Housing Development Tools and Policies

Lack of affordable housing is a nationwide problem affecting U.S. cities and regions of all sizes and geographies. Put simply, there have been no viable large-scale solutions identified to address this country’s crippling housing shortage.

Deficits of quality affordable housing stock, whether for-purchase or rental units, are especially problematic for rural communities, especially cities like Manchester that have seen flat or negative economic and population growth rates. While demand for quality housing at both the entry and mid-level price points is reportedly strong in Manchester, purely anecdotal evidence will not be sufficient to attract development. Especially after the bursting housing bubble led to creation of financing reforms during and after the Great Recession, housing developers are extraordinarily cautious about making investments in communities without quantifiable demand for purchase and/or rental product.

Housing Stock Photo

Thus, Manchester must not only consider ways to incentivize new housing development to address perceived demand, but aggressively pursue all opportunities to improve its regulatory policies and processes to ensure that those developers who are interested in exploring opportunities in northeast Iowa choose Manchester as their preferred site. Currently, some in the development community believe that Manchester is being passed over for new housing investment in favor of cities with business climates perceived to be more investment-friendly, transparent, predictable, and cost-competitive.

In order to be implemented and utilized effectively, the tools and policies proposed in the Manchester Placemaking Plan’s housing section must be accompanied by a culture change in the civic and private sectors and even the public at large. Leaders and stakeholders alike must acknowledge that the city’s lack of housing capacity is a crisis that threatens Manchester’s future economic viability and the quality of life that makes the city such a compelling location for businesses and talent.

This culture change will be necessary because solutions will cost money, both in public and private subsidies for a housing revolving loan fund and potentially the hiring of additional personnel to improve the city’s capacity to work with developers to secure investment. A belief that local growth threatens Manchester’s sustainable future will be the very reason that the city’s future is at risk.

Status quo thinking is not what Manchester needs right now. As it has demonstrated in the past with Good to Great and other progressive initiatives, Manchester has the ability to embrace challenges with a collaborative spirit and future-focused attitude. Addressing its housing crisis will require an equally committed community-wide effort to achieve meaningful progress.

The City Council has adopted a Housing Committee to oversee housing related efforts in Manchester.

Creating a Housing Revolving Loan Fund

A revolving loan fund would provide a vehicle for businesses and public sector partners to have “skin in the game” in addressing the local housing crisis. The fund would ideally become self-sustaining and eventually sunset as the private market gradually assumes the full cost burden for new housing. In order to achieve affordable rental and/or new home prices, the city needs to work with local businesses and other stakeholders to create a revolving loan housing program to address the issue head on.

The goal of this fund is three-fold:

  • Incentivize developers to build in Manchester

  • Build new housing units that are attainable for a majority of residents

  • Create a self-sustaining fund

Revolving Loan Fund:

Revolving Loan Fund

Subsidy Calculations

In order to convince potential investors to contribute to any program or fund, they must understand how their return on investment (ROI) will be derived. Ideally, employers understand they will be able to fulfill or expand their hiring goals if the housing stock exists to enable more people to move into the community. However, local governments must look at the fiscal impact from property tax gains to increase funding for schools, public services, and other benefits.

For instance, the average vacant infill lot in Manchester is assessed at approximately $20,000 and currently provides $363 in annual property tax revenue. Building a smaller home in an infill lot could increase that parcel’s value to $150,000 with an annual tax revenue of $2,726. Building a home in a new subdivision such as Fairview Acres could be assessed closer to $200,000 with an annual tax revenue of $3,635.61. Over a ten-year period, these new homes would account for an additional tax revenue of $20,000 for an infill lot and nearly $30,000 for the new subdivision lot.

By providing a subsidy to match these long-term realized tax revenues, Manchester will be better equipped to meet its housing demand goals. The investment per lot could be reduced by $10,000 if the lot is provided to the builder for free.

Property Tax Comparison – Vacant Lot vs New Housing

Tax Revenue by Levy
Vacant Lot $20,000.00 $171.33 $64.60 $127.63 $363.56
New Infill House $150,000.00 $1,284.96 $484.52 $957.23 $2,726.71
New Subdivision House $200,000.00 $1,713.28 $646.03 $1,276.31 $3,635.61

Recommended Subsidy Per Unit – Single Family

Subsidy Available
Provide Own Lot Free Lot Provided
Infill Lot $20,000 $10,000
Greenfield Site $30,000 $20,000

When comparing this subsidy to multi-family housing, there are greater property tax benefits to be realized. For this example, consider a new 12-unit apartment complex with a proposed assessed value of $1,000,000 or $84,000 per unit. The developer requested $280,000 in incentives through tax abatement and infrastructure improvements which equates to $24,000 per unit. The total annual tax revenue from this complex would be $18,178.07 which would take nearly 16 years to recoup this subsidy investment. While this ROI has a longer term than the single-family subsidy, multifamily housing provides more housing units on less land serving the housing demand. 

Property Tax Comparison – 12-Unit Apartment vs Per Unit

Tax Revenue by Levy
12-Unit Apartment $1,000,000 $8,566.38 $3,230.15 $6,381.54 $18,178.07
Per Unit $83,333 $713.86 $269.18 $531.80 $1,514.84

Lot Analysis

In order to better understand the potential for development in and around Manchester, McClure designed and executed a customized development analysis. This process included reviewing floodplains, growth areas, vacant lots of land, zoning, and property conditions as designated by the Delaware County Assessor. The findings of this analysis can be used to help direct development throughout the community from infill lots to new subdivision on the fringes of the city’s jurisdiction.

Infill development can bring several benefits: (Source)

  • Municipalities can save money by promoting development in areas that already have infrastructure connected to public services, as opposed to financing new infrastructure for greenfield development.
  • Infill development can raise property values in the surrounding neighborhood.
  • It can bring residences and destinations closer together, making it easier for people to walk, bike, use transit, or drive shorter distances, which reduces pollution from vehicles.
  • For distressed communities especially, infill development can help stabilize a community by attracting a greater diversity of household income levels, bringing new resources to a neighborhood and reducing concentrated poverty

This custom GIS-based website will be available to Manchester to support implementation of its housing-development goals.

Housing Demand Matrix

The housing demand matrix is a tool McClure created for Manchester to determine the level of subsidy required to meet the different demand scenarios described in Appendix B: Manchester Housing Needs Assessment. As a refresher, the analysis posited a range of potential demand conditions for single and multi-family housing based on the following scenarios:

  • Scenario 1: Convert Commuters to Residents
  • Scenario 2: Housing for Expanding Businesses
  • Scenario 3: New Units Created to Replace Dilapidated Housing

The investment or subsidy funds needed to invest into the RLF could be capitalized based on varying investment levels from the following sources: City of Manchester, Delaware County, private businesses, State of Iowa, government and philanthropic grants, and individual investors. It should be noted all city, county and private businesses must be invested first before the state will support this initiative.

Another potential investment source could be the non-profit entity Manchester Enterprises, which has traditionally focused its resources on industrial property but has recently reportedly considered housing as a possible program area.

Specific commitment levels of each funding source will be determined as the RLF is designed and formalized. However, capitalization is typically a fairly even split between public and private sources.

This option considers the most conservative option only, development of a total 22 single family units and 26 multifamily units over the next 10 years. The total subsidy required for this option is $1.17 million over a 10-year period or nearly $120,000 annually. Each funding partner would be required to invest nearly $30,000 into the fund on an annual basis.

Single Family Multi-Family
1) Commuters A1 13 15 28
2) New Employees B1 5 6 10
3) Dilapidated Housing C1 5 5 10
TOTAL UNITS 22 26 48
Added Population 54 50 103
Subsidy Per Unit* 1x  $ 25,000  $ 24,000
Subsidy Total  $ 550,350  $619,344.00  $ 1,169,694
City 25%  $13,758.75  $15,483.60  $29,242
County 25%  $13,758.75  $15,483.60  $29,242
Business 25%  $13,758.75  $15,483.60  $29,242
State of Iowa 25%  $13,758.75  $15,483.60  $29,242

*Could be reduced by $10,000 per housing unit if the lot is provided for $1.

This option considers a more moderate approach, development of a total of 59 single family units and 70 multifamily units over the next 10 years. The total subsidy required for this option is $3.14 million over a 10-year period or nearly $314,000 annually. Each funding partner would be required to invest nearly $80,000 into the fund on an annual basis.

Single Family Multi-Family
1) Commuters A2 38 46 84
2) New Employees B2 11 14 25
3) Dilapidated Housing C2 10 10 20
TOTAL UNITS 59 70 129
Added Population 54 50 103
Subsidy Per Unit* 1x  $ 25,000  $ 24,000
Subsidy Total  $ 1,471,050  $ 1,673,232  $ 3,144,282
City 25%  $36,776.25  $41,830.80  $78,607
County 25%  $36,776.25  $41,830.80  $78,607
Business 25%  $36,776.25  $41,830.80  $78,607
State of Iowa 25%  $36,776.25  $41,830.80  $78,607

*Could be reduced by $10,000 per housing unit if the lot is provided for $1.

The third and final alternative analyzed is the most aggressive option building out more than 100 single family units and 119 multifamily units over the next 10 years. The total subsidy required for this option is $5.36 million over a 10-year period or nearly $536,000 annually. Each funding partner would be required to invest nearly $135,000 into the fund on an annual basis.

Single Family Multi-Family
1) Commuters A3 36 77 140
2) New Employees B3 23 28 50
3) Dilapidated Housing C3 15 15 30
TOTAL UNITS 100 119 219
Added Population 245 229 474
Subsidy Per Unit* 1x  $ 25,000  $ 24,000
Subsidy Total  $ 2,504,250  $ 2,859,120  $ 5,363,370
City 25%  $62,606.25  $71,478.00  $134,084
County 25%  $62,606.25  $71,478.00  $134,084
Business 25%  $62,606.25  $71,478.00  $134,084
State of Iowa 25%  $62,606.25  $71,478.00  $134,084

*Could be reduced by $10,000 per housing unit if the lot is provided for $1.

Enhancing Existing Incentives and Resources

While the RLF would provide direct funding from the city and its investment partners to a developer, there are numerous existing local, state and federal resources that can be utilized to achieve similar goals. It should be noted income limits for some of these programs may restrict renters or homebuyer’s ability to participate. In addition, these programs are very competitive so there are no guarantees the community would receive funding.

Urban Revitalization Program – Residential Property

The City of Manchester recently expanded its housing development incentive program to be competitive with peer communities. Program details are listed below.

Five-Year 100% Value
  • Year 1: 100% of the increased value
  • Year 2: 100% of the increased value
  • Year 3: 100% of the increased value
  • Year 4: 100% of the increased value
  • Year 5: 100% of the increased value

However, the benefits offered through the city’s Urban Revitalization Program could be better promoted. For example, the city currently has a brochure outlining the details of the program, but it is highly technical and may not be fully understood by the general public.

Developing new language to be included on the city’s website or a new brochure targeted at single-family housing would potentially drive greater responses from people looking to build a home in Manchester. The graphic below is an example of the type of information that could be presented to better inform the general public of a tax abatement program.

Incentive Example

Improving Utilization of Regional Programs

The reality in most communities is that multiple programs exist to support the development of workforce housing and buyers’ and renters’ ability to afford quality single- and multi-family units. The challenge lies in identifying the staff and partner capacity to utilize these programs and promoting these opportunities to eligible residents and investors. In Manchester, stakeholders identified two programs in particular that warrant more aggressive utilization in the city. These are:

Eastern Iowa Regional Housing Corporation Housing Trust Fund (EIRHC HTF): Through its inclusion in the EIRHC geography, Delaware County is eligible to utilize this program. The Fund assists in the provision of decent, safe and affordable housing, as well as providing access to the resources for creating housing opportunities to the families served in eastern Iowa. The emphasis is to provide economic assistance to benefit the -moderate, very low, and extremely low-income residents of EIRHC counties. Eligible entities include individuals, community organizations, non-profit and for-profit companies seeking to develop, rehabilitate, and rental and owner-occupied affordable housing.

Pocket Neighborhood Program: Through its East Central Development Corporation (ECDC), the East Central Intergovernmental Association (ECIA) (also the parent organization of EIRHC), created the Pocket Neighborhood program as an opportunity to create a cluster of homes at an affordable price point for young professionals and seniors looking to downsize. Pocket Neighborhoods consist of a planned community of ten to 12 moderately priced homes, with affordable building templates and smaller footprints. Bear River Creek Cottages in Maquoketa, the first ECIA Pocket Neighborhood is scheduled to open in 2019. [Source]

Fully Leverage State and Federal Resources

Multiple state and federal resources can complement local and regional tools to help Manchester bridge the gap between the cost to build and the return on investment to sell or lease a housing unit.

One of the most popular programs in the State of Iowa is the Workforce Housing Tax Credit (WHTC) Program. Developers can receive up to $30,000 in state tax credits for each housing unit built or renovated built in what the program identifies as a “small city”. There are no income restrictions on the renter or home buyers, however, the cost to develop the site cannot exceed $215,000 per unit. While the annual allocation for this program was expanded to $25 million in tax credits, the program will not accept new applications until July 2020 when new rules and requirements will take effect.

Another tool utilized by many Iowa communities to support housing development is the Iowa Code Chapter 657A program. In the December 2017 Iowa Supreme Court case of Eagle Grove v. Cahalan Investments, justices upheld Section 657A.10A allowing cities to petition a district court to transfer ownership of abandoned properties to the city. Once under city control, the property can either be upgraded or transferred or sold to an investor for the purposes of constructing quality housing. This tool enables Manchester to not only ameliorate abandoned residences but also convert them into quality housing to meet the need for affordable units.

Additional programs to consider include:

FirstHome Plus program: Offers pairing a grant of up to $2,500 to help with down payment and closing costs with an affordable, fixed rate mortgage.

Military Homeownership Assistance program: Provides eligible service members and veterans with a $5,000 grant that may be used toward down payment and closing costs. Grant subject to a one-time use.

CDBG Housing Rehabilitation Fund: This annual competitive program assists communities in rehabilitating owner-occupied single-family homes used as principal residences.

Better Formalize Manchester’s Development Process

A number of stakeholders indicated that the City of Manchester is losing out on development projects to other communities in Delaware County where the process to secure project approval and permits is more transparent, timely, and reliable. Many Iowa cities large and small have created online development guidelines and checklists spelling out the process and requirements needed to receive development approval for a range of project types.

Indeed, reducing risk to a developer is one of the most important factors that can catalyze development projects. Ensuring developers understand on the front end of an investment the likely cost, duration, permit requirements, and incentives available for their projects helps them budget and acquire resources. Creating clear pathways for different types and tiers of projects through the city’s regulatory system will reduce permit turnaround types and get projects to market more quickly.

One way the City of Manchester can help reduce risk is to establish an open and transparent process to gain approval and begin construction.

A Development Guide is a tool that helps promote this transparent process by highlighting important information on such topics as a city’s development incentives, the permitting and approval process, and a timeline from start to finish. This would allow any city staff member the ability to clearly and concisely provide this vital information to whomever requests it. Developers will then be able to create their business models, or pro forma, fully aware of what to expect.

This guide or checklist could include the following elements:

  • List of Available Incentives
  • Outlining development permitting and approval process
    • Zoning
    • Water/sewer connections
    • Storm Water
    • Setbacks & Height Restrictions
    • Driveway/Streets
    • Sidewalk Connections
    • Parking Requirements
    • Lighting
    • Signage Regulations
    • Estimated Project Costs
    • Economic Impact
  • Permit Fees Inspection Schedule
  • List of Contacts
  • FAQ for Developers

The assumptions behind the Housing Development Tools and Policies recommendations are contained in the Manchester Housing Needs Assessment found in Appendix B.

Implementation steps for the Housing Development Tools and Policies recommendations are included in Appendix C.

McClure has created the following Development Guide for potential use by the City of Manchester. It includes content from best practice guides from peer communities and matches the formatting and text of the city’s existing Permit Form.

Manchester Development Guide



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