In 2018, when the City of Minneapolis agreed to give exclusive development rights for a vacant, city-owned lot a few blocks from the Guthrie Theater and Stone Arch Bridge, the plan was to build luxury condos and office space.
A year later, that was still the idea, when developer AECOM extended its development rights with the city and brought in a new partner, Beowulf Energy. The plan: to build a 14-story high rise, with condos starting at $500,000 and penthouses that would likely be among the most expensive properties in the area.
But with the arrival of 2020, the COVID-19 pandemic and resultant economic crunch, demand in the market for luxury housing shriveled up. So the developers decided to pivot. Instead of a building where 90 percent of the units would be luxury and market-rate condos, they are now hoping to build an “affordable condo” project in which half of the units would be sold to residents who qualify as having moderate incomes.
If developers AECOM and Beowulf can actually build the project, it would be a “trailblazer,” said Community Planning and Economic Development Senior Project Coordinator Emily Stern. Though affordable condos have been built elsewhere in the country, the approach is novel in the Twin Cities and could offer a new way to expand affordable home buying options in the area.
The developers are still figuring out many of the details about the project — including how many total units and what the building’s market-rate condos will cost — but the affordable condo component would work by subsidizing the cost of building the units with public or private investment dollars. “The subsidy, or the offset, is in the front-end development cost,” said AECOM Minneapolis Managing Principal Brian Dusek.
Once the condos are built, the developers would hand off responsibility for determining if a buyer qualifies for an affordable unit to the Minneapolis-based City of Lakes Community Land Trust, a nonprofit land trust that helps low and moderate-income people purchase homes. The goal is to make the condos affordable to those making 50-60 percent of the Area Median Income for the Twin Cities, or roughly $50,00 for a two-person household.
The idea would be to keep the units affordable by having condo-buyers agree to sell the units only to people who also qualify as moderate-income. The developers are also devising a way to ensure that affordability isn’t canceled out by monthly fees, which condominium associations charge homeowners for building upkeep.
By building the project in Downtown East, the development would also bring affordable housing to a neighborhood not known for having a lot of it. “This is bringing affordability to a neighborhood with amenities already built out, services built out,” such as Trader Joe’s, the Mill City Farmers Market and other stores and restaurants, said Beowulf Executive Vice President Nazar Khan.
And though the project is still in the early stages — AECOM and Beowulf are researching similar projects in other parts of the country — housing advocates say the concept could usher in a new model for both developers and affordable homeownership in the Twin Cities. Said Staci Horwitz, City of Lakes Community Land Trust’s operations director: “The potential is really significant.”
Couple questions come to mind – when the model requires a public subsidy, how much per unit are we talking about?
Also if there is a requirement to only sell to people of moderate income, that effectively puts a cap on the value the condos can command on the market – so if a purpose for home ownership is to benefit from the appreciation of the property, but the appreciation is limited based on local wage inflation, does this remove that benefit from these units – and based then on association fees and the like at what point does this become less attractive then just renting?
The proposal is for 50% moderate to low income and the other 50% to the wealthy. I also hope there is a 90% owner-occupied requirement. Too many downtown condos get bought for rental property and that seems like a devaluing in the making.
Besides affordable healthcare, people NEED affordable housing. If the private industry cannot do this for us, the govt needs to. It’s cruel how many people are suffering today due to unaffordable housing, healthcare and life…in this the wealthiest nation in the world.
Many say to let the market take care of these issue…but the market has totally failed the people.
Its not the market that failed. Its zoning codes. Its Nimbys. Its people opposing new housing projects. Housing is too expensive because the market was been artificially constrained.
People say they want affordable housing. But they don’t want it built in their neighborhood.
I think the first commenter raises some valid points. I like the idea of helping people invest in property who might not be able to; but at what point do tax payers support it? It’s hard for many above that affordable level to manage buying a home given the average price is now 300,000 yet then they would have raised taxes to help others buy is a tough sell. I like the idea of private money to assist in this.
My wife and I purchased our first and only home in 1986. It was a starter house and our income covered the mortgage, insurance, taxes, and interest. We lived in that starter house until 2020. Our income increased over the years but never increased enough to move up to a nicer /larger home to raise a family. Our income was limited so the only solution was not to have children. We made it to retirement and now we live in a nice senior community. I will pay taxes to fund parks, public safety, and other things that enhance the greater good. I refused to pay for things to give other people that I could not afford to have in my life. This sounds heartless and cold. That’s just the way I feel at this point in time.