Federal tax credits are misused on costly artist lofts in Twin Cities

The affordable housing shortage is at a crisis stage in the Twin Cities metro area and has been for some time. Waiting lists are long, and some have been closed for lack of available dwellings. Those waiting for housing are disproportionately people of color — in part because of one of the nation's worst income equality gaps.

That's why a report from the University of Minnesota's Institute on Metropolitan Opportunity is so troubling, with its findings that precious federal tax credits originally intended for low-income housing instead have gone to costly rehabs of historic buildings housing mostly white artists. Lobbyists in 2008 got artists' lofts exempted from the requirement to use affordable housing tax credits for the general public, kicking off a boom in such housing.

There's public good in saving architecturally significant buildings such as Minneapolis' Pillsbury A-Mill or St. Paul's Schmidt Brewery. And, clearly, art has intrinsic value for a community, and artists typically enhance the value of the places they occupy. But artists are not the only ones who enjoy hardwood floors, exposed brick, yoga studios, rooftop fire pits, free Wi-Fi and skyline views — amenities, by the way, seldom found in nonartist affordable housing complexes. Such developments also tend to be located in what's called high-opportunity areas — nicer neighborhoods that might otherwise resist low-income housing.

In other words, these projects represent the very cream of affordable housing. And, according to data supplied by the Minnesota Housing Finance Agency, their tenant populations range from 80 to 92 percent white. In a state with some of the worst racial inequities in the country, it's hard to understand why more was not done to ensure more diverse populations. Affordable housing developments in the Twin Cities typically house 70 percent people of color.

Government officials have a responsibility to make sure that developments done at taxpayer expense do not worsen de facto segregation.

The fact is that artist housing is in high demand. Developers need to do little to fill their buildings beyond putting the word out in the artistic community. Tenant screening committees, along with requirements for portfolios and reservation fees, can be used to ensure that only serious artists are allowed in, but these also can serve as unintentional obstacles. Prospective tenants at the Carleton Artist Lofts in St. Paul, for example, must be prepared to put down a $500 deposit and a $45 fee, demonstrate an ongoing commitment to the arts, and document income no higher than $36,000 for a single occupant. If they qualify, rent is capped at $945 for a one-bedroom apartment — the upper end of affordability for many low-income workers.

Diversity aside, there is another disconcerting aspect to such developments. They are expensive. And in a region that is so far behind on meeting the need for low-income housing, it verges on irresponsible to squander federal housing tax credits on projects that benefit so few.

In St. Paul, the waiting list for affordable housing stands at 3,500 and has been closed since September 2015, when it was open for one week. According to the website, there is no target date for when it will reopen.

The Institute on Metropolitan Opportunity has calculated that for the $460 million spent on just four artist-loft developments in Minneapolis and St. Paul, the government could have purchased 1,600 single-family homes in Minnetonka or created 6,000 units of more typical affordable housing.

Going forward, officials should take steps to ensure that the choicest affordable housing in the region is also racially diverse. This area is not lacking in artists of color. Even more important, officials have an obligation to the thousands of families desperate for affordable housing, particularly in high-opportunity neighborhoods.

Gov. Mark Dayton and the Legislature took some steps to address racial inequality during the last session. Even more valuable would be a serious commitment — at every level of government — to better affordable housing that does not add to racial inequities and that is used for maximum benefit.