'Reality versus just a pipe dream': Families search for affordable homeownership
May 28—Cole and Jessica Shane dream of having a home to call their own someday.
"As my children get older and start spreading their wings, I want them to have that knowledge of wherever they go they can always go home," Jessica said.
The home they envision has room for their family of nine to gather around a big dinner table. There's enough space for Dungeons & Dragons sessions, crafting in the winter and Cole's home office.
The family found an affordable rental house on North Fifth Street in St. Peter about eight years ago, where they've lived with seven children since. With the house no longer available for rent come the end of June, though, they're needing to search for an interim place while they work to buy their own home.
As they quickly found out searching for a new rental, the area's affordable housing landscape is far thinner now than it was eight years ago.
"The prices for places are outrageous," Jessica said.
One- and two-bedroom apartments now go for the price the Shanes pay to rent their place. A rental with four bedrooms, enough to comfortably house the couple and children ranging between 8 and 18 years old, is at least double what they've been paying.
The Shanes' experience as full-time workers trying to find affordable housing in south-central Minnesota is one shared by many as consumers contend with rising purchase and rental prices. Young professionals looking to rent, families trying to change from renters to homeowners, and retirees aiming to downsize all feel it.
New landscape
In Mankato, the house price index measuring single-family home price movements over time rose by 70% in the decade from 2012 to 2022, according to economic data from the Federal Reserve Bank of St. Louis. Within that decade, however, the most pronounced spike occurred between early 2021 and late 2022.
From late 2012 to early 2021, the city's house price index had only risen by about 35%. Early 2021 to late 2022 had the sharpest rise in prices since at least the mid-1980s — the earliest data included in the Fed's analysis — pushing the decade's overall rise to 70%.
Weekly wages in the Mankato area haven't kept up with the rising costs of housing. The Fed data showed wages in Mankato rose by about 47% over a similar period.
Nichelle Shannon, one of two Mankato home ownership advisers and certified Housing and Urban Development counselors with the Southwest Minnesota Housing Partnership, hears how challenging the home buying market is from clients. One she knows of had to compete with 19 other prospective buyers for a home.
"It's a very aggressive market for those looking to buy," she said.
The nonprofit, known as SWMHP, offers homebuyer education workshops each month, with 19 families taking the classes so far in 2023. Another 35 families received pre-purchase counseling through SWMHP.
Jessica and Cole Shane met Shannon in February and received guidance to position themselves for homeownership. With Shannon's help, they secured a loan through First National Bank then applied for a single-family direct home loan through the U.S. Department of Agriculture.
Now they're eagerly awaiting pre-approval so they can begin their homeownership search in earnest. Many steps were needed to get to this point, they said, but buying a home now feels attainable.
"I always thought we could never be homeowners," Cole said. "They (SWMHP) help you realize that it's just as possible as paying rent. You just need to know what you're doing, and if you've never had the experience of buying a house, it's hard to know what you're doing."
Guidance on the road home
John Pot learned the ins and outs of homeownership at SWMHP's workshops as well. For the Mankato man, being a homeowner one day could mean having his own yard to mow and a garden to tend.
"With a yard I can grow something," he said.
Back in Sudan, where he's from, he grew up planting crops with his father. Pot hasn't had a garden since coming to the U.S., though, where he's lived in Texas, Nebraska and Iowa before moving here to be closer to family.
While he works toward a home through Habitat for Humanity South Central Minnesota, he and his wife work full time to pay rent on a four-bedroom apartment for them and their six children on Warren Street in Mankato. Habitat works with qualifying families to build homes, with families committing to put sweat equity into construction.
Along with a garden, being a homeowner would mean room for Pot's children to play and no loud music keeping them up at night from apartments across the way. If something needed fixing, like how one of the apartment's windows let in howling winds and snow during the winter, he could address it.
"When you get a house, you take responsibility for your own place," he said.
Like the Shanes, Pot and his family's lease is up this summer and they're looking for a better fit. Also like for the Shanes, the search isn't easy.
Both families made their current rentals work despite size constraints. D&D nights for the Shanes required a pop-up table added on to another table.
The activity is one of the ways to get everyone in the family in one place to spend time together, Cole said, no small feat considering they have multiple busy teens.
"We make it work," Jessica said. "But we have to shift our living and dining room around."
After working with SWMHP, dreams of home ownership don't feel as far off as they used to for Pot and the Shanes. The nonprofit treats families like people, not numbers, Jessica said.
"Being a lower-income family, you think it's never going to happen, but it can happen if you're really serious about it," she said. "They're the ones who are going to help you figure it out."
Shannon said one of her and colleague Mary Grack's goals at SWMHP is to ensure clients are informed consumers when they're ready to take that step. High interest and very high price points make the road to homeownership harder right now, but Shannon said SWMHP focuses on solutions.
"We've assisted clients with improving their financial well-being to aid in pursuing homeownership," she stated in an email. "Therefore, if clients are willing to do the work, we're willing to be the guide. There is no instant gratification unfortunately, but we are here to be of service to those that would like to pursue homeownership."
It takes time to improve a low credit score enough to be in good position for home buying. Filling out applications and waiting for approvals likewise are gradual processes.
On top of SWMHP's longstanding programs, Shannon is encouraged by the promise of a newer shared equity housing model collaboration between SWMHP and the city of Mankato. It's still in its infancy, but the approach could bring more pathways to homeownership to people in the area.
Under this model, the city provides subsidy funding for SWMHP to purchase existing homes or build new homes in order to sell them to lower-income buyers at a lower cost. The buyer owns the house, not the land, and in return for the discounted purchase price, they agree to sell the home at an affordable price should they decide to move someday.
Rental woes
The rising cost of housing is making the transition from renter to homeowner bumpier, but rent hikes make staying put a pain as well for area residents. One person responded to an online query by the Free Press by sharing how rent on a one-bedroom unit in North Mankato recently rose from $600 to $950.
The hike was similar to one at a Fourth Street apartment in Mankato in 2022. Residents were given little more than the minimum legal notice to decide whether a hike from $500 per month to $850 was affordable.
Other respondents described housing prices in the Mankato area as "ridiculous." Affordable housing, defined as costing 30% of income, was "nearly impossible to find in the local market at this time," said one respondent.
Erica Koser, co-director of Connections Shelter, said she knew of guests experiencing homelessness this year who lost their housing after rent hikes.
"That was why they were with us," she said. "They'd had apartment buildings purchased and flipped, and they were priced out."
The shelter's guest data for the 2022-2023 season exhibits the wide range of circumstances and ages of people unable to find local affordable housing. Most guests are in the 25-65 age range, but the shelter served people in the 18-25 age range and 65-plus age range as well.
For many of them, finding a rental unit is a tough but mostly realistic goal with the right support in place. Buying a home someday is more like a far-off dream.
"For us we see people who are already in crisis mode and have to figure out how to find affordable housing," she said. "It's really depressing and really hard, and as providers we get super frustrated, but we also get stubborn and dig in (to help)."
Eviction data over the last five years also demonstrated how more renters are struggling to stay in units. After a decline in evictions during the COVID-19 pandemic due to moratoriums and rental assistance programs, the total in Blue Earth and Nicollet counties rose from 92 in 2021 to 328 in 2022, according to district court case data.
The Shanes' rental house felt enough like home over the last eight or so years. The family's youngest child, 8, with special needs, wouldn't remember any other home besides it.
Being renters, however, meant they didn't control their own destiny. Rent could go up and they had no guarantee the place would be available for as long as they wanted.
Homeownership would provide the assurances they need. By the end of the summer, they hope to find that home.
"For people who are low to moderate income, SWMHP helped us turn that into a reality versus just a pipe dream," Jessica said.
Follow Brian Arola @BrianArola
Follow Brian Arola @BrianArola
