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Duluth housing ventures vie for credits

The Dubin-Guru Group proposes to rehab the Board of Trade Building at 307 W. First St., creating 54 units of housing. --- Clint Austin / caustin@duluthnews.com

Four proposed local apartment building projects have entered the running for low-income housing tax credits, and all the would-be developers for those properties will seek support from the Duluth City Council on Monday. Plus, a fifth request will be made for tax credits to maintain 39 units of affordable housing in an existing building in the city, Washington Studios.

Combined, the projects could inject nearly $57 million into the city and add up to 180 new units to the city's drum-tight rental housing market. Duluth's most recent Housing Indicator Report showed a local rental vacancy rate of just 3.3 percent in 2015, and the Minnesota Department of Employment and Economic Development lowered that figure to an estimated 3.1 percent in 2016.

Keith Hamre, Duluth's director of planning and construction services, described the large level of interest in housing tax credits this year as "exciting" at a Thursday night City Council meeting.

One Roof Community Housing will bring two proposals to the table: one for the 53-unit Brewery Creek development at the intersection of Sixth Avenue East and East Fourth Street across from a Whole Foods Co-op store and another for a 42-unit Decker Dwellings development next door to Schneiderman's Furniture store off Decker Road.

Meanwhile, the Dubin-Guru Group proposes to rehab the Board of Trade Building at 307 W. First St., creating 54 units of housing. And developer Grant Carlson aims to bring 31 units of affordable housing to the old St. Louis County Jail at 521 W. Second St.

In addition to the new projects being proposed, the owner/manager of another pre-existing rental housing property in Duluth will seek support from the MHFA. Art Space is requesting about $4.3 million in housing finance tax credits to help preserve 39 units of housing at Washington Studios to assist with $11.4 million of reinvestment.

One Roof is seeking about $8.7 million in tax credit financing from the Minnesota Housing Finance Agency to support the Decker project, which is expected to cost more than $10 million to complete.

At Brewery Creek, One Roof will ask the MHFA for nearly $11 million in tax credit financing to support what's expected to be a $17.7 million development with commercial space on the ground floor. Jeff Corey, One Roof's executive director, said the proposed project represents just the first phase of what could be a larger development. About one-third of the available building lot would remain to accommodate future expansion.

Hamre referred to both of One Roof's applications as "very strong" but noted the projects will face stiff statewide competition, as they seek 9 percent credits to fund a greater share of the development costs.

However, the other three requests are for more modest 4 percent housing tax credits.

"Four percent (requests) in the past have not been competitive. They've pretty much been an open pipeline with the state," Hamre said.

While Hamre suspects that will remain the case, he said much could depend on how many such requests the MHFA receives from other communities.

The Dubin-Guru Group's request is for $1.5 million in housing tax credit financing to assist with an anticipated $8 million overhaul of the Board of Trade Building, converting much of the structure from office to dwelling space.

Carlson seeks about $3.8 million in MHFA tax credits to revamp the old county jail as affordable housing, a project expected to cost about $9.7 million. The development would draw its name from Daniel Burnham, designer of Duluth's Civic Center Plaza.

While Duluth will go up against other communities for funding, the city appears poised to make a strong case that it faces a local housing shortage.

Maxfield Research & Consulting LLC conducted a market analysis in 2014 and predicted Duluth would need an additional 4,470 units of housing by 2020.

And the need for more affordable housing in Duluth is particularly acute.

The average tenant household in Duluth earned about $21,400 per year in 2015, according to the city's latest Housing Indicator Report. The U.S. Department of Housing and Urban Development considers households that devote more than 30 percent of their incomes to rental costs rent-burdened. It follows that the average rental household would ideally spend no more than $535 per month on housing. But rentals at that price point are in short supply, considering the average rent charged in Duluth was more than $850 per month in 2015.

For MHFA purposes, income qualifications for reduced-cost units are determined as a percentage of what's called the area median income (AMI). In Duluth, the AMI is $30,000 for a one-person household; $34,320 for a two-person household; and $42,840 for a four-person household.

At the Board of Trade property, 34 of the 54 rental units would be offered at reduced rates to households that make no more than 60 percent of the area median income.

At Brewery Creek, 42 of the 53 units would be income-restricted, with half of those for households making no more than 60 percent AMI and the other half for no more than 50 percent AMI. Four of the income-restricted units would be designated as permanent supportive housing for homeless individuals. One Roof also would like to build four units to serve people with disabilities.

At the Decker Road development, 13 units would be offered at 60 percent AMI, 21 units at 50 percent AMI and 8 units at 30 percent AMI. Four of those units would be reserved to provide supportive housing for homeless individuals, and four units would also be set up to accommodate people with disabilities.

And at the Burnham, all 31 units would be for people making 60 percent AMI.

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