Case Studies
June 23, 2026
Using rental rehabilitation to improve affordable housing quality: Lincoln, NE
Published on: June 23, 2026
- Issue Areas
- Housing and community development
MORE ABOUT THE STRATEGY USED IN THIS CASE STUDY Housing stability and displacement prevention, Maintaining safe and healthy housing
Overview
Summary
- Access to safe and affordable rental housing in the historic South of Downtown (SoDo) neighborhood in Lincoln, NE was a major concern for residents and city leaders. In 2020, 43% of buildings in the neighborhood were classified as “dilapidated or deteriorating,” highlighting the urgent need for housing rehabilitation or redevelopment.
- City leaders sought to incentivize property owners to invest in unit safety and habitability through essential renovations, including plumbing, insulation, windows, roofing, and HVAC units. At the same time, residents wanted to maintain the neighborhood’s character and affordability, expressing concern that redevelopment would make housing unaffordable and accelerate gentrification.
- In 2023, the City of Lincoln launched the South of Downtown Residential Rental Rehab Program (SoDo Rental Rehab), which provides financial assistance to rental property owners to improve the quality, safety, and energy efficiency of housing in the neighborhood. Managed by the Urban Development Department and initially supported by NeighborWorks Lincoln, the Program provides up to $15,000 per unit in financial assistance in exchange for 20-year affordability commitments from property owners to prevent displacement and gentrification.
- The Rental Rehab Program is funded by Tax Increment Financing (TIF), a public financing mechanism used across the country. TIFs freeze property taxes in a particular geography, and as development occurs and property values rise, the increase in property tax revenues is funneled into a special fund focused on the TIF district. In the case of Lincoln, the South of Downtown neighborhood was established as a TIF district, and increased property tax revenues were used to fund grants to owners participating in the Rental Rehab Program.
- Keys to SoDo Rental Rehab’s early success are the multi-sector partnership between the City, which handles funding and administration; the public utility Lincoln Electric Systems (LES), which provides technical assistance for energy efficiency upgrades; and NeighborWorks Lincoln, a nonprofit partner who engaged landlords and contractors. This partnership allows the Program to target interrelated goals to improve housing safety, quality, and energy efficiency while preserving affordability in the SoDo neighborhood.
Results and Accomplishments
253
As of 2026, the Rental Rehab Program has successfully rehabilitated 253 rental units, with an additional 166 units currently approved or in progress.
180+
Over 180 energy efficient heat pumps have been installed in units.
$6.125 Million
Since 2021, over $6.125 million in TIF funding has been redirected to Rental Rehab in SoDo.
Solution
What was the challenge?
- Aging and dilapidated housing stock: When city officials created the South of Downtown Redevelopment and Strategic Plan in 2020, housing affordability and quality were top concerns expressed by South of Downtown residents and the South of Downtown Community Development Organization (SDCDO). Data from the strategic plan indicated that 43% of buildings in the South of Downtown neighborhood were dilapidated, and tenants faced higher costs from older buildings with inefficient utilities (82% of housing units in the South of Downtown neighborhood were built before 1960). Unsafe housing conditions led to increased service calls for City agencies to address safety concerns and building code violations.
- Need to preserve affordable rental housing: South of Downtown is overwhelmingly a renter’s neighborhood (rentals account for 93% of occupied housing). Students, retail and service workers, and other lower-income residents rely on the neighborhood for affordable housing and easy access to downtown and the State Capitol. Many renters felt that they were forced to choose between housing affordability and safety or quality.
- Redevelopment without gentrification: Initially, South of Downtown’s residents were concerned that better housing would come with larger scale redevelopment and increased rents. Additionally, newer mixed-use development around commercial corridors in the neighborhood raised concerns about gentrification. Residents wanted higher-quality affordable housing without compromising the historic character of the neighborhood or rapid development that would drive gentrification and displacement.
- Property owners facing a financial trap: Due to the age of the buildings and low profit margins on affordable units, the cost of necessary mechanical, electrical, and plumbing upgrades exceeded property owners’ ability to fund them without significantly raising rents. Many landlords allowed substandard conditions like pests, poor drainage, and code violations to persist, leading to a risk of building condemnation and subsequent displacement of low-income residents. Landlords also had no incentive to invest in more efficient utilities because they typically did not pay the utility bills.
What was the approach?
- Comprehensive rental property rehabilitation strategy: In 2023, the Urban Development Department launched the SoDo Rental Rehab Program, a grant that funds energy efficiency, habitability, and safety upgrades (e.g., HVAC, roofing, windows, and plumbing). Lincoln Electric Systems (LES) joined the Program during planning, seeking to fund energy efficiency upgrades in high-need areas to offset rising costs and reduce consumption. The City also collaborated with NeighborWorks Lincoln in the first three rounds of funding to support property owners and coordinate with contractors. The City has since taken on coordinating with landlords directly. The SoDo Rental Rehab Program capitalizes on the opportunity for property owners to make energy efficiency upgrades alongside habitability renovations.
- City funding for rehabilitation in exchange for affordability: As of 2024, participation requires landlords to sign a 20-year Land Use Restriction Agreement (LURA) to commit to rent controls and accept Section 8 housing vouchers. The 20-year affordability period means during this time, rents must not exceed HUD Fair Market Rent limits, nor can rent increase more than 5% annually within the FMR. Initially, the Urban Development Department negotiated the length of the affordability with each landlord ranging from 5 to 99 years before establishing a standardized timeframe of 20 years.
- Partnering with Lincoln Electric Systems (LES): LES and the Urban Development Department forged a partnership, enabling the Program to combine habitability repairs (e.g., roofing, plumbing, etc.) with energy-efficiency upgrades (e.g., high-efficiency heat pumps, smart thermostats). LES helps participating property owners evaluate their units for upgrades and provide supplemental grants for newer, energy efficient utilities as well as upgrading connections to the grid. LES covers up to 75% of the utility replacement cost, and rental rehab grants could cover the rest. Ultimately, this partnership added another way for the Rental Rehab Program to further housing affordability by lowering energy bills paid by tenants.
- Engaging property owners and contractors: To advance its goal of rehabilitating 1,000 units in 10 years, the Urban Development Department offered broad eligibility to all property owners in the SoDo neighborhood, regardless of property size, type, age, or condition. The City initially engaged landlords with a mailer sent to every registered property owner in the SoDo neighborhood. In the first three rounds of funding, the City worked with NeighborWorks Lincoln to coordinate between landlords and contractors, leveraging NeighborWorks' expertise building and managing affordable housing to help owners plan renovations and guide contractors through the city's registration and payment process.
- Prioritizing funding to maximize impact: City staff processed grant applications from landlords. They created a ranking system, assigning points to prioritize older buildings, renovations that add accessibility, energy efficiency upgrades, and landlords keeping rents below median area rent. The points system ensured grant funding went to landlords most closely aligned with the intertwined priorities of housing affordability, habitability, and energy efficiency.
Who were the key partners?
- City of Lincoln Urban Development Department: Provides oversight, sets program guidelines, processes payments to landlords and contractors, and manages the ranking and selection process for rehab grants.
- NeighborWorks Lincoln: Served as the primary partner on the ground with landlords for unit rehab planning, contractor management, and site inspections.
- Lincoln Electric Systems (LES): Provides supplemental energy efficiency grants for upgraded utilities such as heat pumps and performs technical assessments to help landlords retrofit their buildings for more energy efficient utilities.
- Property owners: Landlords opt in to the Program and agree to the 20-year fair market rent agreement. Landlords were also responsible for purchasing upgraded appliances, hiring contractors, and supervising the renovations.
- South of Downtown Community Development Organization (SDCDO): Represented resident interests and assisted in the neighborhood planning process.
How was this approach funded?
- Tax Increment Financing (TIF): Tax Increment Financing (TIF) utilizes the growth in property valuations within the SoDo TIF District. TIF allows the City to capture a portion of the annual property tax revenue derived from the increased value of new development beyond a base value to subsidize grants issued for rental rehabilitation projects. As property values in the SoDo neighborhood are re-assessed every three years, a portion of revenue from that increased property tax valuation is directed to the Rental Rehab Program, creating a sustainable funding source. Since 2021, over $6.125 million in TIF funding has been redirected to redevelopment in SoDo.
- LES community impact funding: LES’ grants for landlords were initially funded by $1.3 million in unobligated funds set aside to improve energy efficiency in lower-income areas. These funds supplemented rental rehab grant funding to cover new electric utilities. Additionally, in 2025, LES was awarded a $300,000 Google Data Center Community grant that they directed to continue funding energy efficiency upgrades alongside the SoDo Rental Rehab Program.
Timeline
Lincoln Community Foundation funds and stands up the South of Downtown Community Development Organization (SDCDO) responding to concerns about housing, street lighting, gentrification, and quality of life.
Lincoln City Council declares the South of Downtown Area as "Extremely Blighted."
The City's Affordable Housing Coordinated Action Plan identifies the need for a robust rental rehab program.
The City submitted the notice to divide and the County Assessor's office set aside property tax revenue for the Rental Rehab Program on August 2, 2021.
An initial mailer is sent to property owners to gauge interest. Landlords begin to apply for grants.
The SoDo Rental Rehab Program launches with initial funding from the city and LES. The first round of funding provides rehabilitation grants for 130 rental units.
Announcement of $300,000 in additional funding from Google to expand funding for upgraded energy efficient utilities.
Rounds 3–4 of grants are disbursed, with renovations in units ongoing. The Program is refined, including formalizing rent controls and transitioning administrative duties from NeighborWorks to city staff. The Rental Rehab Program has successfully rehabilitated 253 rental units, with an additional 166 units currently approved or in progress.
Implementation
What factors drove success?
- TIF creates sustainable funding: Designating the South of Downtown neighborhood as a TIF district created a local, sustainable funding source. This allows the Program to fund itself based on increases in property tax revenue associated with property improvements and new developments. This also gave the City of Lincoln greater autonomy to craft program guidelines.
- Catalyzing additional rental property improvements: The collaboration between the City of Lincoln and LES allowed property owners to make energy efficiency upgrades in tandem with basic habitability renovations. In addition to the structural and energy efficiency renovations covered by grant funds, many landlords took the opportunity to make additional cosmetic upgrades that helped make their units better for tenants and more desirable in the long term.
- Benefits for both landlords and tenants: When developing the Rental Rehab Program, city staff found that landlord and tenant interests aligned, allowing them to design a program that benefits both. While tenants gain renovated units with rent controls ensuring affordability, landlords receive structural, energy efficiency, and safety upgrades that make their rental units more marketable in the long term. Ultimately, the Program overcomes landlords’ reluctance to invest in less-profitable units by providing $15,000 per unit for critical renovations in exchange for guaranteed affordability.
- Focusing on all types of rental housing: The SoDo Rental Rehab Program had broad eligibility for property owners and types of properties. This allowed the entire spectrum of affordable housing in the neighborhood to be eligible for rehabilitation, helping maximize the reach of the Program.
- Clearly defined responsibilities between city and community partners: In the first three rounds of grant funding, the Urban Development Department and NeighborWorks defined clear areas of responsibility that helped the Program run smoothly. Initially, the City focused on setting program guidelines as well as managing grant applications, funding, and compliance, while NeighborWorks coordinated between contractors and landlords. A project manager from NeighborWorks met with property owners, put together a scope of work for each property, designated which upgrades qualify for rental rehab funds, and coordinated site inspections with LES staff. As the Program evolved, Urban Development Department staff have taken on NeighborWorks’ responsibilities working with property owners and LES.
What were the major obstacles?
- Technical retrofit challenges: Older buildings (many 80+ years old) often required extensive electrical work before energy-efficient heat pumps could be installed. Some older buildings weren’t set up for electrification of utilities and were unable to receive energy efficiency upgrades.
- Insurance requirements: In the initial round of grant funding, landlords were required to carry insurance for contractors working on their units, but rates were higher for smaller landlords. Subsequent rounds of rental rehab grants shifted the responsibility to be insured to contractors. NeighborWorks Lincoln took on the administrative requirement of ensuring all contractors were insured and registered as vendors with the City of Lincoln.
- Tenant education: Energy consumption data from LES showed that some tenants needed training on how to use new smart thermostats to maximize energy savings.
- Landlord reluctance to accept housing vouchers: Initial rounds of grant funding did not require landlords to accept Section 8 housing vouchers. However, city leaders wanted to ensure the rehabilitated units would be accessible to low income individuals receiving housing assistance, and added the requirement to the rental rehab grant. Once this requirement was added, there was less interest from landlords who were wary of accepting housing vouchers due to additional responsibilities. This concern has been negated following a city ordinance passed in 2025 that prohibits source of income discrimination in any rental housing units within Lincoln.
How was the approach measured and refined?
- Limiting rate increases: Some participating landlords who were charging well below the HUD Fair Market Rent took the opportunity to significantly increase rent to match the HUD FMR. In response, city staff refined the guidelines to protect the most affordable units in the area. In subsequent rounds of grants, landlords must agree to limit rent increases to no more than 5% at lease renewal or signing.
- Data from property owners: Applicants must agree to report to the City annually by providing rent roles or ledgers during the affordability period. This helps city staff track the impact, including whether landlords are charging affordable rents. City staff are also tracking how much the city is spending per unit and the number of individuals served.
- Data from LES: LES collects customer data, including energy consumption and utility bill costs. LES tracks monthly energy consumption measured year over year controlling for weather, with preliminary data indicating that tenants are saving anywhere from $200 to $500 a year from utility upgrades.
- Code violations and quality of life complaints: The City is monitoring calls for service and reported code violations in the South of Downtown neighborhood. As the Program matures, the City is looking to see fewer complaints about housing conditions and related calls for service.