FY 96 Homeownership Zone
Louisville, Kentucky

AMOUNT OF AWARD:

Homeownership Zone Grant — $4,600,000
Section 108 Loan — $5,000,000

NEW HOMEOWNER UNITS:

307 (307 new construction); 150 HOPE VI

PROPOSED COMPLETION:

December 2010

HOMEOWNERSHIP ZONE SITE:

The Park DuValle Homeownership Zone (HOZ) is a 191 acre area in Louisville's West End. It is bounded by Russell Lee Park on the north, Algonquin Park on the east, Algonquin Parkway on the south, and Interstate 264 on the west. It is located six miles from the central business district. At the time of the Homeownership Zone designation, the area was dominated by 1,100 units of highly distressed barracks-style public housing. However, small clusters of houses built on the periphery of the neighborhood had remained stable.

PROGRAM DESCRIPTION:

The Louisville-Jefferson County Metro Government transformed an isolated area of concentrated poverty into a vital, mixed income community. The Metro Government used its Homeownership Zone demonstration grant and a HOPE VI grant to demolish distressed public housing and build an entire new neighborhood, using New Urbanism design principles. Both mixed-income homeownership and rental units were built in the combined project. The new development design includes a framework of streets and defensible open space, community facilities and a Town Center that combines housing with retail and institutional uses.

FUNDING:

PARTNERS:

Louisville Real Estate Development Corporation (LREDC) — Developer

PROJECT OUTCOMES:

• This neighborhood transformation would not have happened without the HOZ designation. The HOZ grant was an incentive for leveraging significant private investment.
• Prior to the HOZ, there were no single-family homes in the HOZ target area. The area is now predominantly homeownership housing.
• In 1994, the mean income of residents (who lived in the Cotter and Lang Homes public housing) was $5,000. The HOZ is now a truly mixed-income neighborhood.
• The neighborhood is a full-service community that incorporates a number of community amenities (three elementary schools, police substation, club house, health center, commercial downtown, and parks) in addition to the new housing units.
• There has been a consistent decrease in crime; the crime rate is about 1% of what it was previously.
• Perceptions of the Park DuValle neighborhood have improved dramatically. Park DuValle has attracted former residents back to the neighborhood as homeowners.
• An established neighborhood Property Owners Association plays an active role in organizing social and educational events for residents, and organizing a neighborhood block watch program.
• Although the current regional economic condition has contributed to a decrease in property values, values in the HOZ have decreased much more slowly and less dramatically than in most areas of Louisville.

INNOVATIONS:

• The City used price incentives as a marketing technique. The first purchasers were offered larger low-cost, soft-second mortgages. To reach lower income persons, purchase incentives were offered on a sliding scale to those earning below 40%, 50% and 70% of adjusted median income (AMI).
• In order to provide immediate neighborhood impact through jobs, the City designed and issued an RFP for �premiere builders�. Premiere Builders were required to develop incentives to attract minority contractors and hire neighborhood residents. Premiere Builders had a one-year probationary period. The City provided BMIR construction financing through its CBDO using its Section 108 loan funds, to ensure that the builders' existing lines of credit were not over-taxed.
• With the help of a developer, a small group of Section 8 recipients signed contracts to purchase homes that were packaged together as one project to reduce costs through economies of scale that made the prices affordable.
• The Louisville Real Estate and Development Company, the City's CBDO, tied a 3-hour Construction Orientation to the second mortgage incentive. Making the class a requirement helped homebuyers set realistic expectations and have a better experience during the construction of their home. The information homebuyers received during the course aided their communication with their builder, forging a stronger buyer/builder relationship.
• Classes for homebuyers on simple maintenance, upkeep and homeowner requirements were offered to provide first-time homebuyers the skills needed for successful homeownership.
• First-time homebuyer packages were provided that included many useful items that a first-time homebuyer might need but might be unable to purchase, such as a lawn mower, gardening tools, rakes, hoses, and lawn sprinklers.
• To prevent predatory lending, the Louisville-Jefferson County Metro Government is subordinating the soft second mortgages using an established policy and partnership with the first mortgage lender. Certain conditions must be met before the Metro government will subordinate its loan to a new first mortgage lender. The new loan must be no greater than the mortgage pay-off and no cash can be taken out of home equity. The Metro government must approve the new loan arrangement.
• The Neighborhood Association holds an Annual Holiday Festival that helps build community. The Holiday Market Place attracts local vendors. Local high school students volunteer to collect toys for children. A variety of children's activities are held.

BEST PRACTICES:

• A police substation was located within the neighborhood to minimize crime.
• The Park DuValle Pattern Book established clear design guidelines for community and architectural character. The Pattern Book was based on the design of traditional Louisville neighborhoods. These guidelines were responsible for creating a seamless transition between rental, homeownership and commercial buildings, and for fostering a sense of community.
• Streets were designed with wide, pedestrian-friendly sidewalks and large shade trees to encourage walkability and minimize traffic flow.
• Common green space is present throughout the neighborhood to create a sense of neighborhood place.
• The Town Center was designed as a mixed-use district of apartments and neighborhood retail services.
• Homebuyer counseling was mandatory for all homebuyers.
• Homebuyers that received a second mortgage incentive from the Metro Government were required to attend a 3-hour Construction Orientation. Making the class a requirement helped homebuyers set realistic expectations and have a better experience during the construction of their home. The information they received during the course aided in their communication with their builder, forging a stronger buyer/builder relationship.
• Realtors, lenders and their clients were invited to attend monthly Open House events that showcased the attractive new neighborhood that was emerging.
• Homebuyer incentives were offered on a sliding scale to eligible homebuyers from $5,000 to $16,800, structured as a soft second ten year forgivable mortgage. Nothing is forgivable in the first five years; 20% is forgivable each year starting in year six through year ten. These incentives were especially important in attracting the first-time homebuyers to the new neighborhood.
• With the help of a developer, a small group of Section 8 recipients signed contracts to purchase homes that were packaged together as one project to reduce costs through economies of scale and make the prices affordable.
• The Neighborhood Association held annual Holiday Festivals to help build a sense of community. The Holiday Market Place attracted local vendors. A local high school volunteered to collect toys for children. A variety of children's activities were provided.
• The Declaration of Covenant, Conditions and Restrictions provides a legal basis to ensure that homeowners and property owners maintain their properties to a specific standard, and that property modifications receive prior approval.
• To prevent predatory lending, the Metro Government subordinated its soft second mortgages using an established policy and partnership with the first mortgage lender. Certain conditions must be met before the Metro Government will subordinate its loan to a new first mortgage lender. The new loan must be no greater than the mortgage pay off and no cash can be taken out of home equity. The Metro Government must approve the new loan arrangement.

LESSONS LEARNED:

• The New Urbanism design and Pattern Book contributed to a sense of community, and ensured that Park DuValle gives the impression of being an established neighborhood. This design approach also contributes to the area's continuing attractiveness and marketability.
• Commercial services are difficult to attract and sustain, despite the development of commercial space in the Town Center. Several commercial enterprises closed. The commercial component needs to be carefully considered based on the market demand. Plans to attract a grocery store are underway.
• Using a counseling agency that did not focus exclusively on Park DuValle resulted in potential homebuyers choosing other developments resulting in wasted marketing efforts.

AWARDS AND RECOGNITIONS:

• American Institute of Architects �Urban Design Honor Award�
• Urban Land Institute �Great Planed Community� Award
• HUD and the Congress for New Urbanism �New Face of American Public Housing� Award
• Affordable Housing Finance magazine's �Reader's Choice Finalist�
• The National Building Museum �Smart Growth Exhibit�

Additional Information

• PROJECT CONTACT
• MAP
• PICTURES