WATERLOO -- People driving through the neighborhood between downtown and the former Rath Packing Co. will see an abundance of decaying homes and businesses.

David Deeds sees potential.

A graduate of Cedar Falls High School with an accounting degree from the University of Northern Iowa, Deeds worked for businesses in the bustling urban centers of Des Moines, Kansas City and Chicago before returning to Black Hawk County to make a home.

Not only did he choose to live in an area the U.S. Census defines as one of the most blighted in Waterloo -- he bought and restored an old Victorian home on Mulberry Street -- Deeds now is focusing his efforts and investment capital into plans to resurrect the historic neighborhood by rehabilitating old homes and, more recently, building new ones.

"People are making a move back to a simpler life when you didn't have to jump in your car to go get a cup of coffee or visit your neighbor," Deeds said, echoing a principle of "new urbanism" now sweeping the country as a younger work force seeks out housing near inner cities and away from suburban sprawl.

"If you look in Chicago, it's amazing the dramatic changes that have happened in what has traditionally been viewed as bad neighborhoods," he added. "I just think the time is right now to do the same thing here."

When Deeds started last month on the first of three new homes he plans to build along East Eighth Street, between Sycamore and Lafayette streets, he was truly breaking ground. It appears to be the first new home built in that neighborhood, which was part of the city's first plat, in more than 80 years.

While Deeds is working to ensure the new homes are within the price range for his target market, he's taking pains to make certain the houses blend in with the older existing homes.

"I'm trying to build affordable houses that are architecturally appropriate," he said. "I was shooting for a historic look."

The two-story houses will be narrow but deep. They will be covered with a fiber cement siding, which simulates real wood more than aluminum siding. Dual gables, taller windows, Victorian features and a front porch running the full-width of the front porch help complete the traditional look.

Inside, the homes have about 1,300 square feet of finished living space, including three bedrooms and 1 1/2 bathrooms, while the basement could be finished to increase the available space. The homes are being constructed soundly with 2-by-6-inch framing and will be designed to receive energy rebates through MidAmerican Energy's efficiency program.

The first house under construction includes several upgrades, including a hardwood floor entry and ceramic tile bathroom, which push the sale price from $120,000 for the base floor plan to $127,700. The site plan allows for a two-car garage, although it isn't included in the purchase price.

While the houses are going to be available for a qualified buyer of any income, the city's Community Development Board has provided $10,000 for each of five homes Deeds would construct to help lower the purchase price for homebuyers earning 80 percent or less of the area's median income. Another $13,500 of incentives are available through state programs to help income-qualified buyers get into the homes.

Deeds said he hopes the new houses and renovations he's completing through his company, Cedar Valley Restoration and Development, can be a catalyst to raise expectations and encourage other property owners in the area to invest in their own houses.

"I really want to get this one up so people have something tangible," he said. "We want to see a real positive center of gravity here in this block."

Deeds, who expects to finish the first house by the end of January, also notes the location near downtown coupled with the city's plans for Riverfront Renaissance projects and a riverfront recreational trail should be a major selling point. The riverfront trail is less than a block away, and the city is seeking developers for riverfront condominiums or apartment buildings to be constructed in the next block.

"I think it has potential because of the proximity to the river and the exciting things planned downtown," Deeds said. "If there's enough people doing their own thing, you're going to see improvements."

Information about the housing development is available at Cedar Valley Restoration and Development's Web site, www.cedarriver.info.

Tim Jamison can be contacted at (319) 291-1577 or tim.jamison@wcfcourier.com.