Officials say a shortage of housing, not jobs, is crimping economic development in Greater Minnesota

The news that Polaris Inc. wants to bring new jobs to Roseau in northwest Minnesota — where the company manufactures snowmobiles, ATVs and military vehicles — has been a welcome development in the small city of 2,700 people.

“If I’m going to add a hundred people, the majority of those are going to be relocation candidates to the Roseau area, which is awesome,” said Nathan Hanson, the Polaris plant director in Roseau. “Build our tax base, the school, you know, grow our community. Everything that any town in the state of Minnesota would like.”

There’s a problem, however. Right now, there’s almost no housing for those new employees or their families in and around Roseau. Hanson said about 80 workers are already living in temporary quarters — mostly hotels and some Polaris-owned homes — as they look for permanent housing. And those in hotels sometimes have to couch surf when the city hosts youth hockey tournaments, which happen regularly in the hockey-mad part of the state.

To help its housing crunch, Roseau has had to take unusual measures, morphing essentially into a housing developer and bypassing the private sector. Now, the city is building a $6.8 million apartment complex that is almost entirely funded by the public.

Roseau is also not alone in its housing struggles. Business and civic leaders say a shortage of housing is widespread in small cities and towns across Greater Minnesota, where employees of bigger companies struggle to find housing and developers rarely build new housing.

“We have the jobs,” said Roseau mayor Dan Fabian, a former GOP state legislator. “We just need the people.”

Why there’s a housing shortage

Todd Peterson, Roseau’s community development coordinator, said there has been a housing shortage for the 25 years he’s lived in the city. Large manufacturers need a lot of labor, and those workers are usually making enough money to disqualify them from affordable housing limited by income. At the same time, those workers aren’t earning enough money to entice developers who need to charge higher rents to make money on a new project, Peterson said. The median household income in Roseau is $52,794, according to the latest Census data. In other words, Roseau residents “can’t afford new construction,” Peterson said.

To add to the problem, there is more government money available for building subsidized affordable housing, Peterson said. It’s far trickier to fund homes without those income limits. “All we do is just keep bidding up the existing stock and nothing ever gets added,” Peterson said.

In 2014, Roseau and the state government subsidized the construction of a 30-unit apartment building that was also aimed in part at housing Polaris workers. But that was seven years ago, and there is still an acute housing need.

Hanson said there is strong demand for Polaris products and said the company has been working to add more employees since COVID-19 related business shutdowns last April. “It’s really to get us fully staffed where we need to be,” Hanson said. “Right now, with the housing, with some of the challenges, we do have some temporary employees. We’d like to backfill them with full-time Polaris employees. And that’s where that 100 number comes, from just to support the demand for the product that we build here in Roseau.”

At times, the company has had as many as 120 workers living in temporary housing. Hanson said that has consequences. For instance, three families recently moved to Minnesota from Texas for Polaris jobs. One family found housing. Two didn’t, got discouraged and moved back to Texas. “It hurts when you see that because they moved here, they liked everything,” Hanson said.

Fabian, the Roseau mayor, said one of the city’s biggest economic engines is youth hockey tournaments in the winter. Most weekends, the city hosts 16 teams. But because hotels are filled with workers, they have a tough time hosting everyone. That means people stay elsewhere, or fewer teams might come to town, which hurts local businesses.

How Roseau is trying to address the housing crunch

Peterson and Fabian said ideally the private sector would take care of building housing. But that’s not really an option right now. “I’ve basically told our city council: ‘If we want housing, the city is going to build it,’” Peterson said.

Roseau first started discussing a city-owned apartment building in January of 2020. At the time, Polaris had said it was getting very difficult to find housing, and when Peterson surveyed all major apartment owners, he found vacancy rates were “basically zero.”

More than a year later, construction is underway on the $6.8 million, 37-unit complex. Roseau’s Economic Development Authority will own the building, most of which will be paid for by a mix of bonds and cash from the city and the Northwest Minnesota Multi-County Housing and Redevelopment Authority — a public nonprofit that works to build housing. The state kicked in $1.58 million in March from a small grant program it runs to help build workforce housing. Polaris donated $100,000, and a medical center and another manufacturer each gave $5,000. 

Roseau bought and donated the land for the apartment building, waived other fees and costs, and spent lots of time trying to figure out how exactly to develop apartments that aren’t considered affordable housing. Peterson said the city itself is barred from building market-rate apartments by state law, but not affordable-rated apartments that it would have a hard time filling.

Peterson said the city expects the Roseau apartment building, called the Eleven01 project, to be open this summer.

The cost and availability of housing have also become a top issue for state legislators. Jack Swanson, a Roseau County Commissioner, recently testified in a joint House and Senate committee on housing affordability that there are many reasons for a “severe workforce shortage in Roseau County.”

“But a lack of housing is by far and away the largest of those,” he said.

Roseau officials have plenty of ideas for how to help the city and others like it. Fabian said there’s a massive amount of state money spent on subsidized housing. But most of it is focused on affordable housing and the workforce housing fund — which Fabian helped create at the Legislature — is limited in what it can do. The most recent Roseau project practically drained the account at the time, Peterson said. And lawmakers approved just $4 million for it in the latest two-year budget.

Fabian also said he hopes the Legislature allows tax credits for companies or people who want to donate cash to a private housing project if the area can demonstrate need.

Peterson also recommended lawmakers put more into the workforce housing program. He said he hoped previously the state would relax Tax Increment Financing laws — which can help governments finance affordable housing — but that the idea was met with resistance.

For now, Peterson said cities must get creative, and publicly finance projects. Hanson, the Polaris plant director, said fixing the housing shortage would be a huge boon for the region and help other nearby companies like Marvin Windows in Warroad.

“If I can get a family to move here, everyone benefits,” Hanson said.