Rents & Raves

 

Housing experts point out that rental housing is as important as single-family homeownership. Government and foundation-sponsored programs both support the production of multi-family rental housing developments and provide rental vouchers that can be used for any rental unit.

 

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“Homeownership for everyone isn’t the goal. It’s nice to think that we could all have a yard, a front porch and a picket fence, but not everyone has the means or the desire to maintain it. Many Minnesotans want rental housing because it’s typically the most accessible and affordable.”

- Kathy Gaalswyk, Initiative Foundation

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Each year, government, nonprofit and commercial developers build 1,200 to 1,400 new units of affordable housing in greater Minnesota. New housing is important, but according to Colleen Landkamer, state director for Minnesota’s USDA Rural Development office, the highest priority for her agency and other state-level partners is the preservation of the existing affordable rental housing.

 

She said her agency financed and maintains about 11,800 units of affordable rental housing in small cities and towns throughout Minnesota. Much of this housing was built in the 1960s and 1970s and some of the units desperately need improvements like energy-efficient windows, heating and cooling as well as new appliances and basic updating.

Forces of Foreclosure

Hanson reported that about one in every 14 Minnesota homeowners is behind at least one house payment, and one in every 30 Minnesota homes have been foreclosed.

“That is an astounding rate of foreclosure, and the crisis is hurting home values across whole communities,” he said.

More foreclosures are expected in 2010 as high unemployment rates cause more families to miss payments. Thousands of adjustable rate mortgages (ARMS) will also reset or balloon in 2010 and 2011, Hanson added. In 2009 alone, lenders foreclosed on 23,000 homes in Minnesota, according to a report from the Minnesota Home Ownership Center produced by HousingLink.

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“When we look back years from now, housing will clearly be the defining issue of our time.  These hardships affect the quality of life for every one of us.”
- Warren Hanson, Greater Minnesota Housing Fund

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Stephanie Klinzing, mayor of Elk River, has seen the impact of the foreclosure crisis in her community. The city was home to enough foreclosures to qualify for federal help.

Elk River has since developed policies that allow it to secure and maintain any foreclosed single-family home and recoup the City’s expenses from the lenders.

Foreclosed townhomes pose additional challenges, according to Klinzing. While the city can collect property taxes on foreclosed homes, lenders aren’t required to pay townhome association fees needed to maintain shared heating and cooling systems, roofs, snow removal and lawn mowing.

“This overburdens adjacent residents, and the shortages can destabilize the entire development,” she said. “The remaining residents don’t have any legal recourse.”

Tax Credit Tools

Minnesota Housing Finance Agency Assistant Commissioner Tonja Orr said rental preservation is one of her top concerns. According to Orr, the federal low-income housing tax credit program has historically been the single largest source of capital for funding affordable rental housing.

The program allows investors with a federal tax liability to buy tax credits that can supplement 70 percent or more of the total cost of an affordable rental project. The more private investment in a project, the less government subsidy is needed.

	Colleen Landkamer, USDA Rural Development: "We need to make sure our existing multi-family facilities are safe and viable places to live.  Our existing portfolio of multi-family housing is a tremendous asset.  It will only remain an asset if we maintain it and stay on top of preserving units that need to be preserved."

“It has been a real win-win program for investors, government, low-income renters and local communities,” said Orr. As business profits have fallen, she added, investors have less need for tax credits and fewer investor dollars are flowing to affordable rental projects during the recession.

“Nationwide, everyone is concerned about the tax credit program,” Orr said. “Until the economy rebounds, the tax credit program won’t be as robust and private capital will be more scarce.” She believes that will lead to an increased need for state government and philanthropic funding.

In addition, many of the tax-credit projects created years ago have federal contracts that are expiring and will no longer provide the level of affordable housing they once did.

Overall, Orr said, Minnesota Housing and other agencies are working together to supply a mix of housing so people of all income levels are housed affordably. She paints the picture of a high school graduate going to school part-time and working at the gas station, or a the teacher with a back-log of student loans, or a retired couple who wants to live near their children.

“In the richest country in the world, why is it that people have to live in their cars?” Orr said. “Why do they have to move every three months because they can’t afford to stay? It’s a basic human right that everyone should have a safe, decent and affordable place that they can call home.” IQ

 

No Need Like Home

Although the precise need for affordable housing is unknown, the most recent study by BBC Consulting projected a 2010 shortfall of 22,000 units of affordable housing in the Twin Cities and 10,600 units in greater Minnesota, after all federal, state and philanthropic resources are invested. However, the foreclosure crisis has caused conditions to worsen.

The BBC study assumed that private builders would continue building and producing homes at a strong rate through 2010, and that foundation and government funding would continue at the same rate to supplement production of affordable housing. Neither happened, Hanson said. As a result, the need for affordable homes is greater than ever.

Warren Hanson, Greater Minnesota Housing Fund

“The need has skyrocketed because of a series of events that started with the mortgage mess and rippled through the whole economy,” Hanson said.

Housing construction has traditionally served as an employment generator. According to the Minnesota Housing Partnership’s 2009 third-quarter report, housing construction-related employment was down to levels of the early 1990s.

Local nonprofit groups, faith-based groups like Habitat for Humanity, and state and federal agencies are working together to help communities stabilize and recover from foreclosure impacts by acquiring, rehabbing and selling foreclosed homes in the hardest hit areas of the state. Special down-payment and low-interest loans are available to new homebuyers, who are required to receive homebuyer training and credit counseling.

After researching several programs, Anna Vick applied to a USDA Rural Development program for a subsidized loan to move out of her two-bedroom apartment and into a singlefamily home. She’ll partially pay the loan back with equity earnings if she ever sells her home.

Because she bought a foreclosed home in Isanti and qualified based on her income, she received $12,500 in down-payment assistance and $23,600 in rehabilitation assistance from the federal Neighborhood Stabilization Program. The program’s purpose is to decrease the number of vacant homes on the market.

Vick used her funds to replace waterdamaged windows, floors, ceilings and carpet. She also purchased new appliances and weatherized the home to make it energy-efficient. Today, her mortgage payment is $834 per month, and due to Minnesota’s new antipredatory lending laws, it will stay at the same affordable rate for 30 years.

“Our newly rehabbed home is in great shape and we can afford it,” Vick said. “The kids can have friends over and go out into the yard and play.”