Expansion OKed despite slow start for land trust
Jun. 18—MANKATO — City leaders intended to start small with their new community land trust — just not this small.
A $370,000 program approved last summer by the Mankato City Council aimed to provide lower-cost home-ownership opportunities to three families by the end of 2022. Even with the program extended beyond the year-end deadline, not a single home has been purchased through the land trust. The lack of progress has been blamed on steep housing prices and rising mortgage rates that have put even subsidized homes out of the reach of the targeted population.
The council unanimously agreed this week to keep trying — this time raising the income limits for eligibility.
The initial program aimed to provide up to $88,500 in Economic Development Authority funds to reduce the purchase price of each of three existing Mankato homes valued at $250,000 or less. Up to $35,000 was also made available for renovations for each of the houses. And $15,000 was allocated to the Southwest Minnesota Housing Partnership to market and administer the new land trust program.
Eligible homebuyers were to have household incomes of no more than 60% of the area median — which works out to $43,200 for a two-person household, and $54,000 for a four-person.
"I think most of us went in thinking, 'Oh, we'll be able to find three houses in town, match this (with an eligible buyer) and a family moves in,'" Council President Mike Laven said in explaining the pilot project to a pair of new council members. "... The market's not there."
There are currently only about 10 homes on the entire Mankato real estate market being offered for $250,000 or less, according to Nancy Bokelmann, the city's housing director.
Rising mortgage rates have reduced how much home any buyer can afford, and that's even more problematic when the choices are limited by a tight housing market and when the buyer has a below-average family budget. The land trust will continue to try to find a purchase that works for people at 60% or less of the local median income, according to Bokelmann.
But the council also has agreed to expand the pool of applicants to those earning up to 80% of the statewide median income. That would mean for 2023 a two-person household earning as much as $70,450 and a four-person household with an income of up to $88,000 would be eligible to participate.
The council vote was unanimous on the change in the income limit, aiming to narrow the gap between the finances of the enrollees and the prices on the market.
But when it came to approving a $600,000 expansion of the program to add 10 more homes, two council members said they couldn't agree, even as the expansion was approved on a 5-2 vote.
"I'm all for this," Council member Michael McLaughlin said before Monday's vote. "... But I'd like to see the original homes succeed so we can build on that success."
Council member Jessica Hatanpa's opposition was primarily focused on plans to include new construction in the expanded program, which would involve five existing homes and five newly-built houses. The new homes could cost more than $400,000 each under the expansion plan, money which Hatanpa felt would be better focused on subsidizing the purchase of existing homes.
Supporters of the land trust — a strategy already being used in Rochester, the Twin Cities and elsewhere around the United States — focus on the fact that the model benefits more than the initial owner. Under the model, the trust maintains ownership of the land beneath the house and leverages that to require the owner of the house to sell it at an affordable price to another eligible buyer when they decide to sell.
The full 10-house expansion of Mankato's land trust will depend on the success of an application to be submitted next month to the Minnesota Housing Finance Agency for $611,000 in state assistance.
