Do prevailing wage requirements hamper affordable housing?

Randy Petersen, Post-Bulletin, Rochester, Minn.
·2 min read

Feb. 23—A Rochester policy adopted late last year to spur development of additional affordable housing could be reversed amid doubts about the proposed impact.

"I have found that it really doesn't add extra cost to the development," Rochester City Council member Mark Bransford said Monday in proposing that the council revisit a section of the city's tax-increment financing policy, which drops a prevailing wage requirement for projects promising to provide a defined level of affordable housing.

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He said his research has also pointed to the potential for wage theft and other issues that can negatively affect workers.

Rochester Assistant City Administrator said he wasn't able to find definitive evidence on whether the wage requirement would significantly change the cost of housing.

"The evidence I saw was all anecdotal," he said following his annual TIF policy update presentation. "It was not based on scientific fact, so to speak."

Spaeth said the policy suggestion came from a developer last year as the city was looking for ways to create incentives for building housing that would be considered affordable for people earning 50% of the area median income.

The prevailing wage requirement was dropped from projects using state or federal housing tax credits for more than 50% of the project's funding sources and multifamily rental housing projects providing at least half of the units at a price deemed affordable to four-person households earning approximately $50,600 a year.

The policy change passed unanimously in November, but council member Nick Campion said Monday that he's been reconsidering the issue.

In addition to Bransford, the other three newly elected council members haven't voted on the issue.

While dropping the prevailing wage requirement was questioned Monday as a viable incentive for the construction of affordable housing, Spaeth said TIF has helped create approximately 3,000 housing units deemed affordable to people earning half the area median income under federal guidelines since 1999.

"That's really the vast majority of the projects we've had," he said.

Last year, the City Council approved TIF agreements for three projects:

— Discovery Square Two, a DMC redevelopment project with office, lab, event and collaborative spaces.

— Badger Hills Senior Housing Project, providing 26 units affordable at 50% of the area median income, 77 units at 60% of the area median income, 81 units at 80% of the area median income and 72 units at 100% of the area median income.

— Century Heights Workforce Housing Project, providing 76 apartments with rent and income restrictions for households earning less than 60% of the area median income.