PLAINVIEW, Minn. — On the outskirts of Plainview in southeastern Minnesota, a cornfield that sits next to a golf course could be a crucial part of the small city’s future.
In theory, it will become a housing development with single-family homes, commercial property and a 43-unit apartment building on 10 acres.
The city has a population of about 3,500, and it’s home to a robust agriculture sector and medical workers because it’s close to Rochester and the Mayo Clinic. But with a steady economy, Plainview has “housing needs across the board,” said mayor Aaron Luckstein. And despite a $1.3 million grant from the state for the apartments, the housing project is on hold. Luckstein blames higher interest rates and pricier construction costs.
The drive to build housing — and the stall in its development — reflects a problem not unique to Plainview. Across Greater Minnesota, many cities and towns face a lack of housing and struggle to boost inventory to meet demand for homes. One thorny problem is building what state officials call workforce housing, which is housing with rents based on what local employers are paying.
Developers and others say there are a litany of problems with building workforce housing, but often the finances simply don’t work.
“The problem in Greater Minnesota is essentially a market failure,” said Bradley Peterson, executive director of the Coalition of Greater Minnesota Cities: With the high cost of building houses stemming from land costs, material costs, the cost of labor and meeting housing regulations, it’s very hard to do affordably, even where employers are paying good wages.
[raw][/raw]
That is what inspired Democratic lawmakers to expand a state program that subsidizes workforce housing in Greater Minnesota. The initiative had a budget of $4 million in the last two-year budget cycle. But the DFL-majority Legislature voted for a roughly 10-fold increase in money, approving almost $40 million in extra cash.
But while the program has bipartisan support, some Republican lawmakers argue it’s a band-aid fix to a much larger problem.
Housing problems in much of Greater Minnesota
The housing crunch has been such a problem in Greater Minnesota, hindering job growth in many places, that local officials and businesses around the state recount horror stories of people trying to find places to live.
In Roseau, Polaris employees have had to live in hotels as they look for scarce permanent housing, only to be displaced when hockey tournaments come to town. Scott McMahon, executive director of the nonprofit Greater Minnesota Partnership said during a February hearing at the Legislature that workers at the now-closed HyLife pork plant in Windom were busing to work from a former hotel HyLife leased in North Mankato.
Another small city with a major manufacturing plant tried to recruit two employees, only to discover both were bidding on one available house, McMahon said. “The other employee turned down the job, didn’t get the house and didn’t move to Minnesota,” he said.
A 2022 report by the Center for Rural Policy and Development and the Greater Minnesota Partnership said the cause of the workforce housing shortage is complex. One major factor is increasing construction costs that price young families out of contention for starter homes and skew the market.
When it comes to multi-family housing, the rent that is possible to charge is not enough to “cash flow a project,” said Sara Bunn, who manages the workforce housing grant program at the Minnesota Housing Finance Agency.
For example, Luckstein said in smaller Plainview, it costs roughly the same to develop homes as in a bigger city like Rochester, especially when it comes to labor and the price of materials.
Another problem, the report says, stems from a higher percentage of seniors in rural communities. When those seniors stay in homes because they want to, or because they lack an assisted living facility to move to, it causes a bottleneck in homes for sale, the report says. It also contributes to a rise in dilapidated houses — sometimes upkeep can cost more than owners can afford.
[image_credit]MinnPost photo by Walker Orenstein[/image_credit][image_caption]Lakeside Foods is a part of the robust agriculture sector in Plainview.[/image_caption]
Waseca paid for a 158-page report on the city’s housing problems in 2021. It said there was demand for 704 new housing units through 2030 and 62% of demand was for senior housing. For comparison, the city has a population of about 9,200 people.
But, like in Plainview, there seemed to be a need for all sorts of housing.
“Interviews with employers, Realtors, and property managers all indicated a severe shortage of market rate rentals in Waseca,” the study says. “Some employers indicated employees earn too much to qualify for affordable housing and there is no housing stock for workforce households.”
A major expansion of workforce housing program
One way the Legislature has tried to ease the shortage of workforce housing in particular is through a state grant program aimed at multi-family housing in small to midsize cities in Greater Minnesota.
Since 2017, the program has had a budget of about $2 million a year. In the most recent grant round, the state awarded $4.59 million to subsidize the construction of 289 units. The money was earmarked for Alexandria, Cold Spring, Cook County/Grand Marais, Dassel, Ellendale, Fosston, Pipestone, Warroad and Plainview. Plainview won the biggest amount, by far.
Still, Housing officials received 23 applications for the money, with requests totaling roughly $19 million. Bunn said that was the first time the program had been “completely oversubscribed,” illustrating growing interest in financial help.
Sen. Lindsey Port, a DFLer from Burnsville who chairs the Senate’s Housing and Homelessness Prevention Committee, said she loves the program and believes it works. “We just have simply, as with everything in housing, completely underfunded it for decades,” Port said.
[image_credit]MinnPost photo by Walker Orenstein[/image_credit][image_caption]Plainview has a population of about 3,500.[/image_caption]
That wasn’t the only legislation passed by the DFL majorities aimed at helping housing issues across the state. The workforce housing money was part of a massive $1 billion housing budget bill, which includes things like $90 million to help preserve privately owned naturally occurring affordable housing and $150 million in downpayment assistance to help lower-income buyers.
Port said lawmakers separately approved money tied to senior housing in a separate budget bill. The housing legislation includes $37 million in financial help connected to manufactured home parks, sometimes known as mobile homes, which Port said have a large footprint in Greater Minnesota, and $20.5 million for a workforce homeownership program.
Peterson, from the Coalition of Greater Minnesota Cities, also promoted $5 million in the housing budget for a grant program to help Greater Minnesota cities with infrastructure like sewage systems and roads needed for housing developments, and another $3 million in the capital construction budget for those needs.
The Republican approach to housing
The workforce housing grants have some support among GOP lawmakers, who represent most rural areas and much of Greater Minnesota. At the February hearing, Sen. Rich Draheim, R-Madison Lake, said it’s a good program.
Sen. Eric Lucero, R-St. Michael, who is the top Republican on the committee and a real estate agent, said grants like this are “absolutely important” when housing is an issue across the state. But he described it as a temporary “shot in the arm” rather than a longer-term solution to a complex problem.
Lucero said it costs more to build a new single-family home in Minnesota than in surrounding states, citing data from the Housing First Minnesota, a trade association for residential builders. Lucero said building materials and other costs like interest rates should be similar across those states, so the higher overall price tag in Minnesota is due to things like more stringent building codes, fees and other regulations, he said. And the Legislature this year approved mandates Lucero said would make labor more expensive, like the new paid family leave program.
Draheim has sponsored a bill, also proposed in the House by DFL Rep. Steve Elkins of Bloomington, that would have altered many aspects of planning and zoning regulations in an attempt to make it easier to develop housing. Supporters called it an effort to compromise in a long-running disagreement between cities and homebuilders.
And Lucero proposed a bill that would ban cities from requiring the use of specific materials, designs or other “aesthetic conditions” not required by the state’s building code. A city also could not set a minimum square footage requirement. Similar measures were in the Draheim legislation. Neither passed.
In Plainview, the $1.3 million grant for apartments in the cornfield development was ultimately not enough. Luckstein said a $600,000 shortfall has grown to a roughly $2 million project gap. For scale, the city’s total budget is about $3.5 million.
The mayor said the city has seen quite a bit of single-family housing development because the price point works better, and because it’s what developers are most familiar with. But, he said, the apartments could house young professionals and people moving to the area needing a place to temporarily rent while they look for more permanent housing.
Plainview is looking at ways to close the financial gap. That could include more money from the workforce housing program. There is interest in moving to Plainview, Luckstein said. The city just wants to ensure they have somewhere to live.
“It’s on everybody’s mind,” Luckstein said of cities across Greater Minnesota. “Everybody is looking at this as a challenge.”
No, an extra $40M from the legislature will not significantly impact workforce housing shortages in greater minnesota. However, it will likely help property developers in greater Minnesota build their winter home in Florida after their creative accounting gives them huge profit on these lousy cheap apartment buildings they claim are near impossible to build due to costs. These sob stories about building expenses were at least plausible in the metro area. Even with increased labor and material cost, the largest expense in a development project is sill the cost of the land. However, the cost of land in outstate towns is next to nothing. Maybe even free. How dumb and gullible do they think people are? (answer: very)
You honestly think that on a $16M 3-4 story apartment complex, the largest expense is land?!? This is so misguided I don’t even know how to answer it. Suprised you are not out there building apartments all over MN since its such easy $.
I wrote the land in outstate MN is clearly not the largest expense. That was the point of my post.
This just doesn’t jibe with what I keep hearing about outstate voters, that they just want to be left alone, and not have things “shoved down their throats” by Metro legislators. Seeking and accepting this interference in the vaunted free market is cognitive dissonance writ large.
It also doesn’t fit the “DFL doesn’t care about rural Minnesota” narrative.
Whenever you get Republican legislators pretending to have solutions to problems, Watch out ! Republicans do NOT look at solutions from a citizen’s view. Their first interest is in padding and protecting the bottom line for business.
I actually don’t mind the solution of preventing cities from requiring aesthetics beyond the state’s safety codes, especially if the state is helping to fund housing. I know that it might rankle the idea that such small towns should be “left alone,” but if you’re going to build business out in the boonies, there are going to be strings attached if you need help housing the workers. Now…what Sen. Lucero might consider “aesthetic” might not be purely aesthetic – I don’t know. Still, if housing meets the state’s building codes otherwise? Yeah, why not. Warning – there are some wealthy people who are absolutely not going to want housing built on smaller than minimum acreage in their little hamlet, or a modernist looking house among their mansions with carriage houses. And if such a bill got any legs, we’d start seeing concerned citizens writing opinion pieces here about how it ruins the feel of neighborhoods.
Exactly, and regulations dictating a minimum square footage isn’t being done out of a concern for the people living in the house, it’s a form of redlining and prevents the construction of things like tiny houses. I’m not a fan of tiny houses themselves, but I am a fan of the older style of smaller house that people would build and then add onto as they could afford to. The places that regulate square footage just want giant cookie cutter McMansions and to keep the “riff raff” out.
As long as it meets modern safety and building codes, let people build what they want.
I don’t mind aesthetic “requirements”, after all local building codes are completely local decisions and small towns elect their mayors and city councils like everyone else. If they let aesthetics or square footage requirements cripple their housing supply that’s on them eh? Meanwhile, having seen the results in multiple instances, letting builders build whatever crap they want wherever they want can seriously degrade livability in a neighborhood. Cheapy cheap housing can be another form of redlining and economic inequity.
At what point does public/social housing become an option? The government could incur the costs and risk that builders are unwilling to take on, and then both these various towns, as well as the state itself, could reap the benefits of the increased housing supply – including the tax revenue this would generate and presumably offset the original cost of building the housing itself.
He says keep profits private, but socialize the losses. Because we don’t hate all socialism.
Great article. I would like to see a follow up article on the different options to help rural MN towns- financing, exemptions, passenger rail or commuter rail, involving employers, incentives to cities and businesses, etc….
Complain about paying too much to workers who build the housing when addressing an issue about housing being too expensive for workers. If we all take pay cuts, I’m sure that will make housing more affordable for everyone.
I grew up in rural MN in the 50s, 60s and 70s when even a low wage worker could afford a house, car, feed their family, afford medical care…none of which is true today?
I don’t know why we accepted this change, but today we not only have some of the worst wealth inequality in the world, with many unable to afford any form of healthcare, housing or life. Our homelessness is an abomination.
It is fixable. Just look at much of Europe. They do it!
it’s not true that a low wage worker can afford a house, car, etc. on a low wage in Europe. I lived in a small town in Germany in 2015-2016. The rent there was significantly more than the apartment I rented in Berlin. Most property in German small towns is owned by people who inherited it. The property tax in Germany is very low and the rates can be passed on to heirs. This discourages property owners from ever selling, redeveloping, or even having renters.
Well, historically large factories, manufacturing, and warehouses have been built in or close to cities for a reason… that’s where the populations necessary to meet worker demand are located, not to mention transportation infrastructure. The Sears and Montgomery Ward warehouses didn’t end up in those locations by accident. Obviously some things have changed, but the need for workers hasn’t.
I don’t know why or how it has come to pass that businesses decide to build out in nowhere land and assume that worker housing is someone else’s problem? How is it that a business fails to determine whether or not the location they choose has enough people to supply their workforce, and that those workers have somewhere to live? Why isn’t that calculation a basic part of the business plan and who’s fault is it when it’s not?
So really, let’s look upstream here and note that this isn’t so much about building worker housing as it is finding some way to subsidize bad private sector planning. Sure, presumably companies are lured out into rural locations with promises of cheaper taxes, labor, whatever… but then we’re told it costs just as much to build out there at it does anywhere else so how much subsidies are these small town dumping into these projects. Why is someone else responsible for meeting the housing demand they’re creating? At the very least companies that build in these locations should be paying for some of the housing costs they’re generating.
And why aren’t we simply talking about the economic sustainability of an assumption that we need to make it possible to build these project anywhere and everywhere in MN? Sustaining rural areas with adequate infrastructure, health care, education, services, and housing is one thing… but why are we trying to grow rural population and is THAT even sustainable? Is rural growth even a rational expectation?
The answer to your questions may be due to the availability of workers in agriculture , food production and manufacturing.
Manufacturers find workers in many rural locations are more willing to perform the well paid positions that they provide for their community vs the metro. In some industries they are there because they are closer to the source of supply.
For decades companies like 3M have manufactured in locations such as Hutchinson, Alexandria , Ames IA , Forrest City IA , Aberdeen SD , Brookings SD etc …. with little if any manufacturing in the twin cities.
These jobs create other jobs and businesses in rural communities who are happy to have the jobs and the economic impact they provide.Maybe it’s not as much a housing issue as it is a workforce issue that creates the need for housing. There are numerous reasons the metro is not always an attractive option.
Well, apparently those well paying jobs don’t pay enough to afford housing. So maybe they aren’t all that well paying?
The topic of the article is the shortage of housing and the cost of development. Both , along with 7% interest rates drive up the cost to home buyers. This problem is not unique to rural Minnesota.
I’m sure the jobs being provided are important and a valued contribution in these communities.
Housing in many of those locations is surprisingly expensive. The median house price in Aberdeen is over $220k. The median household income in Aberdeen is $56-57k. That isn’t good math. This article (https://www.fatherly.com/news/map-median-home-price-by-state) indicates that South Dakota is one of just 3 states (in 2021, at least) where the median house price is less than $299k, but it remains that less than half of residents can afford a house. Rental is more affordable – median rent in Aberdeen, SD is $650 in 2023. But there are 18 (yes, 18) rentals available (https://aberdeensd.com/housing/rent/). The population of Aberdeen is over 28,000. So, while businesses might have good reasons to locate their manufacturing facilities outside of big cities, those advantages don’t necessarily apply to their workers, who not only can’t afford to own a house, more and more frequently can’t even find a home at all.
Jeff, if manufacturers found workers in rural areas we wouldn’t be having this conversation, workers and their housing wouldn’t be a problem. Wherever 3m or anyone has a plant of some kind, they must have workers who live nearby. Those who ARE moving out to rural areas aren’t doing it for manufacturing jobs.
There may be a rationale of some kind such as proximity, but that rationale is moot if you can’t staff the plant. Rural American is depopulating, small towns get smaller not bigger, and we have dozens of examples of private prisons, meat packers, and other manufacturers that failed to reverse the trend. Rural America is littered with near ghost towns who’s populations collapsed for a variety of reasons.
The article is not about a shortage of workers. In Plainview the economy is based on agriculture and the employer Lakeside foods is part of a “robust agricultural economy.” It’s also seeing growth from Mayo Clinic employees. The housing shortage is not solved by suggesting employers need to move their operations away from the source of supply or there’s an unlimited supply of qualified workers who are willing to work in the metro. Should the Mayo Clinic move its operations when the same housing issues exist in Rochester and Minneapolis ?
The metro has the same issues as Plainview. A lack of housing availability , affordability and the high cost of development.
People will move to where jobs are. Not every employer or employee sees the metro as the answer to the problem. Rural jobs and employers is not the problem. The problem is housing and that is not unique to towns outside of the metro area.
Actually Jeff the article IS about a worker shortage. If workers have no place to live… you have no workers. You can’t claim that these projects grow populations in small towns and then claim that the population is already there but has no place to live… workers either live there or they don’t.
Yes, housing costs are a problem everywhere but the article isn’t talking about housing workers can’t afford, it’s talking about housing that doesn’t exist hence all the discussion about developers and costs and $40 million to build new housing.
Reading this makes me wonder about an idea that was tried before earlier in the last century: how about the companies building the warehouses and manufacturing facilities actually build the housing needed for their employees? Perhaps some sort of spinoff division – or perhaps just a more aggressive investment strategy and forward thinking by a company’s already existing property acquisition department to build new housing. Surely somehow in the tax code there’s benefits to creating a division or some novel way (or not so novel) way to profit from investing in this real estate, in cooperation with a finance arm or bank that would write the mortgages (and are likely already providing a revolving credit line/facility for the company).
Is it a wise investment, given the costs to build as outlined above? Over the long term, as housing appreciates, probably? Is there some sort of write off for these companies, tax credits, some sort of TIF-like funding to help cushion the already deep and record profit-making companies? Highly probable. Could help recruitment, too, for folks reticent to come to these smaller cities.
Steve, in our “modern” economy corporations get to externalize their costs… profit is private, risk is public. Anyways, I think some of the meat packing and associated plants in Southern MN have actually done this; workers down there have been living trailer homes for decades. That’s another thing… why would you need oh-so expensive houses built in the first place? Trailer homes seem like quick and less expensive alternatives.
This certainly isn’t unique to the rural area. Housing is too expensive everywhere now.