From dodgy to desirable: How 2 historic Des Moines neighborhoods turned it around

Many of those colossal old Victorians that color Sherman Hill are fetching $300,000 to $500,000 now.

But in 1989, when I first pulled up to a tiny studio there with a futon and a pile of Russian fiction, you couldn’t find one worth more than $100,000.

Jogging on both sides of MLK Jr. Parkway back then, 22-year-old me thought the neighborhood was as dead as the plots I huffed by at Woodland Cemetery. The crime was unsettling. Coffee shops, bars or restaurants were few.

No way I’ll be back after this internship, I thought.

Not long after, Lyla Dozier moved a few blocks west into a house on 27th Street in Woodland Heights, the area that stretches from MLK to 31st Street, Ingersoll Avenue to Interstate 235. She says she was something of a house flipper then before we had the term.

But where others like me saw decay, she saw potential.

“It’s really the character of the people you are surrounded by that make up a neighborhood,” she says. “This place is good people.”

Not everyone living in a distressed neighborhood yearns for the type of gentrification that has turned Sherman Hill into the artsy, edgy destination it is now.

But those who put down roots will tell you they do yearn, like Dozier did back in the early ‘90s, for greater stability: a mix of incomes, better homes, higher property values, safety, neighborliness.

You could guess an improved economy helped Woodland Heights and Sherman Hill turn a corner, but that’s only part of the story. The transformation happened because neighbors like Dozier, and public and private groups, never strayed from a mission to turn them around.

“We went from distressed to stable,” Dozier says. “It’s proof you can change a neighborhood. But it takes a lot of hard work and a lot of money.”

Home values in Sherman Hill and Woodland Heights made some of the biggest gains in Polk County’s new assessments this spring. The census tract that includes both neighborhoods grew 16 percent from the depth of the recession in 2011 to this year, according to a Register analysis.

Similar attempts to morph neighborhoods are taking place across the city in places like Capitol Park, Capitol East and Union Park. Walk those areas, as I have this spring, and you recognize each area and its needs are distinct.

But housing experts say there are lessons for all of us from the sweat and working together that has taken place over almost 30 years in Sherman Hill and Woodland Heights:

• Change begins with active neighbors.
• City leaders with vision provide the momentum.
• The transformation requires big investment that doesn’t pay for years.
• Private businesses and newcomers pick up the baton and help the neighborhood thrive.

“If you don’t have the people who live in a neighborhood invested, there’s not going to be a plan,” said Pam Carmichael, executive director of the affordable housing nonprofit Home Inc., which has been a key player in changing several Des Moines neighborhoods. “Neighbors are the force. You need to have them at city hall. They need to have the ear of politicians and speak with one voice.”

The risk-takers

While Carmichael’s organization has focused on creating affordable housing and raising property values in lower-income neighborhoods, another group has worked hard to provide financing.

The Neighborhood Finance Corp. has tapped money from the city of Des Moines and lenders and established loan programs in many neighborhoods in need of face-lifts.

That investment has been key in improving the older housing stock in places like the Drake neighborhood and Beaverdale.

Based on Sixth Avenue in River Bend, Neighborhood Finance has new programs that help where other lenders fear to go.

Its new Front Porch exterior home improvement loan program is similar to a popular one provided for years, but provides money for improvements on the outside of homes. A portion of the renovation loan can be forgiven, and can range from 25 percent to 50 percent, up to $10,000, depending on household income.

That program also has a shorter turnaround — 30 days — than the NFC’s most popular forgivable loan program, and it allows borrowers with lower credit scores.

In Sherman Hill, a “downsizing program” has helped borrowers rehab homes that previously were broken up into apartments. As much as $20,000 can be forgiven under that program if the borrower converts the home back into a single-family dwelling.

Another program allows investors to receive a subsidy worth as much as $20,000 to rehab a property and then turn it over to a homeowner.

“Either the investor or the buyer would have to borrow funds to receive the forgivable loan," said Stephanie Preusch, executive director of Neighborhood Finance Corp. “It encourages more revitalization, and gets more money into a property early in the process.”

It’s through financing like that that newcomers to neighborhoods like Phil Kreznor in Woodland Heights have been able to fix up homes.

Kreznor says he used the well-known $10,000 loan program to have contractors put a new roof on his house on 25th Street, as well as install windows and a water heater.

More than 60 percent of NFC’s lending is in low- and moderate-income areas. Last year, borrowers in the Drake neighborhood, which is larger than most in Des Moines, were the top applicants for all of NFC’s lending programs.

That’s a sign folks are investing in staying. Another is when more private investment enters the market to do high-quality rehab work.

“It makes us feel better,” Preusch said.

Change-makers

Historically, homes in distressed or transitional neighborhoods are slow to sell. Those homes are moving fast in Des Moines neighborhoods that are becoming more stable, like Woodland Heights.

A year and a half ago, Michael Donlin and Ryan Francois formed a company called Rally Cap Properties with the goal of doing custom flipping in Des Moines’ historic neighborhoods. Some of the homes are pre-sold, so Rally Cap can remodel specifically to a buyer’s tastes.

Other times, they gamble that a well-done remodel — which can involve opening up living areas, replacing wiring and plumbing, roofing, or the costly removal of hazardous material like lead and asbestos — will pay off.

Today, the two 24-year-olds say, their biggest challenge is finding homes to work on.

“From when we started to now, the difference is night and day,” Francois said of flipping in the Midwest's fastest-growing city.

Backed by a group of about 10 investors, Rally Cap has focusing its efforts in the North of Grand, Drake, lower Beaverdale, Roosevelt and Woodland Heights neighborhoods. But the three partners now involved and their investors see potential in other neighborhoods near downtown, especially the up-and-coming Market District south of the East Village.

It's labor-intensive: One recently completed house involved 37 subcontractors. Some require months to clean up unrecorded liens.

But the months-long projects are turning profits, and the transformation in places like Woodland Heights, a national historic district where Rally Cap currently has three homes, is palpable.

The problem for others who would like to do the same: Financing remains scarce.

Former Des Moines mayor Preston Daniels says city leaders and developers also have been focusing much of their resources on new construction of rentals and development downtown, in much the same way civic leaders were focused on suburban building back in the late 1990s.

Daniels says he'd like to see more focus on restoring neighborhoods ringing downtown.

Daniels headed the Drake Neighborhood Association before he served on the city council and as mayor from 1997 to 2004. He says it's not easy for neighbors to keep hammering on city officials over years to make change.

“When you’ve been at the war so long and you start to see peace symbols, you want the war to be over,” he said.

But Jack Porter, who with his wife bought a house in 1977 on 18th Street in Sherman Hill for $20,000, says the talks and continued planning are critical.

Sherman Hill was placed on the National Registry of Historic Places decades ago because a few like-minded neighbors began meeting around dining tables and talking about shared dreams for the neighborhood.

Today, he said, neighbors are actually expanding their planning for the area, collaborating with the city and urban planners at Iowa State University to increase safety, keep improving housing stock and add green space. 

Even if newcomers to the area don't know the vision, the longtime neighbors know it will encourage them to stay.

"I can honestly say we know the names of families on every single block and, in some cases, multiple names," Porter said. "We joke we even know what kind of wine some of them like."

Watchdog Unleashed

The concept: Reader's Watchdog columnist Lee Rood hatched the idea on a cold night when she wanted to get back to her favorite solo activity: walking. When spring arrived, Rood resolved to break up her well-worn routes to rediscover the more than 50 neighborhoods that populate her hometown of 20 years.

For the next few months, she'll focus reporting on the big issues facing some of those neighborhoods.

Where she's been: ACCENT, Capitol Park, Chautauqua Park, Cheatom Park, Salisbury Oaks, downtown Des Moines, River Bend, Woodland Heights, Sherman Hill.

Where she's headed: McKinley School-Columbus Park and Indianola Hills

What should she Watchdog next? Write her at Lrood@dmreg.com, Twitter: @LeeRood, Facebook: DesMoinesRegister.com/ReadersWatchdog.