Housing cost burden a deepening crisis for many Minnesotans

Apr. 16—By Mark Fischenich

mfischenich@mankatofreepress.com

For 2-year-old Aurora Jones, the small basement apartment near downtown Mankato that she shares with her mom, Jenny, and their dog, Noodle, is a wonderful home.

"She's happy. She loves it. She's with her mom — it's good," Jenny Jones said.

But at age 43, Jones dreams of providing something more for Aurora and herself and is working and saving and hoping.

"I don't need a 'Real Housewives' McMansion," the single mom said. "I just want a cute little ranch house for me and my kid, a yard for her to play in and maybe a porch for me. And a safe neighborhood — that's an important one."

It's an aspiration that's been at the foundation of the American dream for centuries but now is out of reach for a growing percentage of the population.

Setting aside money for a down payment is difficult when a third of a family's income is devoured by rent payments each month, when options for more affordable apartments are disappearing, when the average price of homes has skyrocketed, when the cost of constructing starter homes has soared.

"Minnesota has never faced an affordable housing crisis like this — a crisis that's deepening, worsening and threatening the economic security of families and the future of our state," state Rep. Michael Howard said Thursday during a legislative debate on legislation providing a massive infusion of state funding for housing programs.

Cost-burdened

The term "affordable housing" can be nebulous, but it's often defined as a home that's in acceptable condition and consumes less than 30% of the occupant's earnings.

By contrast, people living in apartments or homes that cost 30% or more of household income are considered "cost-burdened."

About 590,000 Minnesotans fit the category, according to a 2022 report by the Minnesota Housing Finance Agency. More than half of the renters in Mankato do as well, according to an affordable housing action plan commissioned by the Mankato City Council and the Blue Earth County Board. That's the case across all of Waseca County, where 50.5% of rental households saw 30% or more of their income eaten up by housing, according to the Minnesota Department of Employment and Economic Development.

Although Waseca was the only county where more than half of renters are cost-burdened, Blue Earth County was close — 49.2%, according to DEED's analysis. In four other area counties, nearly as large a share of the renters was struggling with housing costs — 44.4% in Le Sueur County, 43.7% in Nicollet County, 41.5% in Faribault County and 41.3% in Martin.

Elsewhere, the percentage of renters cost-burdened by housing expenses was closer to one-third — just over 32% in Sibley and Watonwan counties, 37.2% in Brown.

Speaking from her basement apartment, Jones said she knows that she, Aurora and Noodle are far from alone. Friends, co-workers, and acquaintances across Mankato and beyond are struggling with housing costs.

"It's exhausting ... feeling the burden, right now, the stress. It never used to be that bad," she said. "You pay for rent or you pay for groceries. Or, you pay rent or you pay the cellphone bill. You can't have everything."

While Jones hopes to someday trade that rent check for a mortgage payment, many Mankato-area residents who have taken the plunge into homeownership are struggling just like the renters.

In Blue Earth County, with Mankato's tight housing market, 22.6% of mortgage holders were paying 30% or more of their income on housing, according to the DEED study. Just over a fifth of mortgage holders in Nicollet and Waseca counties fell in that category.

In Le Sueur and Sibley counties, the percentage of mortgage holders that are cost-burdened tops 23% — something that's probably reflective of their presence among the 16 counties in and around the metro area where affordable starter homes are becoming nearly extinct.

Fewer than 10 years ago, more than 9,500 homes were on the market selling for $250,000 or less in those 16 counties. By June last year, the number in that price range was 1,072, according to the Minnesota Housing Finance Agency.

Few options

Choices are extraordinarily limited for Mankatoans looking for an apartment to rent, according to a survey done as part of the city's most recent housing study. The vacancy rate for market-rate apartments was 1.3%. For subsidized apartments for the elderly and disabled, the vacancy rate was below 1%.

Private developers have rapidly added market-rate apartment complexes and townhouses across the city. But with Mankato's population and economy steadily expanding, the number of new households is growing as fast or faster than the number of homes.

City leaders — working with affordable housing developers, federal tax credits and state grants — have worked to get several hundred new apartments constructed in the past decade that are dedicated to tenants who make 60% or less of the average income in the area. But those facilities fill up immediately upon completion.

Mankato Public Housing Authority offers 179 government-owned public housing units and has worked to increase the federal housing choice vouchers it can offer, which reached 537 last year. Income-eligible renters who obtain a voucher can live in a privately owned apartment building and pay no more than 30% of their income toward rent with the federal vouchers covering the remaining gap. Assistance for the homeless has been expanded.

Mankato City Council President Mike Laven, who was first elected to the council in 2000 and has worked on programs for the homeless, has seen the progress made on all levels of housing assistance.

"It doesn't mean the demand has changed. We're just meeting more of it," said Laven, who sees the tentacles of the region's housing shortage touching a wide range of other issues. "Some of that's not new at all, but it's magnified now."

Federal, state, local

Government has been attempting to give lower-income Americans better places to live for decades. Starting during the Great Depression, Congress began funding publicly owned housing for the poor. When that approach fell out of favor, voucher programs were created through the Department of Housing and Urban Development starting in the 1970s — programs where recipients and the government split the cost of the rent in qualifying privately owned apartment buildings.

The Treasury Department is heavily involved as well, offering affordable housing tax credits to incentivize private development of apartments in return for controlled rent levels, something that has brought more than 300 apartment units to Mankato since 2016.

Even the Agriculture Department has been a major player with its Section 515 Program that offers low-interest mortgages for rent-controlled apartments in small towns throughout America. Nearly one in five of the 50,000 subsidized apartments in Greater Minnesota is provided through the USDA program.

About three dozen of those subsidized apartment buildings are in the nine counties closest to Mankato, including in St. Peter, Le Center, Waseca, St. James, Waterville, Arlington, Hanska, Comfrey, Amboy and Vernon Center. But the guaranteed low rents will be disappearing in many of those apartments over the next 10 to 30 years when the mortgages are paid off, according to a recent report by the University of Minnesota's Center for Urban and Regional Affairs.

Locally, Mankato's Economic Development Authority has provided tax subsidies, low-interest loans and other support to new affordable housing projects and for the preservation of existing lower-cost housing.

And the state appears to be on the verge of passing a $1 billion housing finance bill, using a significant chunk of the record-setting $17.5 billion surplus.

Howard, the Democratic state representative from Richfield sponsoring the bill, summarized its provisions Thursday for the House Ways and Means Committee — its last stop before going to a vote by the House of Representatives as soon as this week.

"Before you is a bill that's the most comprehensive one to address our affordable housing crisis that the Legislature has ever considered," Howard said. "First, we're going to build a heckuva lot of homes, homes that are desperately needed to meet the crushing supply-demand mismatch."

The bill includes more than $250 million for housing infrastructure bonds to support construction of new rental housing with controlled rents. Funding will also support construction of more than 1,000 affordable owner-occupied homes, support for workforce housing in Greater Minnesota, repairs and renovations to preserve more than 4,000 existing affordable homes and assistance with down payments for 4,000 first-generation homeowners.

Skepticism

The bill is in a strong position to pass largely intact because of Democratic control of the Legislature and the governor's office. It received plenty of praise from DFLers on the Ways and Means Committee. Republicans were less impressed.

Rep. Paul Novotny, R-Elk River, had doubts about the very premise of the bill, suggesting a simpler way exists for Minnesotans to avoid becoming cost-burdened — move to a cheaper apartment.

"Is there something making them take nice housing or more expensive housing than they can afford?" Novotny said. "... 'Affordable housing' to me is usually 'nicer and more expensive (housing) than I can afford.' And we all make decisions on where we will live. As a man who rented early in his life, I rented what I could afford."

Other Republicans suggested that Minnesota, if it stays on the course set by Democrats, could solve the housing shortage by pushing more and more residents to move to other states.

Rep. Peggy Scott, R-Andover, pointed to the most recent out-migration statistics that left Minnesota with a minuscule rise in population in 2022.

"And if that trend continues, and I see no reason for it not to, that's probably going to put more housing on the market and make it available," Scott said.

Public-private

Rep. John Petersburg, R-Waseca, didn't dispute the existence of the housing crisis or the need to construct more homes.

But Petersburg said the problem would be solved more quickly and efficiently if government left the job to the private sector.

The first step, Petersburg said, should be to eliminate building regulations and zoning rules that make it needlessly more difficult and more expensive to build homes.

"The for-profit side is the one that can get more stuff done cheaper and figure out innovative ways of being able to do it cheaper if we just let them deal with it," he said. "Hopefully, that will be in the mix as well, because I think that's a concern."

Housing First Minnesota, an association of homebuilders, has been making the same argument even while offering tepid support for some of the provisions in Howard's legislation.

"A housing plan that does not consider lifting roadblocks to building new starter homes is woefully incomplete," stated Housing First Minnesota CEO James Vagle. "Especially given that an affordable first home is widely understood to be one of the most critical contributors to an accessible housing market and generational wealth creation."

Howard said he was interested in exploring regulatory reform in housing during the 2024 legislative session.

"I hope we can move forward a significant piece of legislation in that area as well," he said.

All of the above

Laven, who works as a department manager for McDonald's when he's not doing his City Council work, thinks the housing crisis is too big of a problem to suggest that it can only be fixed by government or only by the private sector. Giving people a decent place to live at a price they can afford will require contributions from all levels of government, private developers, lenders, nonprofit organizations and more.

"Everyone needs to be putting forth the maximum effort to make it attainable," he said. "There will have to be a whole bunch of people lined up along the way giving it their all."

In his day job, Laven hears of the financial struggles of the young adults employed there.

"Some of them are working two jobs, or they're clearly relying on family or friends to cover their needs," he said.

Working multiple jobs, if they have kids, brings problems finding day care coverage. Getting to two or more job sites requires reliable transportation. Reliable transportation in Minnesota sometimes means finding an apartment with a garage to ensure the car will start on frigid mornings.

And if the rent check is unbearably large, it's difficult to ever save up enough money for the down payment on a house, Laven said.

"Their rents are as much as a mortgage payment," he said. "How do you build equity to get a mortgage when you're paying that much?"

Seeking a fair shake

Jones rejects any suggestion, such as the one by legislator Novotny, that people struggling to afford a place to live are simply being too choosy.

When she was pregnant with Aurora, she decided she had to move out of her $750-per-month apartment, which was on the second floor of a house with a steep staircase. It didn't seem like a safe choice for a child.

"At first we were looking for places for $700 a month. Then we bumped it up to $800 and we couldn't find anything. Then we had to go to $900, which was totally at the top of my budget," Jones said.

Even then, the places she looked at were in sketchy buildings or neighborhoods. The place she settled on is in a 70-year-old building near downtown. The thermostat was stuck at 60 most of the winter. The security door sometimes froze shut. Some of her possessions were stolen a few weeks back.

"It was the best of the worst when I was looking a few months ago," she said. "For $900, I feel like we should have a lot more."

Working a job and an occasional part-time job while operating a home business on the side, Jones said the $900 rent still consumes more than 30% of her income.

And the quest for more income has to be balanced with parenting Aurora.

"She's first and foremost. She's the most important thing."

But the dream persists — the dream of the little ranch house with Jones on the porch and Aurora and Noodle playing in the yard.

"The goal is to own," she said. "And I will work my butt off until I make it happen."