phase 1, which could include 32 units in the Gray’s Station neighborhood, was awarded $644,400. The Aston, which could have up to 161 units in the East Village, received $1 million.
Some city elected officials said they wondered how Des Moines would fare against other projects across the state.
“You’re touching on what is really keeping me up at night …,” Baethke said.
Council member Josh Mandelbaum also questioned the state’s motives. He wondered if the state’s overall goal was to reduce the funding it gives to developers each year.
“Because if there are fewer projects that ultimately get built because they narrow applicants and narrow the viable projects — instead of spending $35 million in tax credits, they could be spending $25 million and then say there’s not a need for it, even though there’s a pretty significant need — because we’ve been artificially limited here,” he said.
What is the workforce housing tax credit program?
The program provides tax benefits to developers who build housing using properties that are abandoned, empty or dilapidated, according to the state.
The competitive state program allocates $35 million to statewide projects this year. Of that, $17.5 million is available to projects in the 88 least populated counties. The remaining $17.5 million is for those in the 11 most populous counties.
Projects must include at least four single-family homes or one multi-family building with three or more units or two upper-story units. Each project can get up to $1 million.
How is the city going to evaluate?
City staff is working on a set of criteria to evaluate the projects it supports, Baethke said. The city will likely use a ranking process rather than a point system. Those criteria could include things like:
How fast do developers have to submit applications to the city?
Applications are due to the city by April 13. Staff will present its top four project picks to the City Council on May 4.
The applications to the state are due June 10, and state awards will be announced in September.
Baethke said the city is trying to be mindful of developers’ time because many may not want to go through the application process if they’re not going to receive a letter of support from the city.
Mandelbaum asked whether the city would require the applicant developer to have 60% of the project funding to be considered as one of the top four candidates.
Baethke said the city would, but staff have talked about providing flexibility if the funding comes shortly after the city’s deadline.
“We know this is going to be … that’s tough. 60% is a good, healthy number,” she said.
Virginia Barreda is the Des Moines city government reporter for the Register. She can be reached at vbarreda@dmreg.com.
This article originally appeared on Des Moines Register: Iowa developers face new hurdles for state housing tax incentives
Reporting by Virginia Barreda, Des Moines Register / Des Moines Register
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