by CHRIS ROGERS
Over 10 months ago, Mayor Mark Peterson charged the Winona Housing Task Force with advising the city on what it should do to help meet Winona’s housing needs. On Monday, the City Council will review the task force’s recommendations, including a wide range of local subsidies to assist the construction and renovation of workforce housing. As defined by state programs and the task force, “workforce housing” means apartments, townhomes, condos, or single-family homes for individuals earning $57,385 or less or a family of four earning $81,880 or less.
The task force’s work followed on the heels of the city’s 2016 housing study, which identified numerous kinds of housing needs in the Winona area, including a shortage of low-income housing and starter homes and a demand for market-rate rentals and senior housing options. “The housing study identified the need. We then, as the Housing Task Force, said, ‘What can we do about this need?’” explained task force chair and Merchants Bank Vice President Jim Vrchota.
Local leaders see these housing needs as a key piece of Winona’s larger economic success. The recommendations come as Southeast Minnesota expects Mayo Clinic’s Destination Medical Center project to generate thousands of new jobs in the region, both creating growth opportunities and potentially exacerbating a shortage of workers. During meetings this year, task force member and Winona Area Chamber of Commerce President Della Schmidt said that Winona businesses, hospitals, and colleges sometimes struggle to recruit top professional talent — or see new hires choose to live in Onalaska — because of a tight home-buying market and a lack of upscale apartments. The housing study also found that a large portion of Winona workers live elsewhere. People spend money where they live, and people are choosing to commute to Winona and live elsewhere because of a lack of housing options and affordable options, Vrchota said. “The opportunity is there to bring in people and tax base, and the more people we bring in, the more [K-12] students, and that supports the school system,” he stated. “We are heavily a manufacturing community, and they need people,” he added. Those people need places to live.
The task force’s answer to the question — ‘What can we do about this need?’ — was to put together a “toolkit” that steers would-be workforce housing developers toward numerous existing federal and state funding programs and recommends that the City Council use local subsidies to incentivize workforce housing construction and renovation.
The proposed local subsidies range from waiving city fees to directly funding projects. The task force recommended that the city, the state, the federal government, and private companies should all pitch into a funding pool to assist the construction and renovation of workforce housing developments. The task force also recommended the use of local property tax breaks such as tax increment financing (TIF) and tax abatement to aid workforce housing projects. The group suggested that employers help their workers out, too, through programs that would cover an employee’s apartment security deposit or pay for part of each month’s rent. When developers promise to create affordable workforce housing, the city should also waive or reduce its normal fees for building permits and for sewer and water hookups, the task force recommended.
The group also recommended the use of a relatively unique concept: land trusts. In a land trust, an entity — perhaps a government or a nonprofit — owns the land on which houses are built and the homebuyers simply own the house itself. This reduces the cost of homeownership, and enables land trusts to offer homes at affordable rates.
In addition to the local, state, and federal subsidies, the task force suggested that the city make workforce development easier by relaxing regulations. In particular the group recommended reducing the normal set-back requirements to allow denser residential developments when developers pledge to keep them affordable for workforce housing.
The task force also recommended that the city collaborate with various partners — including Habitat for Humanity, the Winona Area Public School District, local colleges, and neighboring cities — to help meet local housing needs.
Affordable for whom?
Winona City Manager Steve Sarvi said the city chose to focus on workforce housing because it falls into a gap between pricier housing that is profitable for developers to build on their own and federal and state programs that already subsidize low-income housing.
Borrowing from definitions in state programs, the task force describes “workforce housing” as housing that is affordable for people earning up to 115 percent of the area median income (AMI). Most federal programs that subsidize low-income housing set a maximum income threshold of 50, 60, or 80 percent of AMI. There are fewer programs out there for people earning just over 80 percent of AMI, but developers may still need government assistance to provide affordable housing for people in that income range, Sarvi explained. There have been some state programs that have started to serve this income range, and that is where the task force got its “workforce” definition. “Minnesota Housing Finance Agency uses 115 percent of AMI as an income benchmark to allow funding sources to reach a wide range of income levels and have a greater community impact by serving occupations such as teachers, police officers, nurses, and frontline professionals,” the task force wrote in its recommendation. The group called workforce housing “the community’s greatest housing need.”
“We’re talking about police officers and teachers,” Sarvi said. “We’re not talking about people who are desperately poor. There’s other programs for them.”
The city’s housing study did identify unmet demand for affordable housing for poorer Winonans, and this fall, the Winona County Criminal Justice Coordinating Council made low-income, transitional, and supportive housing the focus of its annual summit. “That’s what we need,” Winona County Assistant Attorney Rebecca Church said at the event. The city’s housing study reported that there were nearly zero vacancies in subsidized housing units serving Winonans earning under 60 percent of AMI. “These developments are fully occupied, indicating that additional pent-up demand exists for shallow-subsidy rentals in Winona … We recommend that the city continue to allocate funds toward maintaining and improving the existing shallow-subsidy and deep-subsidy units and consider ways to attract new shallow-subsidy rental development to the community,” the study stated. The study also pointed, in particular, to the need for affordable housing options for low-income seniors.
Should the city do something to support housing for poorer Winonans, too? “Absolutely,” Sarvi responded. “The first place to start is the [Housing and Redevelopment Authority (HRA)]. Those are projects the HRA should be looking at.” The Winona HRA Board is appointed by the City Council, but it’s a separate government with a separate budget. Its programs have long waiting lists, and the HRA gets all of its funding from the federal government, the state government, and tenants’ rent. It does not receive funding from the city. Would the city consider city funding for the HRA? “They could levy [their own taxes],” Sarvi responded. “There’s a huge workforce housing need. That’s the one that hasn’t been addressed,” Sarvi said, adding that while that is the focus of the latest recommendations, the city can do more than one thing at once.
Winona Economic Development Specialist Nick Larson pointed out that the proposed workforce housing programs could include people earning far less than 115 percent of AMI; that’s just the maximum. Many successful housing projects include a mix of income levels, he added.
How will subsidies, regulatory relief be implemented?
Some of the proposed assistance programs would take some work to set up, such as a funding pool or a land trust. If the City Council wants to pursue those ideas, it should give staff direction to do that specifically, Sarvi said.
However, many of the local subsidies proposed in the task force’s recommendations are not truly new. A developer could walk into city hall anytime and ask for TIF or tax abatement, Sarvi pointed out. He explained that the task force’s recommendations are simply suggestions to the council on how to use those existing tools and a signal to developers of what sort of assistance the city may be able to provide, in addition to all the state and federal programs available.
How will the city decide what projects deserve assistance and how much? Sarvi said that city staff will vet applicants’ financial plans to ensure that the city is not giving subsidies to people who do not truly need them. City staff will weigh how much assistance a project needs against how far it goes toward meeting the city’s housing needs, he explained. The task force considered requiring developers to agree to keeping a new development affordable for a certain period of years, but ultimately decided to leave that up to negotiation. There would not be quantitative criteria or scoring rubrics for applicants, Sarvi said, explaining, “It’s more of an art than a science. It’s not like you get five points and you get 10 points.” Ultimately, whether to grant financial assistance is a City Council decision on a case-by-case basis, he said. Review by the council and, depending on the case, by other committees like the Planning Commission, help ensure the city is making a prudent decision, Sarvi stated.
When relaxing the normal regulations for workforce housing developments, the city would likely make case-by-case exceptions, rather than rewrite city zoning rules, Sarvi said.
‘Not just something that sits on a shelf’
“The risk of not doing anything is being stagnant,” Larson said. Vrchota pointed to Winona’s population trends. Seventeen years ago, the population was about 27,000, according to the U.S. Census Bureau. Seventeen years later, the population is about 27,000. “There’s an old saying that if you’re not going forward, you’re going back, and I don’t think we want to be going back,” Vrchota said.
“We have three colleges of young people here … How can we get them to stay?” Vrchota asked. “If they don’t have places to live, they’re not going to stay. I think we have the jobs.”
“I’m really hoping that [the task force’s recommendations] get used — that it’s not just something that sits on a shelf, but I’m hearing from Nick that he won’t let that happen,” Vrchota added.
“We’ve got to do something different. We can’t just keep plodding along,” Sarvi said of Winona.
The Winona City Council will meet at 5:30 p.m. on Monday, December 18, in the Wenonah Room on the third floor of city hall to receive a presentation on the task force’s recommendations. The council will not consider formal approval of the recommendations until a later date.