Thursday, February 5, 2015

Greater Minnesota Cities Need Workforce Housing to Prosper

What happens when demand for housing in a community exceeds the financial capacity to supply it? Thief River Falls. The city is one of a number of communities in Greater Minnesota that needs options to house additional workers for burgeoning employers.
According to administrator Larry Kruse, that challenge currently sits on the front burner of policy priorities for city officials there.

As Kruse explained last week in a presentation to state legislative representatives on the Greater Minnesota Economic and Workforce Development Policy Committee, without additional housing options in Thief River Falls, "Businesses can't grow and expand because there won't be enough qualified residents to fill jobs."

Despite a growing demand for market-rate rental housing in some cities, the private market is unable to meet that demand because the cost of construction in many communities exceeds the amount that lending institutions are willing to finance. Unlike affordable housing, there are few available federal, state, or local government financing assistance options for workforce housing.

According to Kruse, multi-housing family stock in his city is old, and rent rates for existing dwellings are currently low relative to other markets. In communities like Thief River Falls, residents typically do not make sufficient wages to pay the amount of rent that would need to be charged for units in a newly constructed housing facilities in order to recoup developer investments.

In a worst case scenario officials in Greater Minnesota cities are concerned that the housing shortage will force businesses to expand in other communities, costing their cities jobs and depressing local economies.

But some help may be on the way. The first bill introduced in the Minnesota House of Representatives (HF 1) for the 2015 session contains a $5 million workforce housing grant program which would expand upon a pilot program that the League advocated for in the 2014 session. The grant program represents an additional step in the right direction for providing help to cities with workforce housing needs, but the League continues the effort to identify other tools and resources to address the emerging challenge.

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