Rochester's affordable housing shortage threatens job growth

Gallad Gudlawe signs the rental papers for his new apartment in April.
Gallad Gudlawe signs the registration papers for his new apartment at 1st Avenue Flats in Rochester, Saturday April 29, 2017.
Jerry Olson for MPR News File

As she packed her belongings in her downtown Rochester apartment, Brittany Dubbels said her wish list for a new place was short.

"We needed an extra bedroom for the baby — a big thing. More space. And we were really looking for a house with a backyard because we have two dogs that need to run," she said.

Dubbels is a housekeeper at the Mayo Clinic making $17 an hour. Her boyfriend trims trees. Together, they make on average $3,000 a month.

That might seem like enough for rent in Rochester. But with most two-bedroom rentals starting at more than $1,000, the city's housing is unaffordable for the couple.

They're one of many Rochester residents who're feeling the squeeze of city's already-tight housing market that's only getting more competitive.

Brittany Dubbels poses with one of her dogs in her Rochester apartment.
Brittany Dubbels poses with one of her two dogs in the downtown Rochester apartment she and her boyfriend are moving out of, on May 18, 2017.
Catharine Richert | MPR News File

A recent report for the city found a large share of Rochester's population has unaffordable housing — half of the city's renters and one in six homeowners. Housing consumes more than 30 percent of their income, the federal definition of unaffordable housing.

That has many residents doing an exercise in fiscal gymnastics: balancing rent, commuting costs, space and safety.

Dubbels said everything she and her boyfriend could afford in Rochester was either rundown or snatched up quickly.

So, they're abandoning the city and moving to a two-bedroom house 30 miles away in Spring Valley. Rent is $750 a month.

But there's also the cost of the commute.

"Half hour to 40 minutes drive, five times a week, two times a day. You have the think about gas," Dubbels said.

The pace of construction is nowhere near what it needs to be, said Steve Borchardt, housing director for the nonprofit Rochester Area Foundation.

This year saw only one affordable-housing apartment building open. It has just 68 units.

City leaders have ambitions to add more than 30,000 jobs over the next two decades as part of the Destination Medical Center economic development project.

To accommodate that growth, Rochester will need to add 3,700 affordable rentals, according to the city report.

The new 68 unit 1st Avenue Flats apartment complex opened in April.
The new 68 unit 1st Avenue Flats apartment complex filled 50 of it's affordable housing apartments when it opened on Saturday, April 29, 2017.
Jerry Olson for MPR News File

"My biggest concern is that it's not going to happen," Borchardt said. "We're not going to expand the workforce for any business unless people have a place to lay down every night."

He points to several forces behind Rochester's affordable housing shortage:

• The current housing supply is tight, which has driven prices higher.

• Construction workers are in short supply, slowing homebuilding.

• Nationally, housing costs have grown faster than household incomes.

City and county officials have options, though, including tax perks to lure developers into the affordable housing market and a new financing program aimed at rehabbing existing housing.

But Borchardt said meeting the growing housing needs will require an overhaul of city policy. And so far, that's not on the table.

Still, developers see opportunity in the strong demand for affordable housing.

Nate Stencil is launching his second affordable housing project in Rochester. But he said it's hard to line up financing, especially the required state bonding.

"The biggest challenge in today's market is that the bonding is very tight," he said.

Stencil said he's still waiting on more financing from the state before he can move forward on his next housing project.

Once he gets it, the profit potential is limited because the state caps rents.

The good news? Stencil said the financial risk is limited. Demand is so high that vacancies won't be a problem.

Across town, one of Rochester's newest affordable housing projects is already full, and Nikki Stevens is getting a tour of her pristine one-bedroom unit.

Stevens isn't the type of person you'd expect to struggle with housing. She has a full-time job working in mental health services. And she's finishing her master's degree.

But with a salary of $30,000 a year, Stevens meets the building's strict income requirements.

Stevens will pay $870 a month for her one-bedroom — which is more expensive than her old place, but she's moving to a nicer part of town.

"Eight-hundred and seventy dollars a month is affordable housing? That's absurd," Stevens said.

Actually, it's not affordable. It will chew up 35 percent of her income. But Stevens is more concerned about her clients.

"I work with people who are completely homeless, and they are supposed to come out and find housing afterwards? It's extremely disheartening to see."

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