Knoxville Veterans District Provides Workforce Housing

The month of May is Affordable Housing Month. Rural Resurrection continues to look at ways to help communities to provide safe, decent, affordable housing.

Across the rural Midwest, communities are quietly wrestling with a difficult question: what should happen to the massive institutional campuses left behind when federal facilities, hospitals, or schools close? On Rural Resurrection, we’ve highlighted a few communities that have chosen adaptive reuse to breathe new life into these historic buildings. However, stakeholders in Knoxville, Iowa, have chosen a different route that is yielding impressive results.

Local leaders weren’t faced with what to do with a single building, but an entire campus of derelict buildings. A former Veterans Administration hospital campus located along one of the main entrances into the community loomed over Knoxville like a dark cloud. But the enormity of the scope required to redevelop the site didn’t stop local leaders. They were determined to turn this eyesore into a long-term asset to the community.

From Federal Campus to Community Opportunity

The Veterans District started off in 1892 as the Industrial Home for the Blind. It would eventually become a veterans hospital in 1920. Over time, the campus expanded into a massive institutional complex with roughly 750,000 square feet of buildings. During World War II, the facility housed about 1,600 patients during peak times.

When the federal government closed the facility in 2009, Knoxville lost a major employer and economic anchor for the community. What remained was a derelict 152-acre campus, too large to ignore, but too tough a nut to crack with a quick redevelopment fix.

Knowing that it was too large of a project for any of the local developers, the City and Marion County worked together on a solution. In 2020, the County acquired the site from the federal government. They then entered into a joint redevelopment agreement (28E) with the City to guide the site’s future together.

Working from a Blank Slate

Before redevelopment could take place, though, the existing site needed to be cleared. To do so, Marion County spent roughly $11 million to demolish the abandoned hospital buildings and obsolete infrastructure. This wasn’t a simple task either, as it involved the demolition and removal of massive structures and the remediation of environmental issues like asbestos. Though costly, it was a necessary step in the redevelopment process. Unless incentives are involved to cover demolition and clearing of a site, developers will choose “greenfield” sites over redevelopment sites.

Once the demolition was complete, Knoxville would take on the next task: installing the base infrastructure to spark new development. Providing the base infrastructure is often seen as a better incentive, as it gives the community an asset rather than a handout to the developer. It also helps the developer limit their development costs and financial risk.

To help fund these activities, a Tax Increment Financing (TIF) district was set up for the District. Under the agreement between the entities, the TIF district’s proceeds would be split evenly to reimburse Marion County for demolition and the City of Knoxville for infrastructure improvements.

Planning for Decades, Not a Single Project

Many communities approach sites like this with a rigid master plan and a hope that the market will buy in and cooperate with the design. However, Knoxville took a different approach.

The Veterans District Concept Plan (2024) intentionally treats redevelopment as a long-term process that will evolve over decades. Instead of dictating a specific plan with building types and land uses, the plan provides a flexible framework that allows development to shift in response to market conditions. The flexibility within the plan reflects the hard truth about rural redevelopment. It won’t happen in one fell swoop, but gradually, over time.

Overall, the concept plan was simple, only eight pages long. But it provided the basis for the redevelopment and a path forward. The resulting land use plan laid out the variety of uses allowed on the site and also provided flexibility in use types to meet market demands.

Focusing on the Housing Need

Like most cities, Knoxville has been in dire need of affordable housing. This immediate need is where the leaders at the County and the City focused the first phase of the Veterans District. The City invested about $5 million in the initial phase of infrastructure for the development. For that sum, the groundwork was laid for 34 residential lots, a new park, and trail connections linking the Veterans District to the rest of the community.

As additional plats are approved, the district will gradually expand to include more housing, recreational amenities and other community facilities, including potential school sites. It’s an incremental approach that may draw criticism as inflation impacts future phases. But it is a prudent approach with limited budgets. When redevelopment doesn’t take place as quickly as anticipated, a phased approach is also an ideal approach for public perception. Without phasing, new infrastructure can sit unused, drawing the public ire.

Origin Homes secured a workforce housing tax credit from the Iowa Economic Development Authority (IEDA). The homebuilder was able to use this tax credit, which incentivizes developers to construct affordable homes by refunding sales, service, or use taxes paid during construction. Based on the credit requirements, residents must meet specific area median income guidelines.

Infrastructure Unlocks the Next Phase

In early 2026, Knoxville received a $750,000 federal grant to build a sanitary lift station within the Veterans District. The funding will assist in the construction of a sanitary lift station within the Veterans District. Critical to the next phase of development, this lift station will allow further expansion of the District to the west.

While lift stations rarely make for good headlines, they are often the keys to future development. Without adequate sewer capacity, large portions of the district would remain essentially undevelopable. City officials highlighted that aspect when the grant was announced. The lift station is “a critical piece of infrastructure” needed to support additional housing and revitalization as the City and County continue to build on the momentum the Veterans District has gained. (City of Knoxville, IA)

The momentum for this redevelopment project continues to build. Over 20 single-family homes have been built with a mix of entry-level workforce housing and larger, market-rate houses intermingled. Two of the multi-family buildings have been erected, one designated for 55+ residents. “We’re already further along than most people back 5 years ago thought we’d be in 10 years,” states Dan Nieland of Marion County Development.

Key Takeaways

In asking what has made this project a success so far, Mr. Nieland pointed out several factors. The first being teamwork. “Having everybody at the table and talking through these things,” he stated. “At least we’re at the same table exploring options.” There’s a noticeable common shared goal between the two entities that drives them to success.

Also, under the 28E agreement, the two entities established a smaller joint task force to handle a significant share of development-related decisions. This Joint Development Committee (JDC) consists of one member of the Knoxville City Council, one member of the Marion County Board of Supervisors, and one resident appointed jointly by both entities. The intent was to have the resident be someone knowledgeable with development/redevelopment. Having everybody at the table and talking through issues as they arise, rather than putting everything before the governing boards of both entities, has made the project flow more smoothly.

Lastly, it is important to support ideas that can result in a positive change to your community. “At least explore it. Don’t reject it out of hand,” Dan states. “Especially in today’s world, the out-of-the-box ideas seem to be what makes things happen.”

The Real Lesson for Rural Communities

The most important takeaway from Knoxville’s Veterans District isn’t the concept plan or the housing developed. It’s the combined efforts of a county and a city to create something transformational from a decaying relic from a time gone by.

Instead of waiting for a single developer to take on such a monumental undertaking, local stakeholders have put the work on their backs. They obtained control of the land, removed the obsolete structures, and commenced the phased buildout of infrastructure necessary for redevelopment.

Knoxville is a town known for sprint car racing, home to the National Sprint Car Hall of Fame. But it should be recognized for something else. The innovative desire of two government entities to undertake a massive redevelopment project.