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Despite steady declines in housing prices and mortgage interest rates, many Minnesotans -- even those with jobs -- still face formidable challenges when it comes to paying for a home.

On Tuesday the Minnesota Housing Partnership (MHP) released a report that says low wages and too few jobs have left nearly a third of all homeowners and nearly half of all renters in the state paying more than 30 percent of their gross income on housing. Separately, the Treasury Department said only 30 percent of troubled homeowners nationwide who were able to modify the terms of their mortgage have stuck with the program. More troubling, 40 percent of those seeking help didn't complete the program. Together, the reports paint a grim picture of the challenges that face working Americans as they struggle to find and pay for housing, even as economists claim the economy is recovering.

Business has picked up recently for Ruth MacAllister, a house painter from Linwood Township, but it may be too late to save her home. The single mother of two teenagers signed up for the federal loan modification program in September but was stunned to learn a few months later her bank had no record she had ever been part of it.

Now her three-bedroom, two-bathroom house will be foreclosed this fall. "I'm just trying to stay in the home that my kids have lived in for 17 years," MacAllister said.

As late as 2008, one in eight Minnesota households spent at least half its income on housing, according to the MHP, up from 1 in 15 in 2000, the fastest increase of any state in the nation during that time.

Chip Halbach, MHP's executive director, said in the early part of the decade home prices and rents in Minnesota were relatively low but climbed dramatically as buyers stretched to buy as much house as possible. Incomes, however, didn't keep pace.

At Aeon, a Twin Cities-based affordable housing developer, the problem is getting worse as job losses mount and homeowners who have been through foreclosure become renters.

"This is the world that I work in everyday," said Gina Ciganik, vice president for housing development, who says almost all the residents who live in the organization's housing have jobs and defy stereotypes about who needs affordable housing. "It's really our bus driver, teachers, police officers, janitors and people who collect tickets at baseball games," she said.

To illustrate the point, MHP examined wages for five occupations, including teacher, registered nurse and retail salesperson, and found that for full-time workers, owning a median-priced home is affordable to all these occupations in only nine Minnesota counties, most of them in rural areas in the western part of the state. In none of the counties is renting a typical two-bedroom apartment affordable to all five occupations.

In the most extreme cases, MHP researcher Leigh Rosenberg said, lack of affordable housing has left thousands of Minnesotans without housing. The report shows more than 13,000 people are homeless in the state, a number that's increased more than 25 percent since 2006.

Kris Jacobs, director of the St. Paul-based Jobs Now Coalition that works toward better wages, said a large percentage of all jobs available pay wages that can't support a family, making it difficult for some families to meet basic needs like housing.

Such shortfalls are why developers of nonprofit housing will meet this week in the Twin Cities with architects, planners and designers from around the country as part of the Affordable Housing Design Leadership Institute, sponsored by Enterprise Community Partners.

Aeon, for example, will discuss its plans to add another 120 units of affordable housing to the hundreds it has already built in its Franklin-Portland Gateway project in south Minneapolis. The focus of the event, which will be in a different city next year and is funded in part by the McKnight Foundation, will be on creating rental housing that's sustainable, affordable and accessible to jobs and transit.

Aeon, in partnership with other Twin Cities non-profits, has already built new housing on three corners at the once-troubled intersection for low-income renters like Diane Lewis-Williams, who moved there three years ago with her husband, Vincent Williams, who works full time for another local nonprofit.

She knows the struggles of being a one-income family during tough economic times. She got laid off from her job as a receptionist more than a year ago and sometimes they can't come up with the $680 rent on their one-bedroom apartment, so Aeon has helped create a special payment plan.

"They've made it manageable for us," she said. "They make arrangements. That's what keeps us in."

With the foreclosure crisis humming along at full speed -- 90,000 in Minnesota in the last five years, with one-third of them in 2009 -- demand for affordable housing has never been more acute, particularly rental housing.

"We see people coming to rent because they've lost their home," Ciganik said. "So there's a new resident population that needs affordable places to stay and can't get back into homeownership, so renting is their next option."

According to federal data released Tuesday, 60.2 percent of the permanent modifications in the Making Home Affordable Program happened because of loss of income, such as reductions in hours or wages or lost jobs.

The federal mortgage modification program has met with mixed success. Of the 1.3 million people who have enrolled in the program, by last month about 530,000 had dropped out, while 390,000 homeowners -- 30 percent of those enrolled -- are making payments on time. Some say that pressure on lenders to sign up borrowers without proof of income has led to the high drop-out numbers.

Some, like house painter MacAllister, wonder whether the program is working at all. She took part in the program during a trial period in the fall, when officials at her bank, Wells Fargo, assured her she was part of the federal program, she said. Now they claim they have no record of that.

"They're schlepping hope," MacAllister said. "I'm tired of hope. I want results."

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