OMAHA — Set to rise in one of Nebraska’s oldest and changing urban neighborhoods is a 51-unit rental project aimed at keeping lower income residents from being priced out of midtown Omaha.

Not far away, a pair of obsolete downtown office buildings, each over a century old, are to be rehabbed into a total of 56 rent-restricted apartments on top of street-level commercial space.

Elsewhere in the state, in cities such as Beatrice, Schuyler and Hastings, dozens more residential dwellings will soon sprout for seniors on fixed budgets.

They’re all part of the latest round of Nebraska projects fueled by low-income housing tax credits — a tool experts say accounts for the state’s biggest chunk of affordable rental housing, or about 5,000 new dwellings added over the last decade and another 2,000 or so in various stages of development.

Offsets tax liability

In essence, the credit allows investors to offset their tax liability in exchange for providing upfront funds to develop affordable housing. That money reduces a project’s overall debt, which allows rents to be more affordable at below market rates.

The Nebraska Investment Finance Authority, the entity that administers both federal and state tax credit programs, awarded the latest batch of credits to nine planned developments that are on track to produce 383 new rental homes. 

For those awardees, the credits translate into a total of nearly $111 million in funds to cover the bulk of construction costs for the planned projects, which then must remain affordable for 30 to 45 years, said NIFA executive director Shannon Harner.

“Investing in affordable housing is investing in the future of Nebraska,” Harner said.

Housing — and ways to provide more of it at accessible prices — has been in the spotlight as business and community leaders have noted consequences, including rising numbers of eviction court cases and workers leaving the Cornhusker state.

Indeed, housing shot up as one of the top two priorities identified in a 2023 survey of lawmakers cited during the past two years by the Legislature’s planning committee, which exists to identify trends, challenges and goals for Nebraska.

A housing report issued in September by the Nebraska Legislative Research Office used Census Bureau data to look at how the state stacks up nationally: 

• Nebraska ranked at the bottom of the pack when looking at how much state government spent on “housing and community development” projects, according to the bureau’s 2021 Survey of State and Local Government Finances.
• Nebraska climbed to 39th among the 50 states when combining amounts that local communities spent along with their state governments on “housing and community development.”
• In comparing per capita local and state government spending, Nebraska, with $137 per capita spending, ranked 28th. Massachusetts was at the top ($506) and Wyoming at the bottom ($35). 
• In comparing per capita local and state government spending with neighboring states, Nebraska was behind Colorado ($275), but ahead of Missouri ($135); Iowa ($134), South Dakota ($128), Kansas ($81) and Wyoming ($35). 

Said the research report: “Many state housing funding programs exist in Nebraska, but the state ranks poorly in spending on housing and community development.”

It said that people interviewed for the research agreed that increased funding for construction and rehabilitation of affordable housing would improve the overall housing market and position Nebraska as “immensely more attractive” to potential businesses and job seekers.

‘Robbing Peter to pay Paul’

While housing experts consider the tax credit programs the most prolific in creating affordable rental units, Harner said that COVID-19 supply chain challenges have led to a production backup.

As developers catch up, Nebraska lawmakers this past session fell short in other affordable housing related programs, housing advocates said.

The Legislature, for instance, shifted $25 million from the Nebraska Affordable Housing Trust Fund, which is funded by a portion of the documentary stamp tax from real estate transactions. That amount then was directed to two other housing funds, one that helps create rural workforce housing and another for urban, middle-income workforce housing.

“It was just basically robbing Peter to pay Paul, it wasn’t new funding,” said Amber Marker, executive director of the Nebraska Housing Developers Association.

The year before, Gov. Jim Pillen vetoed $40 million that had been proposed for workforce housing, saying that he wanted to protect the state’s cash reserves – the source of the housing funds – and didn’t want to “flood the market” with government-funded housing.

State Sen. Wendy DeBoer of Omaha, the chair of the Legislature’s Planning Committee, said housing continues to be a pressing and alarming concern for the state and its workforce needs, across both urban and rural communities.

Competition for money is fierce, she said, and much of the Legislature’s recent focus was on property tax relief. 

She said she’ll continue to push for improvements.

Areas of optimism

Advocates say they are optimistic, however, about progress under the Nebraska Strategic Housing Council, a wide-ranging group of policymakers, legislators, community and industry leaders that aims to tackle the shortage of housing across the state.

Among top goals declared by the council last year was to create, by 2028, 35,000 affordable and attainable homes for low- to middle-income earners, which the council said would reduce the number of needed units by about a third.

Another positive sign, they said, are affordable housing action plans that Nebraska cities were required to adopt by the start of this year. Legislation required that the plans include, for example, intentions for construction of affordable housing and how cities plan to use government incentives for that purpose.

The federal American Rescue Plan Act also fueled affordable housing efforts by nonprofits such as Omaha Front Porch Investments, which got the financial boost from the City of Omaha’s ARPA allotment. 

Two recent reports from the Legislative Research Office — including the September “Framing the Future: Altering the Affordable Housing Blueprint in Nebraska” and another issued in July, “The Good Life at the Wrong Price”  — intend to provide information for lawmakers as they consider future action and legislation.

According to the July report, “Relative to other states, the affordable housing supply in Nebraska is woefully lacking. A shortage of diverse and appropriate housing units in the market has increased both the cost of rent and home purchase prices of the available houses and apartments in the state.”

Researchers cited multiple reasons for the difficulty, including interest rates, appraisal gaps, insufficient ready-to-develop lots, limited construction workers in rural counties, complex building regulations.

Market rate units sprinkled in

Meanwhile, developers selected by NIFA in the latest round of housing tax credit allocations are closer to creating 383 affordable units. 

An additional 57 market-rate units will be sprinkled within the nine project sites, according to their plans.

Of the nine developments, five are in the state’s largest city of Omaha. 

One is a two-building, $27 million project by developer Neeraj Agarwal that is to create 56 affordable dwellings in historic structures — one that most recently served as office space for lawyers and another once owned by the inventor of a version of the modern parachute.

Dubbed the Howard Street Rehab, construction is to start next year at 1501 Howard St. and 500 S. 18t St., contributing to expected revival of a pocket just outside Omaha’s Old Market. The federal and state low-income housing tax credits are to cover about 42% of total development costs, NIFA said. Helping as well are sources including the historic tax credit.

Yet another Agarwal project —  a beneficiary of a previous tax credit allocation round — is underway and expected to produce 54 rental units along Omaha’s original main street.

That $25 million 1904 Farnam project is across the street from City Hall. For decades the seven-level building served as home to law firms and small businesses. Planned restoration of the Art Deco-style landmark is assisted financially by other sources as well, including historic tax credits.

Agarwal said the downtown projects would not be “financially doable” for his for-profit business if not for the housing tax credit and other public incentive programs.

West of downtown Omaha, the $19 million first phase of the Poppleton Project is to create 51 units for people with household incomes at 50% or below the area’s average median income. 

The target tenant population is working class and service employees at risk of being squeezed out by rents rising with the popularity of the area that’s situated between a reviving downtown business district and a job-magnet University of Nebraska Medical Center.

According to the nonprofit inCommon Housing Development Corp., the project is on the “front lines” of the housing crisis, subject to the impact of “gentrification over the past decade” and the lingering financial stress of a pandemic.

An estimated $24 million future phase is to bring 69 additional dwellings of various sizes and styles to the same acre of land, reserved for residents and families earning under a certain income. 

‘Post-COVID economics’

In “post COVID economics,” the housing challenge is greater, and “it’s going to take all hands on deck” to solve workforce housing gaps, said Sheryl Garst, project manager at inCommon Housing Development.

The inCommon history offers an example of the greater focus needed to produce affordable housing, Garst said. The nonprofit started serving the midtown Omaha area nearly 20 years ago, initially offering leadership and job training for residents and eventually taking on housing rehabilitation projects. Just recently, its board helped launch the inCommon Housing Development Corp., led by Garst, to concentrate on affordable housing efforts. 

With increased labor, material and other costs, a project such as the Poppleton would not be feasible without the boost from federal and state tax credits, Garst said. 

Tax credits are expected to provide about 67% of development costs for the first phase. Other sources including public tax-increment financing and HOME funds will buttress traditional conventional loans to fill the gap.

Underlying efforts, said Garst, is the belief that affordable housing, generally defined as paying no more than 30% of income on housing, helps build success by preserving money for emergencies, home ownership and other life goals.

“When you’re living paycheck to paycheck, that doesn’t help anyone in that generation or future generations,” she said. “It all starts at the home.”