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.”