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MN Housing Needs Take State and Federal Support

May 07, 2014 By Lee Egerstrom, Economic Development Fellow

As the Minnesota Legislature finishes work on a state bonding bill that will include increased funds for housing programs, a fresh look at rural Minnesota housing needs reveals just how dependent many communities are on both state and federal housing programs.

“There really hasn’t been any housing construction in our small towns without (either state or federal) programs,” said Jenny Larson, community development director for Three Rivers Community Action Program that operates housing programs in small communities throughout southeastern Minnesota.

This is an observation made and repeated throughout the state. Minnesota 2020 teamed with the Minnesota Housing Partnership earlier this year for a report on the Uneven Recovery from the housing crash and Great Recession of 2008-2009. Big city neighborhoods, suburban and exurban areas around central cities, and northern Minnesota communities have pretty consistent stories of construction inaction to tell even though the housing crash affected communities differently.

Except for some specific and fortunate neighborhoods, most areas of Minnesota are still waiting for a “recovery” to start. This is especially true of small towns, said Three Rivers CAP’s Larson.

Community Action Program personnel around the state and local housing officials need to access every program available to help keep senior and low-income people in affordable and safe housing, she added. For instance, one fairly small program from the USDA Rural Development housing programs helps people “winterize” and rehab homes. Larson’s office helps about 50 people with winterizing and rehabbing work each year.

The House version of the state bonding bill would provide $100 million in state bonding authority to back up local housing efforts. Of that amount, $20 million would be to help rehabilitation efforts to keep properties safe and in use.

Although all involve helping make housing affordable, federal programs through USDA Rural Development and state programs operated through funding from the Minnesota Housing Finance Authority and other agencies are not redundant, said Colleen Landkamer, Minnesota state director of Rural Development.

Rather, they compliment each other, she said. That is among reasons why USDA Rural Development has an informational meeting on Friday at Fergus Falls with west-central and northwestern area housing officials. A similar meeting is planned later at Winona.

Three Rivers Community Action Program is a prime example of how local groups work with appropriate state and federal agencies to keep roofs over rural people’s heads. In recent years, Larson said, her group has accessed state and federal funds and loan guarantees to help build 199 units of new rental housing, 244 units were preserved under these programs, 101 new single-family homes were built, 29 homes were renovated and resold, and 126 homebuyers were helped with down payment assistance in 20 southeastern counties.

Elsewhere, communities along the I-90 corridor have had an uptick in manufacturing plant development and expansion in the past year to 18 months. The increased jobs are welcome, but community leaders say that has also tightened markets for scarce housing stock in and around their communities.

Better jobs in manufacturing put pressure on market rate properties. Left behind are low-cost properties that need work to continue as rural residencies for seniors, disabled and lower income families.

A year ago, rural community advocates were worried that Congress would either fail to extend rural housing programs in the federal farm bill or severely cut back on these programs that are crucial for home ownership and rental properties in rural areas. Rural Minnesota appears to have survived that battle for the present.

In an annual Progress Report for 2013, USDA Rural Development’s Minnesota office noted that $605 million in loans, grants and loan guarantees were provided to rural Minnesota communities in the past year.

Single-family guaranteed loans made through local banks and mortgage bankers accounted for $575.3 million of that amount. Another $13.2 million were provided in direct home loans to qualified people, and $15.7 million were provided for rural rental housing. About $1.1 million were provided in housing preservation and rural home repair loans and grants.

Vital to communities that Larson’s service agency serves are ongoing rural rental properties that USDA Rural Development manages. In 2013, the annual report noted, the USDA agency had 600 multi-family properties under management that provided 11,000 housing unites in small towns.

“The USDA property is the only rental property in a lot of our small towns,” Larson said.

Meanwhile, getting Minnesota’s housing market back on track is important in all 87 counties regardless whether impacted communities qualify for various federal and state programs.

State programs can operate where USDA can’t, given differences in programs and qualifications. But the shared importance for local and state economies was noted in a recent statement from Landkamer citing data from the National Association of Realtors.

The sale of an existing medium-priced home generates more than $58,000 in additional economic activity from real estate services, home appliances, furniture, landscaping and related investments.

This is why all Minnesotans need a recovery in the housing markets. This is why Minnesota lawmakers are readying bonding bills to help make it happen.

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  • William Pappas says:

    May 13, 2014 at 5:47 am

    The recent Great Recession, still dragging on Minnesota’s economy, coalesced many social and economic trends to permanently depress our state’s housing market and stock.  A sharp decrease in the number of farms and an increase in their size has accelerated the ongoing deterioration of rural communities once vibrant with a farm economy.  While farm production and income in terms of dollars has increased, the money is ending up in the pockets of fewer and more absent owners creating fewer economic opportunities for small business.  This impacts the housing market in a number of negative ways.  Meanwhile, new entrants into the housing market, specifically young college educated graduates, must delay their home buying due to the accumulation of loans and debt to get a degree.  Some estimates are that it could impact when first homes are purchased by 7 or 8 years.  Add to this the stagnation of income from middle class jobs and real damage is done to Minnesota’s housing situation.