Janesville partners with housing group to rehab houses
JANESVILLE The sweet little house at 627 Rockport Road had a grand view of the Rock River, but it had been carved into an illegal duplex.
A makeshift closet jutted onto the front porch littered with junk. The staircase, electrical service and other parts of the house fell short of city codes.
The vacant house in one of Janesville's challenged neighborhoods screamed to be saved, said Katherine Kamp, deputy director of the Wisconsin Partnership for Housing Development.
Kamp liked the home's cute porch, attractive roofline, arched doorways, original floors and rear deck offering an amazing view of the river.
It was a keeper, she decided.
The group is converting the Rockport Road house back into a single-family home. When they're finished, it will be put up for sale.
The home is among dozens the city has rehabbed with the goals of fighting blight, improving neighborhoods and providing affordable housing.
In 2009, Janesville began getting federal stimulus grants to improve housing. But the myriad of tasks involved in rehabbing homes—buying the structure, acting as general contractor or finding one, designing the fixes and then finally selling the home—strained city staff time.
After getting a third federal grant, the city in June 2011 contracted with the Wisconsin Partnership for Housing Development for help. It has since given the non-profit agency $709,622 in federal money to rehab six homes and to build a new, two-story home on Lincoln Street. The partnership bought four of the homes, while the city transferred ownership of two homes and the vacant lot.
The partnership, a national organization headquartered in Madison, has been around for about 25 years, Kamp said.
The group has more flexibility than the city to buy homes and solicit proposals from contractors, said Jennifer Petruzzello, Janesville's director of neighborhood services. The partnership can use a contractor for multiple projects without going through a formal bidding process, for example. An offer to purchase doesn't have to be approved by the city council.
"It is less bureaucratic for us to do it, and it's a little bit quicker," Kamp said.
Workers are paid the prevailing wage, which is a federal requirement.
The partnership gets a developer's fee, which is up to 10 percent of the construction costs, depending on whether the rehab has stayed within budget, Kamp said. Other costs that go into the final price include utilities, property taxes, inspections, snow removal, yard maintenance and appraisals. Both total about 12.5 percent of the construction cost, although that is an estimate until the homes sell, Petruzzello said.
The home at 270 S. Franklin St., for example, was appraised at $30,000 and purchased by the partnership for $27,000. Construction was $99,973. Total costs to put the house back on the market were about $112,470. The house is newly appraised for $72,500.
The home has fresh paint, polished floors and new appliances. Design changes on the second floor make the space more livable. The front porch was shored up. The mechanicals were replaced.
Homes targeted by the city usually are in the inner city neighborhoods and are vacant, often because they are in foreclosure or the owner did not pay taxes. Some homes cannot be rehabbed and are demolished, with the property redeveloped or sold to neighbors to reduce density.
The homes are sold to low- to moderate-income people. The proceeds are returned to the city for use again for housing purposes.
Three of the Janesville home rehabilitated by the partnership are for sale.
Not for profit
Because cost of rehab often is more than the eventual sale price, some might say the program doesn't make financial sense.
Kamp responded that tearing down a structure and starting over usually costs more. The new home the group is building on the empty lot will cost about $150,000, she said.
The total doesn't include $24,000 the city spent in October 2010 to buy the lot, Petruzzello said.
"From an environmental perspective, it's clearly better to take what's here and use it," she said.
Rehabs tackle major problems that a private investor would not spend money to fix, Petruzzello said.
Profit is not the motive, Petruzzello and Kamp said.
The goals, they said, are to:
-- Provide affordable, quality housing for moderate- to low-income families. The rehabs usually include new roofs, plumbing, electrical, heating and appliances, so the new owners would have no major outlays after moving in. The rehabbed homes are energy efficient and lead free.
"These home are here for another 50 more years, 60 more years," Kamp said. "People will be able to live in it and call it home."
The hope is to make the homes affordable so mortgage payments are about what people might otherwise pay in rent.
"What we try to do is look at the family and their situation and income level and ensure that the monthly mortgage is affordable," Kamp said.
A home that sells for $70,000 to $80,000 is roughly what a family of four could afford, according to income guidelines.
-- Hire local workers. Kamp estimated 10 to 15 people are employed full-time in Janesville because of the program. The stimulus money was not meant to only rehab houses but to create jobs, she said.
"It has been really successful in doing that in every community we've worked in," Kamp said.
-- Stabilize property values.
-- Eliminate blight. The city wants to avoid private investors buying foreclosed properties at a low cost and renting them out without major improvements.
-- Reduce housing density.
The partnership has had good responses to its homes when they go up for sale. Houses have been on the market for only about a week before offers start arriving, Kamp said.
"We price the houses to be consistent with the neighbors and also to be affordable for families and to provide the incentive for someone to move back into this neighborhood," she said.
The partnership has offers for two of the three homes up for sale.
Neighborhoods benefit when homes are owner occupied, Kamp said.
When homes are improved in a neighborhood, other residents often start working on their own home, Kamp said.
"It has an important side benefit," she said.
The homes that are improved make "huge differences" in the immediate area, she said.
"Janesville has been really smart in that. (The city has) focused on a few neighborhoods and focused a lot of resources on those neighborhoods to try to turn them around.
"I have looked at a lot of houses in these neighborhoods," she said. "There's some beautiful, historic homes, and people like to live in older homes that have character that they can make their own."
The Wisconsin Partnership for Housing Development has signed two city contracts since June 2011 to rehab six homes and build a new home with a goal of improving housing in the inner city neighborhoods. Three of the seven are now for sale.
270 S. Franklin St.
Size: 1,472 square feet
Pre-rehab appraisal: $30,000
Purchase price: $27,000
Estimated rehab cost and fees: $112,470
Post construction appraisal: $72,500
Sale price: $72,500
410 Johnson St.
Size: 1,628 square feet
Purchase price: $25,740
Pre-rehab appraisal: $26,000
Estimated rehab cost and fees: $109,609
Post-rehab appraisal: $73,000.
Sale price: $73,000
275 Rockport Road (under construction)
Size: 1,391 square feet
Purchase price: $37,500
Pre-rehab appraisal: $49,000
Rehab cost and fees: Not yet available
627 Rockport Road (under construction)
Size: 1,600 square feet
Purchase price: $12,977.
Pre-rehab appraisal: $25,000
Rehab cost and fees: Not yet available
378 Wilson Ave.
Size: 916 square feet
Purchase price: $34,000
Pre-rehab appraisal: $41,500
Estimated rehab cost and fees: $76,928
Post-rehab appraisal: $67,000
Sale price: $64,900
403 Lincoln St. (under construction)
Size: 1,748 square feet
Purchase price: Donated
Pre-rehab appraisal: $54,000
Rehab cost and fees: Not yet available
176 Lincoln St. (new construction)
Size: About 1,600 square feet
Estimated cost and fees: $150,000 for construction plus $24,000 for the lot