City Council Meeting Date: November 21, 2023
To: Mayor and City Council
City Administrator
From: Jake Reilly, Community Development Director
Melissa Hanson, Housing Coordinator
Title
Northcountry Cooperative Foundation (NCF) Revised Concept Plan.
Body
Action Requested:
City Council to hear an update on NCF’s revised concept plan for the development of HRA-owned land at Southbridge.
Summary Report:
The HRA owns approximately 7.27 acres of undeveloped land in the Southbridge area near Spring Creek Park. Adjacent to the HRA land, the City owns additional land. The HRA has been exploring a variety of development options to create affordable, environmentally sustainable, workforce housing citywide. NCF has presented an affordable homeownership concept that may fit what the HRA is looking for and has proposed developing a single-family neighborhood using factory-built homes and a resident-owner cooperative ownership model.
Background
The HRA has been exploring a variety of development options to create affordable, sustainable, workforce housing citywide. Alongside a goal to incorporate a single-family ownership option in the Southbridge neighborhood, the HRA has stated a desire to fill the gaps in the Northfield housing market identified in both the 2021 Northfield Housing Report (Att. 1) and the April 2022 Housing + Education in Northfield Technical Assistance Assessment Findings (Att. 2) report commissioned by the Northfield Promise collaborative, of which the City is a member.
NCF has presented a homeownership concept that may fit what the HRA is looking for and has proposed to develop a single-family neighborhood, with infrastructure built to City standards, using factory-built homes for the product and a resident-owner cooperative model likely handled through a common-interest-community plat as the underlying legal framework.
NCF presented the initial concept plan at the HRA’s May 4, 2023 regular meeting. At that meeting, the HRA Board authorized staff to move forward with a non-binding, time-limited yet exclusive agreement that would not hold the HRA to a commitment to sell property to NCF but would offer assurances regarding site control to funding organizations, including not-for-profit funders and state and federal grantors.
NCF is a 501(c)3 nonprofit organization founded in 1999 in Minneapolis. NCF’s goal is to “transform lives and communities through cooperative (co-op) enterprise.” The website states that they carry out this charge by providing technical assistance and education to cooperative organizations. Primarily, NCF provides co-op development and support services to affordable housing co-ops. Over its 20-year history, the organization has worked to create an ecosystem that supports housing co-ops through organizing and educating stakeholders about the benefits of the model and by advocating for the creation of financial and operational tools that housing co-ops need to succeed. As one of several cooperative development centers around the country, NCF delivers ongoing education, organizational development, and support to homeowners.
The concept plan, “New Leaf: Housing for Workforce Families” is a novel approach to affordable homeownership, long-term affordability, and sustainable, energy-efficient homes. NCF has been working with FannieMae (the fiscal sponsor of the concept), Street Front Development (a Minnesota-based developer with nearly 20-years of relevant development experience, including in sustainable energy); an architecture/new urbanism advisor and a clean-energy-transition advisor to deliver a potential solution to address aspects of both the national housing shortage and climate change.
The New Leaf concept envisions a neighborhood of 50 to 100 factory-built homes offering ownership attainable at all workforce incomes (for example, a family of four with income not more than $75,000 annually or a single person making not more than $25/hour), built and sited on land that is subdivided to meet a municipalities’ existing zoning code standards and supported by infrastructure built to city standards including water, wastewater, roads, sidewalks, trails, and trees. The initial concept plan as proposed earlier this year met Northfield-specific Land Development Code and infrastructure standards.
The HRA has now twice declined to enter into the agreement based on a stated desire to have more information about project financing, siting of homes, house design, long-term affordability, resident-owner cooperative models, and a stated desire to have a clearer policy for the disposition of HRA-owned parcels/properties.
In order to provide additional, specific, and relevant information to decision makers and policy advisors, members of the HRA, City Council and Planning Commission, and City staff toured Schult/Clayton Homes in Redwood Falls on two separate occasions. Schult/Clayton Homes is the prospective factory-built home manufacturer and is one of the first factory-built home manufacturers in the United States to produce homes that meet the net-zero-ready standards for manufactured homes, jointly set forth by the United States Environmental Protection Agency (EPA) and the United States Department of Housing and Urban Development (HUD) in 2021 (Att. 3).
Separate from the recent creation of an EPA standard for a HUD-certified net-zero-ready manufactured home, in 2021 HUD updated relevant sections of the Code of Federal Regulations relating to the construction and siting of manufactured homes (Att. 4). These updates removed some barriers to and enhanced the practicability of siting manufactured housing units, including (but not limited to) adding/amending standards for placement, for multi-level manufactured housing and for both attached and detached garages.
Staff has shared a list of the HRA (and other interested parties’) concerns about foundation and footing requirements; emergency storm shelter requirements; size, quality, durability, and environmental sustainability/energy efficiency of the home; financing structure; purchase, loan, and lender requirements/availability; and additional information about how a cooperative ownership structure for a single-family home neighborhood works with the staff and consultants at NCF. NCF plans to include responses to as many of those concerns and questions as possible during the presentation or highlight any that are not yet able to be answered but plan to be answered if the organization is able to move forward with additional due diligence.
Policy Context
Earlier this month, Up for Growth, a national, cross-sector member network committed to solving the housing shortage and affordability crisis through data-driven research and evidence-based policy released a report called “2023 Housing Underproduction™ in the U.S” (Att. 5). That report details housing production in the United States, including historical information about how national, state, and local housing policies have impacted housing unit production since the 1920s, and a crisis precipitated by the Great Recession and shifts in family preferences and migration trends that was further complicated by an unexpected global pandemic. The report suggests a number of units needed to be produced - nationwide - in order to meet not just future demand, but also existing demand. It further identifies numbers of needed units by state and by sub-jurisdiction. The numbers in this report align with similar research produced by other national organization as well as local groups (with national influence) such as the Family Housing Fund and Minnesota Housing Partnership and the State of Minnesota Housing Finance Agency. At baseline, research around housing production in the US in 2021 concluded that the US needs at least 3.89 million housing units to meet existing demand. For Minnesota, that looks like 106,000 homes.
Perhaps most important to a community like Northfield is the conclusions made about rural communities and housing shortages. For example, the report notes that, “between 2019 and 2021, massive new household formation and shifting demand for lower-cost suburbs led to an 11% spike in the housing deficit of non-urban America, officially moving the center of housing
underproduction away from large coastal cities to, quite literally, everywhere else.”
Additional research by multiple organizations has identified that the current cost to produce units, especially for single-family and ownership opportunities far outstrips the ability for many working families to afford to purchase a home without significant subsidy, if at all. According to Ehlers, the City’s financial advisor, one-to-two-bedroom units in new multifamily structures must not cost more than approximately $185,000 to build (per unit, for a unit size of about 800 square feet) in order for a builder to qualify for financing. And in many communities, developers have demonstrated that they would rather pay $150,000 to $175,000 per unit into a city’s affordable housing trust fund than produce affordable units, even at an affordability level of 125 percent of area median income (AMI) (Rice County’s AMI is $93,000 and Dakota County’s is $124,300). Lenders typically consider a family or a person to be “home ready” at or above 80% of area median income, which is still considered “low income” by HUD and the US Census Bureau. Subsidies are typically available to those who make less than 125% of AMI. The most recent data produced by the Saint Paul Area Association of Realtors (whose reach includes Dakota and Rice Counties) shows that the average home sale price in their area was $380,000. New construction homes exceed that number, on average, when taken separately.
Through a direct appropriation by the state legislature, thanks to Representative Kristi Pursell’s efforts to mitigate housing shortages statewide, especially in rural communities, the City has been given $300,000 toward infrastructure for a cooperatively owned community that has factory-built homes. Additionally, applications have been made to the Minnesota Housing Finance Agency through the Consolidated RFP to support this type of initiative. State and National leaders have recognized the existence and severity of the housing shortage crisis, which only continues to grow, and those organizations have similarly recognized a need for a new model for housing unit production. In fact, the Habitat for Humanity affiliate in LaCrosse, Wisconsin has become a modular and manufactured home dealer, working directly with a MN-based factory, based on the idea that offering only stick-built new construction is not necessarily a sustainable future for the national, well-known not-for-profit home producer to continue to be as successful as it has been.
Northfield has been offered a unique opportunity to work with an organization that may be able to mitigate some of the elements described above. And to work with them to create a neighborhood that meets standards expected by and worthy of all Northfielders.
Alternative Options:
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Financial Impacts:
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Tentative Timelines:
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