With a $1 million land donation and thousands of hours of volunteer labor at the ready, Habitat for Humanity is embarking on one of its most ambitious projects yet: 33 for-sale suburban townhouses.

The project is a milestone for the Twin Cities chapter of the national nonprofit. It's their first foray into Hugo, a once-rural suburb north of downtown St. Paul, and it's being built on the largest land gift in the history of the organization.

"This is the start of something big for us," said Matt Haugen, Habitat's director of marketing.

The five-acre project is also one the few post-Recession townhouse projects in the metro that will cater to entry-level new-home buyers.

The average sale price of new houses in the Twin Cities metro last year was in the mid $300,000s, according to Metrostudy, which tracks construction trends across the country, more than $100,000 higher than the median price of existing homes last year.

With new home sales still lagging behind the broader housing recovery and construction costs on the rise, homebuilders have been catering to move-up buyers willing to spend far more than first-timers.

The homes will be built on the largest land gift in the group’s history.

Last year, for example, fewer than 500 attached townhouses were built across the entire 13-county metro, according to Metrostudy. That was only a fraction of the more than 10,000 housing units built across the metro, according to the Builders Association of the Twin Cities.

"There literally isn't anything for those first-time buyers," said Wendy Pace, director of business development for Metrostudy. "That's a hole in the market, if any builder is looking for a niche to fill."

Already, with financing easier to come by and demand on the rise, townhouses are making their way back into the product mix as builders look for new sales opportunities, according to David Siegel, BATC's executive director.

"For a first-time home buyer, or someone looking for an association-maintained lifestyle, this is the most achievable product from a cost perspective," he said.

Before the housing crash, thousands of townhouses had been built and there was a glut of listings, especially in suburbs like Hugo where the Generation Acres development was destined to become 41 townhouses.

Only a handful of those units got built before construction came to a halt in 2007 when the housing collapsed and its lender defaulted.

The land went into foreclosure, and it was acquired by Joel and John Schwieters of J.L. Schwieters Construction.

Joel Schwieters said the duo considered several options for the development, including a piecemeal sale of the property, but quickly saw the wisdom of making the donation. The Hugo-based company provides service and materials to builders and isn't a general contractor or developer.

"We're a strong believer in Habitat," said Schwieters, noting that Habitat offers would-be homeowners the chance to learn construction skills while contributing sweat equity to the project.

The project will be built in phases over the next three years with the help of several longtime volunteer groups, including a group of 3M retirees who are celebrating the 20th Habitat project.

The houses are likely to appraise for about $175,000 each, Haugen said, and the sale price and financing will depend on the specific families' incomes.

For example, with a $175,000 purchase price and a zero-percent interest mortgage from Habitat, buyers will pay about $1,100, including taxes, insurance, association fees and a $50 monthly maintenance fee.

Already, work is well underway on the first units. The foundations have been poured and volunteers are framing the walls. Haugen said that three of the eight townhouses in the first phase have been spoken for, and another three are expected to be matched with in the coming weeks.

"There are a lot of apartments out there and very few entry-level houses," said Schwieters. "This will fit nicely into the community."

Jim Buchta • 612-673-7376