Despite squeeze, affordable housing remains a priority

With few homes or commercial projects being built, the construction of government-subsidized housing and the rehabilitation of existing homes are among the few remaining opportunities for construction in the state.

Yet the Minnesota Housing Finance Agency is looking to keep building steady. Despite the struggling economy, its goal for 2012 is to keep construction activity at a respectable pace compared with previous years.

The group, which funds housing projects to battle homelessness, said its $658 million affordable-housing plan for 2012 is 6.1 percent smaller than this year's. That's mainly because of a lack of demand from first-time home buyers seeking subsidies and the end of federal economic stimulus funding.

But Commissioner of Minnesota Housing Mary Tingerthal said rental housing developers who look to the agency for crucial financing in their efforts will again find it a willing partner.

"I think [the 2012 plan] shows very much a continued commitment to the huge unmet need for affordable housing," she said. "But it wasn't painless."

Under the plan, funding for affordable rental housing construction and rehabbing took a 7.3 percent cut, from $122 million to $113 million. But it's a level that housing developers say they're generally OK with, given the state spending cutbacks in just about all areas of human services.

The agency estimates that 602 new affordable units will be built in the state next year, versus 783 this year and 645 in 2009.

About 1,692 existing apartments are projected to be preserved in 2012, compared with 1,695 this year.

The need in that preservation field is especially acute. The MHFA estimates that 30 percent of the state's 31,000 Section 8 units are at risk of opting out of the program within five years, with many of them in outstate Minnesota.

"We need to make sure we're wisely using units that already exist," Tingerthal said.

The poster child for that emphasis is arguably Sherman Associates' $90 million rehabilitation of Riverside Plaza in Minneapolis, which last year tapped more than $12 million in agency funding to rehabilitate the 38-year-old, 1,303-unit complex, half of whose units receive Section 8 subsidies.

But, Tingerthal added, with apartment vacancy rates at historic lows, alterations could be made to the agency's scoring process for project funding that give more weight to new construction.

"There will be some new construction done in the affordable rental sector, but definitely there is an emphasis on rehabilitation, so rehab contractors, architects and lenders who do that type of work will benefit from that state's housing investment emphasis," said Halbach, whose nonprofit tracks homelessness in the state.

"Mary Tingerthal's job at the agency is to weed through this tough period and come up with something that makes a lot of sense. I think she's done pretty darn well," he said.

"We're excited with both Dayton's and Commissioner Tingerthal's efforts given the current environment," added Lee Blons, executive director of the Plymouth Church Neighborhood Foundation, which has created or preserved 433 units of housing since its founding in 1999. "I'd say we're feeling good that the resources are still there."

She noted that while MHFA still supports construction, it has scaled back rent assistance given to the neediest of low-income tenants.

Tingerthal said she hoped more construction work could be generated next year through the agency's $40 million request in Dayton's upcoming bonding bill. Some $10 million of it would be earmarked for the preservation of existing low-income housing, In all, 450 to 600 housing units would be built or rehabbed under the request.