The city of St. Paul and Ramsey County are plunging tens of millions of federal Rescue Plan dollars into affordable housing for a group hurt by Minnesota’s continuing shortage of the sought-after homes.
The local governments want to spend $74.5 million to provide more housing options for people making 30 percent of the area median income, or about $31,500 a year for a family of four.
“The demand is there, and the elected leaders are pushing for it. And developers say, ‘We're happy to do it, but it just costs money,” said St. Paul City Council President Amy Brendmoen. “And we need some, you know, if we're going to get there, we need some gap financing.”
The city and county each will set aside around $37 million for projects both within the city limits and elsewhere in the county. The money comes from the federal American Rescue Plan Act.
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“All the resources that are currently available for affordable housing are always oversubscribed, meaning the request for funding exceeds what's available,” said Cecile Bedor, an executive with CommonBond Communities, a nonprofit affordable housing developer. “It's significant. So any new investment of additional dollars into affordable housing is really welcomed and really critical.”
The funding is expected to help build about 1,000 units in the county, mostly in St. Paul. According to the Metropolitan Council, Ramsey County needs around 15,000 affordable housing units to meet the current need.
“We have to work on something where people who make less now can make more later so they can afford more expensive housing, or we have to figure out a way to drive down the cost of housing,” said Jennifer Ho, Minnesota’s housing commissioner.
Spending planned by Ramsey County and St. Paul will help to drive down costs, Ho said. Developers would pay less for their mortgages and rents could be cheaper or at least not rise as much. But developers still see headwinds to more lower cost housing.
“I think [even with] the challenges for new construction to the price, the materials, supply chain, obviously, COVID, I think there is a way, there is a path, to get across the finish line,” said Johnny Opara, president and CEO of JO Companies, which has plans for apartment complexes in St. Paul and Brooklyn Park, Minn. “You know, just having access to those funds, is promising for developers, who do have a passion for building these projects.”
But one other hurdle is community buy-in. Often people are supportive of affordable housing in general, but not when it shows up in their neighborhoods.
St. Paul council’s Brendmoen says it means a lot of the same neighborhoods get affordable housing developments because it's just easier to get approval.
“It's like, where's the right place? Is it only in the north end? And on the east side? I don't think so,” Brendmoen said. “You know, it's like, if things need to change, and if we're going to change the equity gap, homeownership gap, we're going to have to do something different with housing as well.”
Brendmoen said several developments already in progress like Highland, Hillcrest and near Allianz Field could be good candidates for these funds.