Edina considers allowing developers to buy their way out of affordable-housing obligations

As Edina booms with new construction of luxury apartments and teardown McMansions, officials worry that lower- and middle-income workers will be priced out of the city even more than they are now.

Currently, more than 96 percent of Edina's 23,000 housing units are considered unaffordable for a four-person family making $43,000 a year or less. City leaders fear that Edina's teachers, cops, firefighters and medical workers won't be able to live in the city they serve, and that jobs may go away if workers can't find housing nearby.

To address the issue, the city is considering adopting an affordable-housing policy with an unusual twist: allowing developers to buy their way out of building affordable housing.

It may sound backward. But the idea is that collecting hefty fees from developers of luxury housing will allow the city to build a pool of cash that it can use to create affordable housing elsewhere in the city, either on its own or in partnership with other developers or nonprofits. The City Council is expected to discuss the idea at its Tuesday meeting. The city currently has no affordable-housing policy.

"One of the things that people who don't live in Edina may not realize is that we have a pretty diverse housing base," said City Council Member Kevin Staunton. "We have multimillion-dollar homes, but we also have a lot of neighborhoods that have modest postwar ramblers.

"In recent years we're starting to have redevelopment that's included a lot of multi-family housing in the Southdale area. As we're doing that, I think we'd like to mix in affordable housing as part of that."

Critics say that the policy would let developers off the hook, building luxury towers while the city "corralled" low-income residents into projects. The city's Human Rights and Relations Commission recently passed a resolution opposing the use of payments in lieu of affordable housing. The East Edina Housing Foundation, which drafted the city's proposed policy, originally opposed the fee option but added it to the proposal at the request of the City Council.

City officials said the fees could make possible a range of policies that would help both single-family homeowners and apartment dwellers. The proposed policy would require that any project receiving a concession from the city — a rezoning or variance, for example — must affordably price 10 percent of its units. That would mean $975 monthly rent on a two-bedroom apartment, or $300,000 for a two-bedroom home.

Developers could avoid that obligation by paying a fee of about $220,000 for each affordable unit not built. On a 100-unit apartment or condo complex, that would yield $2.2 million toward the creation or preservation of affordable housing somewhere else in the city.

Staunton said the fee system could be used to expand a small program currently in use involving land trusts for single-family homes. In a land trust program, a nonprofit group buys the land under a home and holds it in trust. The buyer pays only for the physical home structure, helping to keep costs down.

The fee system has been used elsewhere in the United States, but not in the Twin Cities area, several housing experts said. It can be an effective way to boost affordable housing if the fees are put in a designated trust fund.

"If it is not earmarked, it stands a chance of being pirated" for other community needs, said Harold Simon, executive director of the National Housing Institute in Montclair, N.J. "There has to be a safeguard to make sure the money that comes in is used for affordable housing."

Simon said such programs run the risk of concentrating lower-income residents in certain areas of a city — the failed model of so many postwar U.S. housing projects.

"It's a segregation model," he said. "It's saying, 'Low-income people, you live here. Together.' "

The fee system is "a sensible thing to do, if you do it thoughtfully," said Rick Jacobus, principal of Street Level Advisors, an affordable-housing consultant in Oakland, Calif. But spending the money is as important as collecting it, he added.

"Some cities fail to spend the money," he said. "It can be difficult to find sites for affordable housing, and there also can be opposition to building affordable housing — NIMBYism."

John Reinan • 612-673-7402