August 25, 2025

Capstone Behavioral Healthcare is met with scrutiny by city and neighbors after buying home for clients

Mental health clinic argues it doesn’t need conditional use permit from city, neighbors say they should have been notified before purchase

Capstone Behavioral Healthcare recently purchased a home for some of its clients to rent, but since then it has had to argue with the city about whether it needs a conditional use permit and endure the intense scrutiny from neighbors who feel like they should have had a say before any tenants moved in.

Capstone Behavioral Healthcare blames the city for forcing a public hearing at a zoning board of adjustment meeting in which the nonprofit was subjected to intense scrutiny by residents who said they should have been informed before the mental health care provider purchased a home in their neighborhood.

The board of adjustment was tasked with determining if the group home was exempt. Julie Smith, executive director of Capstone Behavioral Healthcare, argued in emails with city staff and at the public hearing that the nonprofit is, by state law, exempt from needing a conditional use permit for the property.

However, conflicting interpretations of state and municipal codes have put the nonprofit at odds with the city over who is in the right. Smith argued the city’s insistence on requiring a conditional use permit conflicts with state law, and she disagreed with holding a public hearing because she felt it violated clients’ rights.

In the confusion, residents flocked to the board of adjustment’s public hearing anyway to voice their opposition to Capstone using the home. They complained their quiet neighborhood would be disrupted by the clients, and they questioned whether the clients had criminal backgrounds based on their mental illnesses.

They’re living right next door to me.

People fall into drug problems and they look for other means to get the money to buy the drugs when nobody’s looking.

If you’ve got a schizophrenic person next door who might take off and do crazy stuff and there is nobody there 24-7, that’s concerning.

We have started to build a privacy fence.

My kids do feel a little uncomfortable.

Just let us know, “Hey, there are no sex offenders living in your area. The people living here aren’t child predators.”

Are they pedophiles? Illegals? Child rapers? Murderers? What are they? We don’t know!

Smith scoffed at many of these comments and often laughed out of disbelief or frustration, which the neighbors interpreted as rude and discouraging. In a tearful rebuttal, she condemned neighbors for thinking that “horrible, rotten, dangerous people” have moved into their neighborhood. They’re not dangerous, she said.

“They are people,” Smith said to the board. “…What gives the city the right to ask Capstone to apply for a conditional use permit so that the neighbors can be notified that we’re moving in these ‘horrible’ people to their neighborhood? Their children are not in danger. Their families are not in danger.”

The tenants have a right to live and a right to privacy, she added. Smith also questioned whether previous owners of the home ever had to disclose to their neighbors their medical histories or if they have ever been treated for anxiety or depression before moving in and living their lives.

“I don’t blame any of the neighbors for being upset or wondering, ‘Oh my god! What’s going on at that Capstone house?’ I 1,000 percent blame the city,” Smith said. “It is the city’s fault and the city is discriminating against Capstone and the people that are living at that home.”

The city should have gathered its information outside of a public hearing, Smith said, and it should not have contacted nearby residents about the group home.

“We should have never gotten to this point where it was in a public meeting,” she said. “This violates all of their rights because all of these neighbors have been notified that they were moving into the neighborhood, and they were notified that they have a disability. And, frankly, it’s none of their business.”

CONDITIONAL USE REQUEST CONFLICTS WITH STATE CODE

When Smith was asked by the board of adjustment for information about the use of the home, she told board members that it is Capstone’s understanding — based on Iowa Code — that it does not need to apply for a conditional use permit and that she had already included some of that information in her application.

The property was described by Smith in her application as a “residential home” that Capstone had purchased to offer housing to persons with disabilities.

In her emails with city staff, Smith submitted two specific chapters in the state code: Iowa Code 414.22, which covers homes for persons with disabilities; and Iowa Code 414.32, which covers zoning restrictions related to residential care services. Smith asked that these codes be distributed to the board members, too.

“This code (414.22) states that a residence housing persons with disabilities must be treated the same as single-family dwellings for zoning purposes, and cities may not impose conditions that are not applied to other single-family homes,” Smith said in her email to city staff.

Smith claimed Iowa Code 414.32 prohibits a city from requiring a special or conditional use permit for a residential program that complies with applicable licensing or certification standards and serves eight or fewer unrelated individuals with disabilities. The group home in question would house up to four residents.

The home is not considered a residential care facility or nursing facility with full-time staff managing the space. Smith said it is just a home where clients live and pay rent to the owner. There is no on-site treatment, but a full-time staff member is available to respond to the clients at the home.

Initially, it was believed the staff member was also living at the home, leading to some confusion and rebukes from neighbors, which was only exacerbated by how often Smith refused to answer the board’s questions. For instance, she did not want to divulge details of Capstone’s intake process or reveal client information.

“I don’t believe anyone who moves into a rental property has to ask permission to live there,” Smith said. “And that’s what this is. It’s a rental property.”

Capstone is a state-designated Community Mental Health Center, which means the nonprofit is accredited by the Iowa Department of Health and Human Services.

It also has a number of homes in the community. Smith said the nonprofit has a six-bedroom home and an apartment that are both subsidized by the U.S. Department of Housing and Urban Development (HUD). Capstone also has another group home similar to the one that was discussed at the public hearing.

As a member of the leadership team for Jasper County Cares Coalition and the Community Health Improvement Plan (CHIP), Smith said she and Jasper County Public Health work closely with the local hospital and other agencies in town. Addressing housing and homelessness is one of the top priorities in Newton.

“It provides housing to people who are unable to afford a regular apartment in the community,” Smith said.

NEIGHBORS OPPOSE THE HOUSE & THE PROCESS

Cynthia Carpenter said it was wrong for Capstone to start moving in tenants without the approval of the community. She also disliked that Smith was not answering the board’s questions and felt neighbors should have had a say before the nonprofit ever bought the house to begin with.

“I’m concerned with the fact that she (Smith) is not wanting to tell you the problems these people have,” Cynthia Carpenter said. “They’re living right next door to me; and the guy behind me, he’s already built a security fence. And I felt like they should have warned us or asked us about it before they purchased it.”

She also worried the tenants — who she assumed are addicted to drugs — would relapse, break into her house and then steal her belongings.

“People fall into drug problems and they look for other means to get the money to buy the drugs when nobody’s looking,” she said. “I’ve had that happen before.”

Cynthia Carpenter later said she felt uneasy knowing the tenants did not have a full-time staff member at their home. She said after she moved in she introduced herself to all her neighbors and told them of her and her husband’s health problems, suggesting the tenants ought to do the same.

“There was nothing hid,” she said. “So if you’re thinking that it’s OK that you can hide—If you’ve got a schizophrenic person next door who might take off and do crazy stuff and there is nobody there 24-7, that’s concerning.”

Russell Carpenter said neighbors are not trying to belittle the people living in the house, but he felt they should have been notified in some way.

“Are they pedophiles? Illegals? Child rapers? Murderers? What are they? We don’t know!” Russell Carpenter said. “My hats off to you people taking care of people like these … But like I say we just found this stuff out four or five days ago. We don’t know how to react to it. What do we do? Who’s moving in?”

Ashley Pettyjohn, who also lives next door, was more empathetic to Capstone and praised the nonprofit for its services. As someone who also has experience working in the healthcare industry, she knows there are some things that cannot be disclosed to the public and that some things are not the public’s business.

Still, she said she felt blindsided when she saw the house was purchased by Capstone. While she acknowledged that Capstone may not be obligated to reach out to anyone in the surrounding neighborhood, she wished they had. She said it may have been received better.

“We have started to build a privacy fence because it’s very scary to have children and not know who is coming and going next door,” Ashley Pettyjohn said, noting she has two kids and four step-kids. “We’ve already had several instances of I’m assuming the residents being outside, and my kids do feel a little uncomfortable.”

Ashley Pettyjohn said one of her kids told her they saw what they assumed was a tenant coughing and vomiting on the grass.

“It’s kind of hard to explain that to children,” she said.

Andy Pettyjohn said although Capstone cannot disclose personal information of tenants living in the house, he countered that neighbors should know if there are child predators or sex offenders living in the home. He felt like the tenants could at least reach out to say hello or that Capstone make steps to reassure residents.

“Just let us know, ‘Hey, there are no sex offenders living in your area. The people living here aren’t child predators,’” he said. “We know absolutely nothing and clearly we’re not going to get any information today. I know that doesn’t have to do with zoning, but that is a concern of the neighborhood.”

Andy Pettyjohn later added he is not trying to discriminate against anybody, but it would have been nice if the individuals living in the house introduced themselves.

“It would be nice to know who they are, and if they have a problem just let us know,” he said. “If they need help, we know we can help them. That’s what a good neighbor does.”

Michelle Modlin was concerned a house was purchased “for a specific activity” in a residentially zoned neighborhood, and she questioned the process. Floyd Davis, who lives nearby and also serves on the executive committee for the Newton Housing Development Corporation, worried about neighborhood kids.

“Our neighborhood is a good neighborhood — we’re kind of friendly,” Davis said. “And I think it would have been if we would have gotten a certified letter stating that something like this might happen. It’ll be something different than the single-family dwelling. There will be four families in there.”

Capstone Behavioral Healthcare recently purchased a home for some of its clients to rent, but since then it has had to argue with the city about whether it needs a conditional use permit and endure the intense scrutiny from neighbors who feel like they should have had a say before any tenants moved in.

VICE-PRESIDENT OF CAPSTONE BOARD DEFENDS SMITH

Rita Baker, vice-president of the Capstone Board of Directors and president of the Capstone Foundation Board of Directors, told board members that she shoulders much of the responsibility rather than Smith because she works for her directors. Baker went on to speak up for and defended Smith at the hearing.

“This woman goes out 24-7 when she gets a call from the police department or the sheriff’s department and when one of our community members in the Newton or Jasper County area needs help,” Baker said of Smith responding to mental health crises. “Julie answers those phone calls on her cell phone.”

Baker was saddened by the hearing. It hurt her heart and soul, she said.

“We are not harboring criminals at Capstone,” Baker said. “If there were sex offenders living in your neighborhood, you would be made aware of that.”

Progress Industries had similar group homes, she added, and they were chosen to be located in each quadrant of Newton so that residents felt like they belonged. Baker said Capstone is not withholding information because they don’t want them to know the tenants; they’re withholding information about diagnoses.

“And things that are put on their intake form because there is a HIPAA law — this is medical information,” Baker said. “And we can’t give that medical information out. We respect these people. They’re human beings and they have rights just like you and I do. And that’s why we’re not willing to give information like that.”

Baker said Capstone staff have worked tirelessly to end the stigma that comes with mental health and substance abuse diagnoses. She questioned whether the neighbors would feel as adamantly as they do if a person moved in with other medical issues “like cancer or heart disease or anything else.”

She wagered that the neighbors know at least someone who has struggled with mental illness or substance abuse.

“There are so many of us working so hard to respect the humanity of every human being, no matter their medical or their physical problems,” Baker said. “…What we’re doing is trying to give them a chance to mend their lives and return to being part of the community. And that’s part of our mission at Capstone.”

Cynthia Carpenter asked Baker if she ever had to live next door to “one of your Capstone houses.” Baker said she lived next to a Progress Industries house.

“But that’s different,” Cynthia Carpenter said. “Those people were born that way. These people became that way.”

Baker said, “No, no, no, no.”

“Well, if they’re on drugs they became that way on drugs.”

OTHER INDIVIDUALS & AGENCIES VOICE SUPPORT FOR CAPSTONE

Bill Ehler also serves on the Capstone Board of Directors and is often involved with National Alliance on Mental Illness (NAMI). Ehler said he has a daughter with bipolar disorder who lives in an apartment, and she did not have to disclose her medical history before moving in.

“There was nothing required,” he said. “So what’s the difference here? Like Julie said, they had all their rights to be able to buy that building and have those people move in. I understand kind of the way the law is that because of their privacy we cannot divulge all this information to neighbors. I know it’s a quirk.”

But that is the way it is, Ehler added.

Sheila Bower, a supporter of Capstone, said one of the hardest things some people will ever do is walk to a neighbor’s house and introduce themselves. Bower said it is because of social stigmas of mental health, and she suggested many of the neighbors fostered those stigmas.

“Nobody ever said any of these people were on drugs,” Bower said. “You just assumed the worst. How about get off your butts instead of you going and talking to everybody you actually go and introduce yourself to these people? You maybe could help them instead of making them feel like they don’t belong.”

Jasper County Sheriff Brad Shutts wrote a letter of support for Smith and Capstone’s initiatives for improved housing. He said accessible, safe and stable housing is essential for supporting well-being and managing and recovering from mental health challenges.

“Individuals facing behavioral health conditions often face challenges in securing and maintaining appropriate housing, which can worsen their conditions and create additional barriers to recovery,” Shutts said, noting Capstone’s efforts are both commendable and vital.

Shutts said Capstone’s housing programs promote recovery, enhance well-being and facilitate community integration.

“Capstone Behavioral Healthcare’s endeavors to enhance housing opportunities and infrastructure in the city of Newton are fully endorsed,” he said. “It is believed that their continued dedication will lead to tangible and meaningful improvements in the lives of those they serve.”

Many other community leaders wrote letters of support, too. Jessica Gasser, a psychologist and clinical director at Capstone, said Smith knows that ignoring patients is not the answer and that “they will be returning to our communities and will be living in our communities regardless of what help is offered to them.”

Connie McQuiston, director of Jasper County General Assistance, noted that housing was identified in the Community Health Needs Assessment as a top need in the community. McQuiston said finding housing for low-income populations is a struggle, particularly when they are ill and need more supports.

“Julie’s passion for this segment of the population is unmatched,” she said.

Becky Pryor, administrator of the Jasper County Health Department, emphasized Capstone’s impact on the community, noting the nonprofit has grown from 879 visits per year in 2012 to more than 20,000 visits in 2024. Pryor said Capstone is the central hub for mental health and substance misuse in Jasper County.

“They are the first line of support for referrals, crisis response, school interventions, jail diversion, court mandates, probation needs, peer support and emergency assessments,” Pryor said. “They serve everyone, from children to the elderly, from those in crisis to those simply seeking help.”

Pryor added that asking individuals whether they have a mental health or substance issue is not appropriate and may violate their right to privacy.

“Capstone’s tenants, whether they are employees, guests or individuals receiving services, are entitled to the same right to privacy as anyone else,” she said. “Speculating about or questioning someone’s health or treatment status is not only disrespectful, but it can also be harmful.”

Pryor emphasized the need to foster a community where individuals feel safe and supported, and not scrutinized or judged.

THE CITY’S CODES AND THE CITY ATTORNEY’S RESPONSE

Erin Chambers, director of community development for the City of Newton, said notices of a public meeting were sent to neighbors within 400 feet of the subject property. The property is zoned “R-2” for one- and two-family residences. But according to City Code, conditional uses are required for group care facilities.

When the board of adjustment asked if it is required to have a public hearing in order for it to determine if Capstone is exempt from a conditional use permit, Chambers said the city’s attorney made a ruling and contacted Capstone’s legal counsel. Chambers said she went by the guidance of the city attorney.

According to the email sent by Matthew Brick of Brick Gentry P.C., the city’s legal counsel, he said that although state codes may create an exemption for conditional use permits, they only do so after evidence is provided that the exemptions apply. Brick said Capstone refused to provide information to the city.

Specifically, information that was suggested be included along with Capstone’s application for a conditional use permit.

Chambers suggested Capstone include the following information:

• Maximum number of residents at any given time.

• Number of staff present at the home, and the hours staff will be there.

• Interior layout and exterior layout of the home.

• If tenants would be paying rent.

• Length of their stay and if it is permanent or temporary housing.

• If tenants have cars and where they would be parked.

• Details about the lease agreements and any house rules.

• The addresses of other properties owned by Capstone that did not obtain a conditional use permit.

Since this information was not provided to the city, Brick said there was no way for it to confirm these exemptions without a hearing.

Brick said Iowa Code 414.22 only allows an exemption after it is shown that the residence is a community-based residential home which is licensed as a residential care facility under Chapter 135C to provide room and board, personal care, habitation services and supervision in a family environment exclusively for no more than eight people with a developmental disability or brain injury and any necessary support personnel. The property must also not be located within a continuous city block of another such property.

According to Brick’s interpretation of Iowa Code 135C.23(2), an exemption is allowed only if it is shown that the home has not admitted or retained residents who are: dangerous to the resident or other residents, in an acute stage of alcoholism, drug addiction or mental illness, unduly disturbing to other residents or in need of medical procedures or services which cannot be or are not being carried out in the facility.

Brick said under Iowa Code 414.32, it must be shown that a residence is a single-family dwelling owned or rented by the recipient or a multi-family dwelling which does not hold itself out to the public as a community-based residential provider otherwise regulated by law, including but not limited to a residential care facility, and which provides dwelling units to no more than four recipients of services under a home and community-based services waiver at any one time.

“A zoning hearing is the mechanism to allow your client to establish whether the property at issue requires a conditional use permit or qualifies for an exemption,” Brick said in the email to Capstone’s attorney. “The procedure under Iowa Code and Newton’s City Code requires notice of the hearing to be publicly posted and mailed to all property owners within 400 feet of the outside boundaries of the subject property.”

The city affirms Capstone is not exempt from a public notice procedure and that no private medical information was disclosed.

In response to Smith’s allegations regarding discrimination, Brick said it is a claim the city takes seriously and asked all evidence be provided so they can be investigated. Brick said the city is committed to providing a fair and respectful environment for all residents and remains supportive of Capstone’s mission.

Christopher Braunschweig

Christopher Braunschweig

Christopher Braunschweig has a strong passion for community journalism and covers city council, school board, politics and general news in Newton, Iowa and Jasper County.