Greater Minnesota Housing Fund: Supporting Workforce Housing

Greater Minnesota Housing Fund: Supporting Workforce Housing

The Greater Minnesota Housing Fund helped local leaders develop River Falls Estates to address a workforce housing shortage in Thief River Falls, Minnesota. Credit: Greater Minnesota Housing Fund.

Greater Minnesota Housing Fund: Supporting Workforce Housing

As Minnesota’s largest community development financial institution (CDFI), the Greater Minnesota Housing Fund (GMHF) builds partnerships and finances the development of quality affordable housing and communities throughout the state. Since 1996, GMHF has provided more than $208 million in direct financing through various initiatives, which in turn have garnered an additional $1 billion in capital investment for affordable housing and community facilities. One of GMHF’s programs creates workforce housing solutions in partnership with companies experiencing challenges in recruiting employees because of a shortage of nearby affordable housing.

Building Solutions

GMHF established its employer-assisted housing (EAH) program in the late 1990s when the state was experiencing significant economic growth. Policymakers viewed the short supply of adequate and affordable housing for a qualified workforce as a major economic development issue. In response to this challenge, GMHF created an EAH program that brings together community leaders, businesses, and other resources to provide affordable housing that supports both employees and the local economy. GMHF’s services include identifying developers, packaging financing, raising capital, establishing partnerships, performing market studies, and offering expertise on affordable housing issues. Warren Hanson, president and chief executive officer of GMHF, says of his organization’s involvement, “We are willing to be there from the very beginning until the very end providing technical assistance and money.”

When working with employers and local leaders, GMHF shares its knowledge of affordable housing policy and financing to identify the appropriate resources for each project. Hanson describes the financing process as “a matter of analyzing what the true gap is. We want to maximize the private debt, private equity, and local government support.” He explains that this analysis clarifies what the employers and GMHF need to provide to make the project viable.

With the economic recovery from the 2008 recession gaining strength, employers throughout Minnesota are again experiencing a need for workforce housing, and the EAH program continues to address this need. From its launch through 2013, the EAH program has invested $148 million, including more than $18 million from GMHF and $20 million from employers, to create 1,387 units in 14 employer-assisted housing developments. One of those developments was River Falls Estates in Thief River Falls.

River Falls Estates

The 41-unit River Falls Estates offers a range of units from studios to three bedrooms that are affordable to households earning below 80 percent of the area median income. Credit: Greater Minnesota Housing Fund.

Major employers in the city of Thief River Falls have taken steps to provide workforce housing. Two businesses, Digi-Key and Arctic Cat, together employing 4,000 people, were growing and needed additional employees. The lack of available housing deterred potential employees from accepting positions at the companies, despite one company’s efforts to provide long-distance busing. With the housing shortage further exacerbated by other business growth and a local college’s expansion plans, GMHF met with local leaders to begin planning River Falls Estates in 2012. The resulting three-story building meets the energy-efficiency requirements of the Minnesota Green Communities program. The functional features of the development include a laundry room on each floor of the building and 20 garage parking spaces are available to residents occupying the studio, one-, two-, and three-bedroom apartments. The 41-unit development provides 8 units affordable to households earning up to 50 percent of the area median income (AMI) and 33 units for households with incomes between 60 and 80 percent of AMI. This helps make local housing attainable for employees of local businesses including manufacturing firms such as Digi-Key and Arctic Cat, which offer starting wages between $15 and $18 per hour.

GMHF supported the $6.5 million River Falls Estates development with a $475,000 loan secured by city tax increment financing (TIF) revenues. Revenues are expected to be stable after five years, creating the possibility of ending its financial commitment and refinancing the loan through a private lender. According to Hanson, the TIF component was critical to the viability of the development and is often the most effective tool for maximizing local resources to create employee housing. The project also received $540,000 from local employers, as well as a $2.5 million loan from the Minnesota National Bank.

Meeting the Growing Need

Thief River Falls is continuing to address the community’s needs by partnering with GMHF to develop two more workforce housing projects. GMHF is also expanding its workforce housing efforts elsewhere in Minnesota. As Hanson states, “[It] happens to be an important and very good time to engage employers because the economy is hot [and] employers need workers.” As the state’s economy expands, GMHF is working closely with local business and municipal leaders to keep pace with growing workforce housing needs. The CDFI is currently partnering with Olmsted County and the Mayo Clinic to develop a housing plan that calls for 10,000 new homes — 2,000 of them affordable — to sustain the health care provider’s projected growth through 2020.