Kristie Chestnut’s breaking point came during the Christmas season.

Her 115-year-old house was falling apart, rising interest rates sent her monthly mortgage payment soaring, and her employer cut back on her hours, reducing her income by one-third.

Eventually, it came down to paying her mortgage or buying Christmas presents for her five children, ages 8 to 15.

“I chose not to make my house payment,” Chestnut said.

Helpless, she spent her Sundays searching the real estate listings in the newspaper and driving around town to look at apartments.

“I didn’t realize how hard it was to get a place,” said Chestnut, a certified medication aide at a Des Moines nursing home.

Running out of options, she turned to Anawim Housing, a non-profit organization that provides affordable rental housing for low-income individuals and families. In just over a month, she and her children were moving into a three-bedroom apartment on Sixth Avenue.

Today, she feels as if a weight has been lifted off her shoulders. She’s getting back on her feet and building a better future for her children.

And, she said, they’re all happier.

“Our house seemed so dark and gloomy,” she said. “When we moved, it seemed like our whole world brightened.”

More people, less money

But for many families faced with reduced or stagnant incomes, rising interest rates and high energy costs, their world remains dark and gloomy, and Greater Des Moines housing advocates are concerned that new affordable housing options are not being made available for the growing number of people in need of them.

“I believe that a community needs to provide housing options for every citizen who lives there,” said Sue Paterson-Nielsen, director of the West Des Moines Human Services Department. “You have to provide housing options for every range of income in order to meet the needs of your population.”

A statewide housing study released in January 2003 and conducted by the Iowa Finance Authority and the Iowa Department of Economic Development found that affordability is a widespread problem for low-income households throughout the state. Renters earning less than $20,000 annually have access to a very limited supply of affordable housing units, and those that are available are often poor quality. Nearly one in three renters in Iowa’s central cities is “cost burdened,” meaning they spend more of their monthly income on housing than they can afford. One in four in medium-sized suburbs and non-metro cities is cost burdened.

“The whole rental market is just a mess,” said Sister Stella Neill, executive director of Anawim Housing.

A number of factors, primarily cuts in federal funding, continue to squeeze the affordable housing inventory in Greater Des Moines and throughout the state. Those speaking out on the issue fear homelessness will increase if more housing is not made available to those who need it the most.

Rising construction costs are adding to developers’ debt loads, and as a result, low-income tenants are often paying higher rents. Des Moines’ housing stock is aging and deteriorating, but funding repairs for homes owned and occupied by low-income people has become an uphill battle for many non-profit housing organizations.

Cuts in funding disbursals from the U.S. Department of Housing and Urban Development have put a strain on public housing, and many other sources of funding that developers once accessed to build affordable housing have dried up.

For low-income homeowners with adjustable-rate mortgages, rising interest rates are making a once-affordable situation no longer affordable. And mobile home park residents are being evicted to make room for commercial development.

“There’s just a great deal of need right now and we’ve got to have a lot of resources to meet that need,” said Sheila Lumley, executive director of the Polk County Housing Trust Fund. “But it’s not all doom and gloom. There are a lot of people trying to come together to look at the resources available to not only develop housing but rehabilitate the units we’ve got.”



Living on the edge

For Chestnut, practically everything that was thrown at her was unexpected.

Her employer downsized and cut back on her hours, reducing her income by about one-third. Rising interest rates increased the mortgage payments on her two-bedroom house to more than $800 a month, and her monthly heating bill was approaching $700. Her kitchen flooded every time she did the dishes, and her house was burglarized in December.

“Everything was starting to pile up,” said Chestnut, whose employer has yet to restore the hours she lost.

When a family is living paycheck to paycheck, such unexpected events often put them in a situation in which market-rate housing is no longer affordable.

Pam Carmichael, executive director of HOME Inc., said her organization, which provides affordable single-family housing, assists many individuals and families who are struggling because they are paying more than 35 percent of their income on housing expenses. According to the 2003 housing study, a larger proportion of renters in Iowa’s central cities, including Des Moines, were cost burdened in 2000 than in 1990, and more homeowners were spending more than 35 percent of their income on housing.

Last year, HOME Inc. received about 500 calls from people who were facing the threat of being homeless due to situations such as foreclosures, evictions or utility disconnections.

“If those units aren’t being created for them, then we do have a problem,” Lumley said.

Des Moines’ Enterprise Community, bordered by the Des Moines River on the east, Martin Luther King Jr. Parkway on the west, Hickman Road on the north and Interstate 235 on the south, is the lowest-income census tract in the state of Iowa and has been a focus of redevelopment efforts in Des Moines for more than a decade.

But Mary Neiderbach, a senior city planner in the Des Moines Community Development Department, said the city now has a larger percentage of its population living at or below 80 percent of the area’s median income: $53,500 for a family of four. From 1999 to 2000, there was an increase in the number of census tracts where more than 50 percent of the population earned 80 percent or less of the median income.

Wages have increased only slightly or remained stagnant in recent years while housing costs continue to rise, causing the affordability gap to widen.

“There was a $50 change in our annual income this year over last for affordability purposes,” HOME Inc.’s Carmichael said. “Yet our housing prices, even in the units we’re building, have gone up $10,000.”

Housing advocates fear that, though affordable units are being added to the market, it’s not enough to keep up with the growing need, particularly in the face of tightened restrictions from landlords. Many, especially those that receive some form of government funding, require proper documentation, conduct criminal background checks and run credit reports.

“Fifteen years ago, nobody thought to ask those questions,” Carmichael said. “It’s a way for landlords to protect their businesses. But it’s also cutting out a lot of people on the fringes who are having a pretty hard time.”

Tightening resources

“There’s all kinds of affordable housing built every year in the Des Moines area, and we’re filling them all up,” said Carol Bower, executive director of Community Housing Development Corp., which provides affordable senior housing, repairs for homes owned and occupied by senior citizens and rehabbed single-family houses for affordable home ownership. CHDC’s senior housing units are always filled to capacity and have long waiting lists.

But while the need is growing, the financial resources are not.

Various sources of funding – from Community Development Block Grants to HOME Funds – have dried up or been diminished. As a result, Bower said, CHDC’s future efforts to develop, maintain and rehab affordable housing units will be tempered.

“It’s very serious,” she said. “We will continue to develop affordable housing, but we may not be able to put as many units into the marketplace as are really needed, and that’s a big concern.”

The U.S. Department of Housing and Urban Development is decreasing the funds it makes available for certain housing projects. The city of Des Moines has experienced a decrease in Community Development Block Grants, and Congress is discussing funding cuts to public housing.

“The rental supply has always been the thing that’s decreasing, and a lot of it is tied to funding,” said Chris Johansen, director of the Des Moines Municipal Housing Agency, which operates the city’s public housing and Section 8 voucher programs.

CHDC has hired a consultant and, for the first time in its history, is working on a development campaign that will be geared toward its home repair program. Funds will always be available to operate the organization’s home ownership program, Bower said, but funding for its other programs is becoming scarce.

Up to this point, CHDC had acquired sufficient grant money to fund as much housing as it was able to handle. “Now, we’re going to have to look to private foundations, national foundations, other sources of funding to help supplement that money that is either no longer available or that is depleting,” Bower said.

Neill said most of Anawim Housing’s affordable units are financed through low-income housing tax credits, but the organization uses other development subsidies, such as HOME Funds, Federal Home Loan Bank grants and loans, second lien loans and forgivable lien loans. All of those layers of financing allow Anawim to buy down its debt and charge residents a more affordable rent. It rents some three-bedroom duplexes for about $550 a month, at least $150 a month less than other landlords, even those designated as affordable units under low-income housing tax credit standards.

“Rather than assume we can have our rents at the maximum (allowed under the low-income housing tax credit program), we work at trying to get it as low as we can,” Neill said. “But it gets harder and harder, just basically because of the cost.”

Carmichael said it costs HOME Inc. $150,000 to build a new house, but the families it works with can only afford to pay $100,000 to $110,000. The struggle lies in filling that gap with other financing sources, however scarce they are. In addition, Hurricane Katrina and other factors and events have triggered a rise in construction costs. In response, HOME Inc. has reduced the square footage of its new houses rather than cut back on quality.

Tax-credit allocation

Since Congress established them in 1986, low-income housing tax credits have become one of the few remaining methods to finance the construction of affordable housing. Few other sources of financing as significant as tax credits are available to non-profit and for-profit developers, and the federal government is backing away from public housing.

Kris Saddoris, director of development for Conlin Properties Inc., said tax credits are now used to help finance the construction of about two-thirds of new multifamily units, both affordable and market-rate, nationwide. Since 1991, Conlin Properties has received tax-credit allocations for more than 700 affordable housing units at 17 properties through Polk County, making the company the largest builder of tax-credit housing in the county.

“We couldn’t do it any other way,” Saddoris said.

The Iowa Finance Authority, which administers the IRS-sponsored program in Iowa, receives $1.90 per person in credits based on statewide population, which amounted to about $6 million in 2006. Non-profit and for-profit developers apply for a portion of that annual allocation, with awards given to projects that best meet the objectives of the program, according to IFA spokeswoman Shawna Lode. The program has helped build more than 3,500 units in Polk County since 1987, and the new projects often serve as catalysts to economic development in qualified census tracts.

Recipients receive the tax credits incrementally over a 10-year period and sell the credits to investors as a means of financing a significant portion of the project’s total cost, said Tim Waddell, the IFA’s tax credit manager.

“Truly, the tax credits are the majority of the financial foundation of those projects,” Waddell said. “Without tax credits, I can’t imagine many of those projects would have happened.”

The added layer of financing allows developers to offer low rent to qualifying tenants. At least 20 percent of the units must be rented to households with incomes not exceeding 50 percent of the county’s median income, adjusted to family size, or a minimum of 40 percent must be rented to households with incomes not exceeding 60 percent of the county’s median.

Kathy Kahoun, neighborhood development administrator for the city of Des Moines, said that though the government has indicated that low-income housing tax credits are the primary mechanism for developing affordable housing, some have questioned whether the neediest people can truly afford those units.

“There are people who will say those rents are really high and that people who are really low income – like 30 percent median income – cannot afford to rent those units,” she said.

Chestnut pays about $600 a month for her three-bedroom apartment in one of Anawim’s tax-credit projects. A similar apartment at Conlin’s Fort South II Apartments, the company’s oldest tax-credit project, would have cost her $750 a month.

The ultimate goal for Conlin Properties and other developers, both non-profit and for-profit, is to acquire enough layers of financing so that the remaining debt is low enough that it can be paid off through affordable rents.

“The hard part is that the list (of financing sources) is very short,” Saddoris said. “Especially if you want to serve an even lower-income population, you’re getting yourself into a really low-rent situation and you’ve got to have even more layers.”

A growing concern among housing advocates is that, when projects no longer receive tax-credit revenue after the first 10 years, the projects and their developers will struggle financially. As these projects age, they require improvements that are too costly to be paid for by their low rents. The IFA requires projects have reserves in place to cover those expenses, but Saddoris questions whether the required reserves are sufficient to cover a project’s capital needs for 30 years or more.

The 15-year period during which Conlin Properties’ first tax-credit housing project, the Fort South Apartments on Des Moines’ South Side, had to comply with federal affordability requirements will expire at the end of the year and she questions whether the project can continue to be supported financially through affordable rents. The IFA’s Waddell said Conlin and other developers hitting the 15-year affordability-compliance mark can ask the IFA to sell the project to a non-profit or for-profit owner that will maintain its status as affordable housing (developers of more recent projects have waived that right). Nationwide, only one developer has done so, he said.



Priorities

Low-income families with children, housing advocates say, have few options for affordable housing in Greater Des Moines. Chestnut found that out the hard way on her Sundays spent driving around town looking for an apartment large enough to house her and her five children.

Kahoun said a consolidated plan from HUD shows a shortage of large-family housing, which she said is produced less often and is the most difficult to develop and manage.

According to the state’s 2003 housing study, “nearly half of all female-headed households with children earn less than $20,000, and are thus in the income categories most likely to have affordability problems.” There are about three times as many female-headed families with children as there are male-headed families with children, meaning families such as Chestnut’s “make up a large share of families in need of housing assistance.”

Yet many question whether funding allocations effectively target that area of need. Significant public financing has been poured into developing affordable housing in downtown Des Moines in recent years. Though few deny the need for a downtown revitalization plan that includes housing, many say the scarce resources are not being used to provide housing for families with children.

“I don’t have an issue with tax credits because they have, in a lot of instances, done some real good to increase the number of affordable units in this country since we backed away from public housing,” Carmichael said. “I just think sometimes they’re aimed at the wrong population. I think a lot of what we build in Des Moines using tax credits is not aimed at low-income families with children. Low-income families with children do not live in downtown Des Moines.”

The development of downtown housing is a priority for the city, senior city planner Neiderbach said, but added that the city is conscious of the need for a variety of housing options and affordability levels in the neighborhood. There is little low- to moderate-rent housing downtown, she said, “So I think that’s something we would support if it came in.”

Affordability levels aside, some question whether the housing options themselves are suitable for families with children, in part because of the neighborhood’s urban setting, but also because many of these units were not designed with families in mind, but rather young, upwardly mobile professionals.

“For families that are very low income and are not going to have that same ability to increase their income over time, it’s unlikely that they’re going to live in these units,” Lumley said. “They’re going to look more toward duplexes or single-family units.”

Carmichael expressed concern that, as the value of downtown real estate continues to climb, so too will downtown apartment rents. In addition, she does not believe downtown housing projects that have been approved for tax credits in recent years are efforts to increase the city’s stock of affordable housing.

“When (the compliance period) is gone, I don’t think they’ll be affordable anymore because they were never meant to serve an affordable population anyway,” she said. “It was just a way to get them built.”

Government’s exit

Federal budget cuts are taking aim at one of the country’s oldest affordable housing programs: public housing.

“Congress is really divesting themselves of the program,” said Des Moines Municipal Housing Agency Director Johansen. “We get an operating fund subsidy and every year we apply and there’s an agreement on what our subsidy should be. But right now, Congress is talking about funding that at only 78 percent.”

Johansen’s agency receives annual funding for capital improvements at its public housing units, but federal lawmakers are talking about cutting it by as much as 20 percent.

“The issue there is government is saying ‘We can’t afford to be in housing,'” Anawim’s Neill said. “The bottom line is, if they can’t, who can? I’m not sure who we expect to do it. At the same time, I do not believe government is the best landlord.”

Regardless of federal funding cuts, Johansen said his agency struggles because, though the city collects rent on all of its public housing units, those rents are based on 30 percent of residents’ income, and the city pays all of the utilities.

“If we were funded at the 100 percent level from HUD, I think we could do a much better job of what we’re doing,” he said. “But when the funding is cut, you can’t do much more than that.”

But as public housing funding continues to tighten, it has become increasingly difficult for the city to maintain those units, Johansen said. The city received approval from HUD in 2001 to sell 394 single-family houses and duplexes. As of late July, 101 units had been sold, 88 of which were sold at fair-market value. A handful of those 88 were turned over to the Section 8 voucher program, but others were removed from the city’s affordable housing stock.

Fearing that loss of units on a larger scale, Des Moines area non-profit agencies have committed to purchasing some of those units at 25 percent below the market rate, and will rehab them to be sold or rented to low-income Iowans.

Anawim Housing has committed to purchasing 67 units and has secured financing, primarily low-income housing tax credits, to do so. Neill said the organization is awaiting word on a final financing piece that would make the units even more affordable to residents.

HOME Inc. has purchased about a dozen, Carmichael said, and the most expensive one to date sold for $70,000, and that included a new garage. “That’s unheard of in this community,” she said.

But Carmichael and her peers are quick to point out that their commitment of time and money to rehabbing these public housing units is not an effort to bring new affordable housing units into the market, but rather to maintain the stock that already existed through the city’s public housing program.

The Polk County Housing Trust Fund has committed nearly $2 million to the purchase and rehab effort in order to bring those units back into the affordable housing inventory. “But while we’re able to commit money to that, we’re not able to commit to other things that are just as worthy,” Lumley said.

“Instead of building new units or buying units on the open market and rehabbing them, making them safer, making them affordable, I’m buying public housing,” Carmichael said. “We bought them because we wanted to at least keep them in the affordable inventory. We didn’t want private investors buying them for full price and then turning around and renting them or selling them on contract,” which would significantly affect their affordability, she added.

“Even though we’re renting them and keeping them affordable, we’re taking significant resources out of the community that could have been used for other projects,” she said. “But we’re using them, essentially, to keep a stock that we already had, and a stock that was cheaper when the city owned it than when the non-profits took them over.”

Unlike the city, the non-profits will incur debt on the units and will have to make monthly mortgage payments on the properties, and they will also have to pay taxes – added costs that will have to be passed on to residents. “So we’ve retained more affordability than if they’d gone into private market hands, but we’re still not going to be able to make them as affordable as they could have been under the city,” Carmichael said.

Because of the limited abilities of non-profit housing agencies, Carmichael fears that despite the efforts of the non-profits, there will be many public housing duplexes that will sit vacant.

New competition

The total market value of the 394 public housing units put up for sale is $22 million, though the final total sales price will be reduced due to non-profits purchasing many of them at a reduced rate.

Seventy-five percent of the proceeds will be deposited into an affordable housing endowment fund, with the interest earned on the money used to fund affordable housing in the community, Johansen said. To date, sales have created a $3.5 million endowment with an interest balance of about $100,000, with the first $1 million to be realized in 2008.

The remaining 25 percent of the proceeds will be used for physical improvements at the city’s five public housing manors, four of which are designated for elderly residents only. Johansen anticipates keeping those properties in the city’s public housing inventory for the time being, and said physical improvements are necessary in order to maintain the “decent, safe and sanitary” standards.

But those improvements are also seen as an effort to remain competitive in an increasingly competitive market. Public housing has eligibility requirements similar to those of the federal government’s Section 8 voucher program. The program, also administered by the Des Moines Municipal Housing Agency, provides rental assistance to nearly 3,000 families and individuals, who can use their Section 8 vouchers to obtain housing from participating landlords.

“If we weren’t doing our disposition (of the 394 public housing units), we’d have to compete against all these (Section 8) landlords to house these people,” Johansen said.

The entry of affordable assisted living into Greater Des Moines has put further pressure on the city’s public housing. The Rose of Des Moines, a 52-unit affordable assisted living facility, opened earlier this year at 1918 Forest Ave., and Walden Point, a 60-unit building at 1223 Fifth Ave., opened this spring. After initial hesitation from developers, Waddell said affordable assisted living has gained popularity, and more such projects are likely to be built in the coming years.

Johansen said the affordable assisted living projects, which have been funded primarily through low-income housing tax credits, are meeting a dire need in a community with an aging population. But these assisted living centers, which offer brand-new apartments and a variety of services, such as meals and nursing care, present stiff competition for the city’s four elderly-only manors, which do not provide services to residents and are considerably older than The Rose and Walden Point.

The city recently began a $1.5 million improvement project at Eastview Manor, said Johansen, and he sent architects through some of the assisted living facilities in Greater Des Moines to determine what the city is up against.

“We do the best we can with what we have and what we can do,” he said.

Funding cutbacks have prompted a push by the government toward mixed-finance developments, in which a housing agency partners with a private developer or non-profit organization and uses a mixture of funding sources to develop affordable housing.

“Our agency doesn’t have any plans for development in the near future because we’re going through selling a lot of these units,” Johansen said. “But as far as public housing goes, that’s the only option I see in the future.”

A fresh start

On a recent afternoon, Chestnut watched from behind the fence while her five children tossed around a football on the playground at their apartment building before heading inside to cook in her spacious kitchen – one that doesn’t flood when she does the dishes.

With her rent being several hundred dollars less than her former mortgage payments, she’s finally getting caught up on her bills, and has one payment left to make on her car. She hopes her employer will soon restore the hours she lost.

Chestnut intends to stay in her apartment for at least a year, improving her credit so that she can buy a house – one with a yard for her children to play in.

Greater Des Moines’ non-profit housing agencies will stick with her to the end, making sure that her home ownership dreams become a reality.

But with limited resources and a growing number of people in situations similar to Chestnut’s, it’s getting harder for agencies such as Anawim Housing to step in and be the hero for every family.

Funding cuts lie at the root of most of the issues related to affordable housing in Greater Des Moines, and few are convinced that is a problem that will be rectified. And numerous other factors – such as rising interest rates and construction costs – appear to be beyond housing agencies’ control as well.

“It’s not any different than it was when I started in the business,” Anawim’s Neill said. “It is more acute and reaches a larger number of people. With energy and housing costs going up, people are just getting squeezed. And a larger percentage are being squeezed.”

But Carmichael of HOME Inc. suggests a larger problem that exists on a nationwide level.

“There’s something wrong in this country,” she said. “We haven’t figured out why it takes all this money to adequately house one person, one household. You need all these layers (of funding) to build it and to keep it and to maintain it, and even then there are families that have to have a rental subsidy to live there month to month.”