The City of Ishpeming Downtown Rental Rehabilitation Program

 BACKGROUND

The Michigan State Housing and Development Authority (MSHDA) has been promoting Downtown Rental Rehabilitation (DRR) Programs for the last 10 years. Their primary purpose for funding DRR is to revitalize downtowns where disinvestments have been occurring over the past 40 years. In addition to creating or improving housing units, there are many other benefits, with some listed below:

•  People have moved downtown and personally benefited from living in a walkable community close to shops, parks, schools, churches, etc.

• Downtown property owners have benefited from the rental income generated from these units.

• Downtown retail and service businesses have benefited from the new residences and their guests who bring their business downtown.

•  The City or Village has benefited from increased property values and taxes to help provide needed services to the entire community.

In 2008, Marquette County Community Development applied to MSHDA and received a grant for the amount of $213,500 to improve the rental units in downtown Ishpeming.  So far over six rental property owners with over 15 tenants have qualified for and received assistance to improve their properties. 

PROGRAM DESCRIPTION

The Downtown Ishpeming Rental Rehab Program provides forgivable loans to landlords for improvements to apartment units in the downtown district in the City of Ishpeming.   Landlords must commit to maintaining units as residential rental property for a period of five years, charging initial occupant(s) of 51% of the units Section 8 “Fair Market Rent” (as determined by HUD) or less. 

Furthermore, if tenants are in place at the time of rehabilitation, the landlord must agree to not increase their rent from the pre-rehabilitation rents for a period of one year from the completion of the rehabilitation.  From that point forward, rental rates cannot increase more than 10% annually during the term of the contract for any resident. 

Up to $25,000.00 per rental unit and/or $35,000 for the creation of a rental unit is available for improvements such as lead paint hazard reduction, windows, furnace, plumbing, and electrical updates, roof renovation, etc. Landlords are required to pay 25% of the rehabilitation costs upfront.   The remaining 75% balance of the “loan” is forgiven in its entirety after 5 years when the landlord complies with the requirements of the program. 

Landlords are also required to have an asbestos survey conducted on their property.  The purpose of this survey is to provide asbestos locations to the general contractor selected for your project so he/she is aware and has the option of taking the necessary precautions.  This is a MIOSHA requirement. The landlord is responsible for the cost of the asbestos survey. 

ELIGIBILITY  REQUIREMENTS

The applicant must be the owner of the property, be current on all property taxes and property insurance and be credit worthy. The property owner must be willing and able to gather income and demographic information about their tenants, have an asbestos survey complete and be able to come up with 25% of the cost of improvements. 

Tenants incomes must be at or below 80% of the Area Median Income.  Tenants must be willing to accept that contractors and lead paint inspectors will be in and around their apartment during the construction phase.  Tenants will be required to leave their apartments at least once for up to 8 hours during the lead paint clearance process.  Tenants will not be reimbursed for the lead paint clearance process unless they are asked to leave their apartments for longer than eight hours. 

Contractors selected for Rental Rehab Improvements are all local contractors that have applied to participate in the Marquette County Housing Program and meet the contractor requirements of the program.   The contractor selected is the low bidder on the entire project unless the property owner selects another contractor.  In that case, the property owner would be responsible for paying the difference between the lowest bid and the contractor of choice, plus 25% of the project.