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Duluth to invest $19 million to boost affordable housing

The city has issued a request for proposals.

FileGarfieldSquareC3.jpg
The 50-unit Garfield Square apartment building at the intersection of Superior Street and Garfield and Piedmont avenues nears completion in December 2019. The development provides low-cost affordable housing to its residents. Steve Kuchera / File / Duluth News Tribune

Duluth has set aside $19.2 million in federal COVID-19 relief funds to promote the development of more affordable housing in the city. And on Tuesday, it issued a request for proposals, with the aim of helping to fund up to four projects in the next couple years.

The timeline is an ambitious one, as senior housing planner Jason Hale freely acknowledged.

The city seeks to have development proposals in hand by Jan. 30 and finalists selected in February.

Hale said would-be developers will have about eight weeks to gain site control for the projects they propose.

Developments funded through the RFP process are to be completed by May 31, 2024.

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The American Rescue Plan Act requires that federal COVID-19 relief funds be committed before the end of 2024 and expended by no later than 2026.

“With these sorts of projects, things can fall through. It happens all the time,” Hale said.

“So, we really want to give ourselves some margin in the event that one or more of the selected proposals has hiccup or site control falls through or whatever, then we can go back to other proposals and use all the dollars we received,” said Hale, noting that if Duluth is unable to adhere to the federal guidelines, it could run a very real risk of losing valuable one-time funding.

Hale said Duluth is looking for established developers with proven track records.

“Because of the timeline and because of this one-time opportunity, we really want folks who have done these kinds of projects before and who know what they’re doing and can adapt, because invariably these types of projects have bumps in the road. And we can’t really afford to put something on the back burner for 18 months,” he said.

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Hale said he could see mixed-income projects, with some apartments offered for rent at market rates and at least 20% of the remaining units offered at reduced rates, affordable for households making no more than 50% of the area median income. He could also see other other completely low-income affordable developments making use of 4% housing tax credits.
“So, the 4% would result in more affordable units. But it is reliant on Minnesota Housing’s tax credit process, in a situation where time is of the essence,” Hale said.

If Duluth offers support to such a project that doesn’t receive low-income housing credits, Hale said the city needs to have a backup plan. By the same token, however, he noted that having locally dedicated federal funds committed to a project could boost the odds of obtaining additional support from another organization, such as the Minnesota Housing Finance Agency.

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“When the MHFA reviews projects, they like to see local support and having local buy-in helps,” Hale said.

Some housing projects that are already in the works could be candidates for funding.

“One of the other buckets for allocations of the $19 million is to help bring down rents. That’s the fastest way possible to provide additional affordable housing units, as opposed to waiting for two years, realistically, by the time a new project gets built,” Hale said.

Qualifying projects can be located in economically disadvantaged census tracts that extend into Duluth’s Hillside, Lincoln Park, Chester Park and Kenwood neighborhoods. But Hale said other sites may be eligible, so long as it can be demonstrated that the site and neighborhood were negatively impacted by the COVID-19 pandemic.

The city’s request for proposals, where further details are available, can be viewed at duluthmn.gov/media/12377/rfp-for-mixed-income-multi-family-developments.pdf .

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