Why a rural energy co-op is getting involved in housing

As the economic development director for People’s Energy Cooperative, Marty Walsh works to cultivate new customers to sell energy to. And in the region around a growing Rochester, there’s a lot of opportunity, especially as the Mayo Clinic expands its operations and grows its workforce.

Now, for the first time, the co-op is getting directly involved in a new housing development, said Walsh. He’s seeking a developer for a five-acre plot owned by the co-op. The land, which the co-op is currently not using, is located a few minutes north of Rochester in Oronoco. 

"We no longer needed the facility here at this site, and so we were left with an asset that had served its purpose,” he said. “When we looked at ‘What does the community need, what would be beneficial to the cooperative’s members,’ we started poking around and recognized that housing was an opportunity here."

Minnesota needs more than 100,000 more affordable homes to meet current demand, according to the Minnesota Housing Partnership. As Mayo Clinic grows, that need is acute in Olmsted County, too. A recent study shows the county needs 18,000 new housing units in the next decade to meet projected demand. 

It might seem strange for an energy co-op to get involved in housing. But Walsh said doing so benefits the co-op and the community. 

"Numerous housing needs assessments all point to housing challenges as a hindrance to economic growth in the region. As a utility, economic growth is load growth. It's additional sales,” he said.

Being minutes from downtown Rochester, Oronoco is ripe for development as the region grows, said Oronoco City Administrator Jason Baker. 

"Oronoco is pretty well established with the housing they have. However, Mayo is growing and the region is growing with that. Obviously, there's a regional housing shortage,” he said. “Oronoco is poised to be able to help with that."

There’s plenty of single-family housing in Oronoco. But the community also attracts nurses, techs and other medical support staff that can't always afford higher-end homes.

"And I think that's what we really need in this town — more beginner-style homes for families. Something that's going to allow individuals coming to the region to be able to get their footing and get a house and be able to start their families and grow from here,” said Baker.

And that makes the co-op project a good idea for the town, Baker said. 

High land costs

Many communities find it hard to get developers interested in lower-cost housing because it generates less revenue than higher-end developments. Given the high building costs for any project, developers often steer towards the ones that will be most profitable. 

The co-op is cobbling together a financial package, which includes a forgivable loan, to make the project more enticing to developers. Walsh said the co-op benefits because it’s guaranteed a group of new residential customers. It will also get to have a say in how the developer uses energy efficiency measures to keep costs low for the co-op members. 

Walsh said they'll provide perks to make sure that energy efficiency goal is met. 

"We can look at some rebates, even if they have to be some custom rebates [to put] a little bit of downward pressure on the cost, both for the developer and long term for the resident, as their energy bills won't be as high,” said Walsh. 

Walsh said they're hoping to find a developer and break ground within a year. 

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