Olmsted County is being asked to help ensure 36 apartments near downtown remain affordable.
Rochester Area Foundation recently announced plans to purchase Center Street Village in an effort to keep the apartments affordable.
“First Homes believed our community was at risk for losing these 36 units, and as a community we can’t afford that, especially in this location,” Foundation President Jennifer Woodford said of the complex at 626 E. Center St.
To ensure the numbers add up, First Homes is asking Olmsted County’s Housing and Redevelopment Authority to approve a $360,000 10-year deferred loan to increase the downpayment on the planned purchase.
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Woodford said the property was originally marketed for its potential as an investment property in a city where rents continue to increase.
Today, 34 of the two-bedroom apartments rent for $750 to $900 a month, but the seller recently spent $20,000 to upgrade a pair of two-bedroom units, which now rent for $1,100 apiece.
“What they were trying to show to a new buyer is that you could take a relatively low investment and really raise the rate for the rents,” Woodford said.
The apartment complex was put on the market after the 2018 death of its owner, William Hargis. His estate had already started its marketing effort when First Homes showed interest.
The building, which was originally designed as a condominium complex, is appraised at nearly $2.7 million for tax purposes. Woodford said the planned purchase price remains confidential, since the deal isn’t complete.
However, she noted the estate’s marketing effort provided incentive for First Homes to get involved.
“We don’t have 36 extra affordable apartments, walkable to downtown, that people could just move to,” she said.
With a loan offer from the Greater Minnesota Housing Fund and a grant from the Coalition for Rochester Area Housing, the numbers didn’t quite add up to keep rents low.
With the HRA’s help, Woodford said the foundation hopes to keep rents at their current level to meet local needs.
In addition to a $360,000 loan, the county is also being asked to support a tax credit for the property.
Approved last year, the new tax credit provides a break to landlords who commit to limiting rent increases. If it goes through, First Homes would be the first landlord to receive the credit, which would reduce annual operating costs by approximately $14,000 a year, according to Olmsted County Housing Director Dave Dunn.
In return, Dunn said he is asking First Homes to work with the county, which already has programs to connect low-income tenants with affordable housing. He said a potential agreement could allow the county to help more people who are struggling to find housing.
“It allows us to have units for our master-leasing programs, our voucher programs and other things that we are doing,” he said.
Woodford said the county efforts tie perfectly to the First Homes goals.
“It’s something that I absolutely see for the property,” she said of potential cooperative efforts.
The county’s HRA board is slated to consider the proposal during its 1 p.m. meeting Tuesday in conference room 1 of the city-county Government Center.
Recently, three members — county commissioners Sheila Kiscaden, Stephanie Podulke and Gregg Wright — voiced support for the loan and tax credit, citing a need to preserve affordable rents while the HRA continues to search for ways to develop new affordable housing.
Kiscaden, who sits on the First Homes board, said the effort aligns with recommendations of former Gov. Mark Dayton’s affordable housing task force.
“The most affordable housing is the housing you already have,” said Kiscaden, who was also a member of the state task force.
Woodford said that’s why the Center Street project was appealing as First Homes moved in a new direction.
“To reproduce 36 affordable units would cost an incredible amount,” she said. “We couldn’t afford to do that.”
Deputy County Administrator Paul Fleissner said the county’s involvement makes sense as a way of ensuring residents of all income ranges can afford a place to live.
“This is exactly what I think we should be doing,” he said.