Grant

Iowa Finance Authority ($400,000)

Program-Related Investment

Iowa Finance Authority ($2,000,000)

Background

Much of Iowa’s affordable housing stock is more than a quarter-century old and no longer corresponds to where most of the state’s population now lives.  As a result, Iowa faces the challenge of an oversupply of affordable housing in some areas where there are declining populations, and an undersupply in some areas that have growing populations.  The U.S. Department of Agriculture’s (USDA) Rural Development Office (Rural Development) Section 515 program has funded more than a quarter of the state’s 43,000 subsidized housing units.  Iowa anticipates the recent trend of loss of Section 515 properties – nearly 10 percent in the last year – to continue in the coming decade.  While changes in the rural rental market may explain some of this loss, the precipitous decline is primarily the result of property owners becoming less able to maintain the aging properties or unwilling to continue their participation in the Section 515 program.  Since 2000, the Iowa Finance Authority (Iowa Finance) has pioneered ways to preserve affordable rental housing in rural communities.  In 2007, Rural Development recognized these efforts by awarding $2 million to Iowa Finance Authority’s Rural Development Preservation Demonstration Program.

Project Description

The unifying goal of the grant-funded activities is to enhance the overall proficiency of developers to accelerate the preservation of Section 515 properties.  In close collaboration with the USDA and the U.S. Department of Housing and Urban Development (HUD), Iowa Finance will use the proposed grant to create a comprehensive database of all subsidized properties in the state.  Information will include the physical and financial condition of the property, type of subsidy, and corresponding affordability restrictions, such as expiring rental subsidy contracts.  Iowa Finance intends to use the database to create, test, and implement an analysis tool to determine the financial feasibility of preserving specific properties.  Rural Development has identified about 40 properties as good candidates to test the tool – properties that have the highest risk of losing their affordability because the property owners are unwilling to continue with the Section 515 program.  Iowa Finance also will use the proposed grant to recruit developers with some experience in rural communities and to provide them with the technical assistance needed to navigate the complex process of assuming the ownership of Section 515 properties, arranging for the financing to execute a preservation transaction, and obtaining resources for capital improvements.

The program-related investment will fund two loan products that will allow nonprofits to take advantage of the technical assistance provided through the grant-funded activities.  A predevelopment lending facility will provide interested preservation-minded developers with the funds they need to evaluate the financial and physical conditions of Section 515 properties, and to gauge the market conditions in which they exist.  Predevelopment loans could cover capital needs assessments, energy audits, appraisals, and arranging for permanent financing, all costly endeavors that thinly-capitalized nonprofits often cannot afford.  The other lending facility will provide loans to enable owners to cover 60 percent of the cost of energy-efficiency improvements in preservation projects, based on energy audits conducted and financed by a consortium of utilities, which also will bear the other 40 percent of implementation costs.  Recommendations in the audits follow a prescribed sequence so that the improvements with greatest savings are undertaken first.

Contact

Shawna Lode
Communications Director
Iowa Finance Authority
2015 Grand Ave. Des Moines, IA 50312
515-725-4897 (direct)
1-800-432-7230 (toll-free)
shawna.lode@iowa.gov