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Duluth looks to launch trust to support more affordable housing

A resolution heading to the Duluth City Council Monday could be the first step.

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1 Roof Community Housing is building this house at 5810 Redruth Street as part of a program called Rebuild Duluth, designed to promote infill development, using tax-forfeited land. A sign fronting the project Thursday, Oct. 7, 2021, indicates it will be hitting the market soon. A proposed Hoursing Trust Fund for the city of Duluth also would work to increase density in existing residential neighborhoods and boost the supply of affordable housing. Jed Carlson / Superior Telegram

Duluth soon could gain a valuable new resource to help bolster the city’s supply of affordable housing, with the prospect of a sizable $2 million boost from an organization called LISC — short for the Local Initiatives Support Corp.

At a Thursday morning news conference, Mayor Emily Larson announced that on top of that money, she will seek to transfer $4 million from Duluth’s Community Investment Trust (CIT) fund to a proposed new Housing Trust Fund.

During her “State of the City” address earlier this year, Larson had proposed to launch the Housing Trust Fund with half the initial investment she now seeks.

“In Duluth, we are literally doubling down on housing. And this is exactly the lane that the city of Duluth needs to be in,” she said.

“From point to point, across our city, people are struggling. Employers are losing workers who can’t find the housing they need or can afford. Seniors are moving just barely outside our city limits — away from the city that they love and have raised their families in — to find housing that meets their needs for accessibility. Renters, homeowners, new community members, long-standing neighborhood residents, people of all ages, incomes and abilities, deserve more and better, and we are here to deliver,” Larson said.

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Another Rebuild Duluth remains in progress at 5410 Otsego St. on Thursday, Oct. 7, 2021. Jed Carlson / Superior Telegram

But Larson’s plans will rely on support from the Duluth City Council, which meets Monday to take up a proposed ordinance calling for the creation of a Housing Trust Fund. The ordinance will require a second reading on Oct. 25 before it can go to a vote.

The Council also will be asked that same night to approve Larson’s proposed transfer of $4 million from Duluth’s Community Investment Trust. The funds will be released only if Larson persuades at least seven of the Council’s nine sitting members to reinvest the money in a newly formed Housing Trust Fund.

Larson noted that a local 12-member task force met for months to discuss how best to meet the city’s need for more housing, especially at the lower end of the cost spectrum. Their top recommendation was that Duluth should create a Housing Trust Fund to provide assistance and foster the development of more affordable housing.

CIT rebound

Meanwhile, the city of Duluth is better positioned to tap its CIT fund than it was several years ago.

The CIT fund had been funded in large part through a revenue-sharing agreement with the Fond-du-Luth Casino, but that revenue stream dried up in 2009, when the Fond du Lac Band of Lake Superior Chippewa successfully challenged the legality of the arrangement, effectively closing the financial spigot. At its peak, the balance in Duluth’s Community Investment Trust fund was nearly $60 million.

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Gary Meader / gmeader@duluthnews.com

“Since then, the city used the funds to make debt payments on existing street improvement debt as well as paid for new street projects for a few years,” said Jennifer Carlson, Duluth’s finance director, explaining how the trust was depleted in the following years.

But Duluth stopped drawing down the CIT funds, after seeing the balance slip below $20 million in 2013, and Carlson said it was able to reverse the downward trend by investing the remaining funds with the State Board of Investment. As of the end of 2020, the CIT fund had grown to$30.58 million.

‘Amazing’ allies

The city of Duluth expects to draw on the support of what Larson called some “amazing leaders” and “allies” in the quest to develop more affordable housing.

Chief among these partners will be LISC.

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This home being built on a previously empty lot at 5810 Redruth St., as part of the Rebuild Duluth initiative, awaits siding on Thursday, Oct. 7, 2021. Jed Carlson / Superior Telegram

Larson announced Thursday that LISC is prepared to invest another $2 million in the housing trust, bringing the potential total nest egg for the fund to $6 million.

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“Duluth LISC has brought tens of millions of dollars into this community to support our neighborhoods and one another,” she said, calling it “a truly unbelievable ally and visionary organization in this work of community building.”

LISC Executive Director Pam Kramer served as an adviser to the mayor’s Housing Task Force and said: “For many of us, this feels like an it’s-been-a-long-time-coming moment.” She noted that many people have poured hours of time and energy into addressing Duluth’s housing needs.

“It’s really exciting to see their number one priority moving forward to help fill gaps in Duluth’s existing housing tools and resources,” she said.

Kramer said LISC’s support will be in the form of long-term committed loan resources which will seed other dollars.

“So, we will leverage additional grants and low-cost debt,” said Kramer, adding that LISC’s goal is to raise an additional $3 million, for a likely grand total of $9 million for the Housing Trust Fund.

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The property for this home at 5810 Redruth St. was provided free of charge through Duluth's Rebuild Duluth intiative. The program is designed to put idle tax-forfeited property back on the tax rolls, while also boosting the city's supply of affordable housing. On Thursday, Oct. 7, 2021, the home nears completion. Jed Carlson / Superior Telegram

At large City Councilor Zack Filipovich characterized the trust as a wise investment, saying: “People make our economy work, and people grow our tax base. So, let’s make that easier for folks to build a life in Duluth. And the Housing Trust Fund will help do that.”

“When I talk with local business leaders and entrepreneurs, I hear the single greatest challenge right now is finding a work force. And one of the biggest challenges for a potential work force in Duluth is finding an affordable place to call home and a place to live. The Housing Trust Fund is pro-business,” Filipovich said.

Jason Hale, Duluth’s senior housing planner, said the trust will provide low-interest and forgivable loans to developers who create housing considered affordable for households earning no more than 80% of the area median income. It will promote reuse of buildings and infill development throughout the city.

In order to provide sustained support for the trust, Filipovich has proposed a 0.933% increase in the local property tax levy, with the anticipated $325,000 in annual proceeds to be dedicated for the Housing Trust Fund

“That ensures the loan forgiveness and grant components do not eat into the principal amount,” Filipovich said, helping to sustain the fund for the long haul.

Related Topics: REAL ESTATE
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