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ROCHESTER — A boost in the median income level for Olmsted and Dodge counties will change the calculations for what is considered affordable housing in the region.
Recently released reports of area median income levels throughout the nation show a $3,200 boost for Olmsted and Dodge counties, which share a federally defined metro area.
The increase from $99,700 to $112,900 means calculations used to define maximum rents for housing developed with state and local financial support have been adjusted.
Use of state tax credits or local tax increment financing typically calls for at least a percentage of the apartments created to be deemed as affordable for a family earning a specified percentage of the median income.
In Rochester, that means projects being built with rents that would have been capped at $1,390 for a two-bedroom apartment last year, could now open with rents as high as $1,525.
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For studio apartments, the rent cap rose from $1,081 to $1,186.
It doesn’t mean rents in the affected buildings will automatically increase to the maximum allowed.
“Historically, we’re not at that max rent,” said Heather Barness, property manager at First Avenue Flats, which was built using state support.
She said the apartments at 400 First Ave. NW didn’t see rent increases last year, even after allowable rents rose from $1,125 to $1,390 for two-bedroom apartments, and this year’s rent prices were already in place when the potential for higher rates were revealed.
“We’ve always had a philosophy where rent is based on the floor plan (rather than what’s allowed by the state),” she said.
With 12 different floor plans, First Avenue Flats lists rents ranging from $980 to $995 for one-bedroom units to $910 to $1,200 for two-bedroom apartments.
Dave Dunn, Olmsted County’s housing director, said the increase in allowable rents will likely spur some increases for tenants, but not necessarily to the maximum amount.
“I don’t know that they go up because of that,” he said of the new state caps. “I think they all have their own escalation clauses.”
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He said inflation is likely to push some future rents to increase as leases expire.
However, he said the local increased median income also means new residents might become eligible for lower-cost housing created with state and local financial support.
Where a family of four had to earn less than $61,800 to qualify for housing required to be affordable to someone earning 60% of the area median income under state rules last year, the income level rose to $67,740 this year.
The definition of affordable is based on the assumption that less than 30% of a family’s income is being used for rent and related expenses. Other factors, including family size, play into the parameters.
A federal calculation, which also factors in local fair market rents, is used to set the guidelines, which are adjusted on an annual basis.
Olmsted and Dodge counties aren’t alone in seeing increases to area median incomes.
Statewide, the median family income has increased from $93,100 to $104,000, according to HUD.
In the other counties surrounding Olmsted, increases in area median income ranged from $5,300 in Mower County, where the resulting income is $78,600, to $9,300 in Winona County, which has a reported AMI of $87,500.
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Goodhue County saw a $9,200 increase, to make its $96,800 AMI the region’s third highest, with Mower County being the lowest among the eight Southeast Minnesota counties.
