Mankato receives affordable-housing funds for sixth year in a row

Jan. 28—MANKATO — Mankato's winning streak reached six years in the annual competition for millions of dollars in government funding to provide more affordable housing.

The Minnesota Housing Finance Agency has approved $5.8 million in direct funding for a 64-unit apartment building for low-income seniors and $200,000 to help an estimated 10 low-income residents of Blue Earth County purchase their first home.

The subsidies are needed more than ever, according to Minnesota Housing Commissioner Jennifer Ho, who Friday announced $240 million in project selections to create and preserve more than 1,400 affordable apartments and homes across the state.

"The need for more housing at lower price points has only intensified during the pandemic," Ho said.

Rising construction costs force private developers to focus on apartment projects with maximum revenue potential — ones targeted toward tenants who can afford high rents.

The winners in the 2021 round of applications included an unprecedented number of new apartment units reserved for people with incomes of no more than 30% of the median income in their area. Rents for the units will be at a level that would not produce enough income to pay off construction costs without the government subsidies, she said.

Ho specifically mentioned Mankato's Lewis Lofts project as one of seven around the state that will provide those deeply discounted rents.

The 64-unit apartment building — to be constructed starting this fall just north of Cub Foods West and reserved for tenants 55 years old and older — will have 20 units aimed at the 30% tenants. The remaining units will have affordable rents for tenants earning no more than 50% and no more than 60% of the area median income.

The $5.5 million for Lewis Lofts, plus a $2.1 million short-term loan, comes from Housing Infrastructure Bonds approved by the state to spur construction of affordable housing across Minnesota beyond what could be done solely with the federal tax credits traditionally used for those sorts of projects. Gov. Tim Walz, speaking during the presentation, highlighted that funding.

"Thanks to all of the legislative leaders, we can say 'yes' now to more communities across the state with more funding than we've ever had," said Walz, who is proposing another $250 million for the program in his 2022 supplemental budget. "The federal resources alone don't get us there."

Even with the added state funding, many more applications were denied than were approved because of fiscal constraints, according to Ho.

The agency also funded some projects at less than what was requested, including the $205,000 to the city of Mankato's Economic Development Authority to provide grants to low-income renters who are attempting to purchase their first home.

City leaders were hoping to help 20 first-time homebuyers with funding to bridge the gap between the price of a home and the size of the private mortgage they can obtain. The agency sliced that $410,000 request in half and also reduced the income level at which applicants would be eligible — from 115% of the area median income to no more than 80%.

With the reduced funding, the program is expected to bridge the gap for 10 homebuyers in Blue Earth County, according to a memo to the agency's board of trustees.

"The proposed project will also further the Agency's strategic objective to make homeownership more accessible," the memo stated. "The Greater Mankato area has 51% of renters with an income lower than $35,000 and nearly 52% of renters paying more than 30% of their income on rent. As such, they are unable to save for necessary down-payments and closing costs. The affordability gap financing will be used to assist credit qualified renters into a position of homeownership."

Minority applicants will be targeted to help reduce the gap in homeownership between non-Hispanic whites and families of color, which is one of the largest in the nation, according to the memo: "Mankato EDA will engage organizations working with households of color to promote homeownership along with culturally specific homebuyer education courses. The additional gap assistance with affordable first mortgages can assist households to become stable and build wealth."

While the homeownership program could be life-changing for 10 families, the multi-family apartment buildings being constructed in Mankato with the state and federal subsidies produce a more widespread impact. Since 2016, the Minnesota Housing Finance Agency has approved subsidies for construction of apartment buildings totaling 318 units in Mankato — nearly all of them with controlled rents and reserved for people that meet income requirements. Funding was also provided for renovation and preservation of another 77 existing apartments for low-income tenants.

It started in 2016 with Dublin Crossing (50 units) just north of the Madison East Center. The local winner in 2017 was the 60-unit Rosa Place project near Rosa Parks Elementary School. In 2018, it was Dublin Heights (45 units) adjacent to Dublin Crossing.

In 2019, Colonial Square Apartments — a 77-unit former dormitory on Ramsey Street — was awarded funding to renovate the entire building, parts of which were more than 100 years old, and guarantee that it would continue to be reserved for low-income tenants.

The last two approvals were for "The Neighborhood" — the ambitious project on a vacant city-owned lot near Cub Foods West. In 2020, developer Cohen-Esrey Development Group won subsidies for the 48-unit Sinclair Flats apartment building on the eastern side of the 5-acre lot, all but 10 of which will be rented to income-eligible tenants. With this week's approval, Lewis Lofts will be constructed on the western side of the lot with a row of nine townhouses between the two buildings.

No other communities in the Mankato area submitted applications for new affordable-housing apartment complexes in the 2021 competition.