New workforce housing tax credit could help with price points on future homes
BY CHUCK VANDENBERG
FORT MADISON – With 23 condos elegantly overlooking the city, Fort Madison developer Michael Mohrfeld has turned his sites back down the bluff.
A new state workforce housing tax credit has made completing Green Oak Development, which Mohrfeld started in 2014, a workable project again.
The 2000 Fort Madison High School graduate started Mohrfeld Electric in 2006, then branched into development with Green Oak Development, started building homes on farmland on the city’s northwest side, started a solar installation company, shifted to the Woodland Estate condos in 2017, and now is looking to finish the Green Oak project.
Mohrfeld has built 51 homes and condominiums in Fort Madison in less than seven years, adding about $15 million in real estate value to the city. He’s also built homes in West Point south of South Park.
The tax credit that requires support of the cities involved and requires that the homes be marketed under $200,000.
When Mohrfeld started building homes in 2014, he said his goal was to be in that price range.
“Our goal in 2014 was to hit the market at the $150,000 to $200,000 price point and the very first thing we found out is that it’s virtually impossible to do. We were going upside down on the homes,” he said.
Green Oak built about 28 homes in five years, but he said the demand for multiple car garages, finished basements and another needs pushed the market to over $300,000.
In 2018, he stopped building on Green Oak and moved to tackle some demand for upper level, maintenance-free condos that are now Woodland Estates nestled up the bluff from the Green Oak project.
Mohrfeld said he’s been working with Southeast Iowa Regional Planning Commission Director Mike Norris and thinks the housing tax credit can jump start the Green Oak project again, along with some other unique ideas.
“We’ve applied for the tax credit in West Point and Fort Madison,” he said. “The biggest thing for me is that there’s no restrictions on the consumer. No income guidelines and we liked that.”
The tax credit program caps materials and hard costs on the project at $200,000, which triggers the credit. That could make marketing the homes at the original price point goal doable, which would bring additional mid-market home stock to Fort Madison.
“I don’t want to say it’s hitting the reset button, but it gives us an opportunity to get back closer to what that initial goal was and incentivizes that,” he said.
“What’s neat about the program is that there’s a three-year time period to complete the project. It incentivizes us to build out the remaining 23 lots. We were on pace to do that before, but started on the condominium project and took all our resources up there for two years.
Qualifying for the tax credit is highly competitive with the value of project applications outpacing the funds available by almost a 4:1 ratio, Mohrfeld said.
To help increase the pace of the homes being built, Mohrfeld is also working with Homes for Iowa, a program where inmates at Newton Correctional Facility build homes and then the homes are sold to contractors who relocate them on trucks and set them on foundations.
Norris has also been instrumental in getting the Homes for Iowa program and has helped Mohrfeld navigate that program as well.
Although the tax credit, and the Homes for Iowa, program are not connected, Mohrfeld said that’s a win-win for Iowa.
“It’s a great program that teaches inmates skills and a trade, and we all hear the stories about the skills gaps in the state,” he said. “Not only are they creating much needed housing stock, but there also helping offenders get back on their feet.”
Mohrfeld would purchase the homes, which could be eligible for the tax credit since the hard costs of the building would come in under the $200,000 threshold.
“Our plan would be to put in the foundation and set the home there, while we’re conventionally stick-building one next to it,” he said.
Mohrfeld is looking to use the Homes for Iowa program in Fort Madison and West Point. He said he’s committed to one Homes for Iowa in West Point, and is close to making another commitment for a home in Fort Madison.
He said the main product for consumers would be an unfinished basement home with an attached garage, and extremely energy efficient.”
In addition to partnering with Homes for Iowa, Mohrfeld also has a on-going relationship with the Fort Madison High School Building Trades class.
Those students would also be engaged in helped get structures up. Mohrfeld has incorporated the class into other home building projects as well. A portion of the proceeds from the sales of homes the class helps build is donated back to the program in the form of supplies, tools and equipment.
But he said the bigger win is the skills the students are learning while working in southeast Iowa. Mohrfeld sits on the board of the Lee County Economic Development group is fully aware of workforce issues in this area.
“Being on the Lee County Economic Development Group board, the biggest cry out there is workforce. Training these guys that this is a long-term career – you can make great income, and even stay in southeast Iowa,” he said.
“If the coronavirus has taught us anything, it’s maybe small town Iowa isn’t such a bad place to be.”
Mohrfeld said he will know whether the West Point and Fort Madison projects qualified for the tax credit program in August. In the meantime – he keeps building.