City Council Meeting Date: July 7, 2026
To: Mayor and Members of Council
City Administrator
From: Melissa Hanson, Housing Coordinator
Title
Consider Resolution Authorizing Submission to Minnesota Housing Finance Agency’s Impact Funds - Cherry Street Redevelopment.
Body
Action Requested:
The Northfield City Council is being asked to approve a Resolution authorizing submission of a grant application to Minnesota Housing Finance Agency to support redevelopment of the Cherry Street property into four new affordable homeownership units.
Summary Report:
Staff of the City’s Housing & Redevelopment Authority (HRA) is seeking Council authorization to apply for Minnesota Housing Impact Funds to support redevelopment of the HRA-owned parcel at 308 Cherry Street. The grant would assist with the creation of four energy-efficient, net-zero, factory-built homes affordable to households earning between 80%-115% Area Median Income (AMI) - for a family of four income levels between $86,700 - $124,660, this demographic is considered low- to moderate-income households. Council approval is required prior to grant submission due to the City’s Grant Management Policy, which mandates governing body approval for certain grant applications.
The recommended concept aligns with neighborhood feedback, which favored lower-density, single-family homes over higher-density alternatives. Project Overview for Cherry Street Infill Redevelopment:
• Development of four single-family, factory-built modular homes on Cherry Street
• Each home is planned to be 3 bedrooms, 2 bathrooms, with basements and garages
• Homes constructed to Green Communities Standards and designed to be net-zero
• Homes targeted to households at 80%-115% AMI
• Partnership with Rice County Habitat for Humanity as builder (builder-only role)
• Down payment assistance and financial education administered through Three Rivers Community Action
Staff met with nearby residents on two occasions to review conceptual options for the Cherry Street and Linden Street parcels. While neighbors expressed general support for reinvestment in the area, they did not support redevelopment concepts that would introduce additional density beyond single-family homes. The proposed four-unit single-family design reflects this input.
Impact Funds awarded for the Cherry Street project will be used to help bridge the affordability gap between development costs and attainable purchase prices for households earning 80%-115% of Area Median Income (AMI). Eligible uses include gap financing to support construction of the four modular single-family homes, site preparation costs (including demolition and asbestos abatement), and private utility connections from the homes to existing public infrastructure. Based on current discussions with Minnesota Housing, the City anticipates applying for the maximum allowable funding of $440,000 ($110,000 per unit) under the program.
The Cherry Street redevelopment is located on a fully served infill site within an established neighborhood. Public streets and utilities are already in place, and no extension of public infrastructure is required. The project area is not yet subdivided; subdivision into four buildable lots will occur following demolition of an existing structure on the north portion of the property. The site’s compact dimensions and established context make it well suited for small-scale infill development supported by Impact Funds.
Impact Funds will help bridge the gap between rising construction costs and the incomes of local workforce households, supporting economic sustainability and employer workforce stability.
City Plans & Policies Relevance:
In 2024, the HRA acquired these parcels opportunistically to support future infill housing development in a neighborhood identified for reinvestment. The proposed redevelopment is aligned with the City’s Strategic Plan Priority 2: Increase Housing Availability and Priority 1: Improve Financial Strength, as well as the 2045 Comprehensive Plan goals related to infill development, equitable access to housing, and expanding affordable and workforce homeownership opportunities.
Impact Funds would significantly reduce the overall development cost, enhancing affordability for target-income households and supporting the City’s efforts to expand attainable homeownership options for the local workforce.
Alternative Options:
• City Council could choose not to authorize the application. The project financing gap would remain and the Cherry Street redevelopment would be delayed until alternative funding is secured.
• Council could direct staff to pursue alternative funding sources. Staff could evaluate other local, state, or federal funding programs; however, few programs are targeted to households at 80% - 115% AMI. Additionally, Northfield’s current new-construction market does not produce homes affordable to this income range without significant subsidy, making alternative funding sources limited.
• Council could choose to delay the application to next year’s Impact Fund round. Staff could prepare a more comprehensive redevelopment plan for both Linden Street and Cherry Street before applying.
• Hold the property and explore higher-density redevelopment. Staff could evaluate additional infill or multifamily options; however, this direction is not supported by neighbors based on previous engagement.
Financial Impacts:
The grant does not create an ongoing financial obligation for the City beyond standard grant administration. Funding received will be appropriated following Council acceptance per the Grant Management Policy.
Tentative Timelines:
Council Action for Grant Submission July 7, 2026
Grant Application Due July 9, 2026
Grant Award Notice November 2026