New company building modular homes on vacant lots in north Minneapolis

A Twin Cities start-up construction company is launching an effort to fill hundreds of vacant lots in north Minneapolis — remnants of the city's predatory lending and foreclosure crisis — with factory-built homes that will be made and sold for far less than the cost of an average new house today.

"This is what we've been trying to do for five years," said Cherie Shoquist, a project manager for the city's planning and economic development department, lauding the plan as a solution to a long-term problem.

Smart Homes, a private company that's associated with Fridley-based minority-owned Thor Construction Co., broke ground Thursday on a model house — a four-bedroom bungalow at 43rd and Irving Avs. N. that will have 1,800 square feet of living space and a garage. The company is ready to start construction on another 15 lots, and the company expects to continue to acquire sites as demand dictates.

The project is the brainchild of Ravi Norman, CEO of Thor, which recently announced plans to build a $30 million retail/office complex in the heart of north Minneapolis. Smart Homes is temporarily housed at Thor's Fridley headquarters and is owned by Norman and veteran Thor construction manager Gary Findell.

Although Thor will provide some support, the houses will be built in a factory in Detroit Lakes by Dynamic Homes and delivered to the site in sections.

Anderson Mitchell will be the project manager for Thor. He's a North Side resident who also was an independent contractor in north Minneapolis for 12 years and has built and refurbished housing for Habitat for Humanity and other developers.

"I came [to Thor] to do Smart Homes," Mitchell said. "We need homeowners. A lot of the crime comes out of single-family rental housing owned by slumlords. Their market is the lowest type of renter. I've lived through that with somebody next door as a North Side resident."

Findell said Smart Homes developed its model homes by working with urban-design architects and taking the layout to Dynamic Homes.

"We asked them to 'modularize' it and deliver an urban-looking house that looks like the others being built in these neighborhoods," he said. "Modular housing has to meet the same standards and building codes as any other structure."

The North Side bore the brunt of the predatory lending and subsequent foreclosure crisis. Hundreds of houses that were abandoned because their owners stopped paying the mortgage or taxes were eventually demolished to eliminate the blight that comes with having a vacant and neglected house on the block. Many blocks are now pockmarked with several vacant lots.

At a time when demand for new housing in Minneapolis has never been stronger, the city has been trying to find a way to develop about 350 lots that it owns. Because it costs more to build than buyers are willing — or able — to pay, the private market wasn't able to step in and develop the lots.

Several years ago, the city launched its own initiative, the Green Homes North, to help boost house prices and increase homeownership in an area with one of the highest percentage of renters.

The program has built dozens of energy-efficient houses, but with a significant subsidy. Recently, Twin Cities-based Alatus Corp. started building market-rate houses with all the bells and whistles of an upscale suburban subdivision in its Parkside at Humboldt Greenway development, which are selling for $300,000 and up. So far, about a half-dozen houses have sold.

Shoquist said Smart Homes has its roots in a work group assembled to help come up with a solution to the trouble with the vacant lots. The goal, she said, was to increase affordable housing opportunities, support minority contractors and developers, and build and keep wealth in the communities where those vacant lots are located.

"The Smart Homes model is an excellent example of what the city is looking for," she said.

Because land prices are lower in north Minneapolis, the Parkside houses are still a bargain compared with what buyers pay in a typical suburban subdivision. With labor and materials in high demand, construction costs are on the rise. The average price of a new home on the Builders Association of the Twin Cities Parade of Homes this spring was $591,000.

Modular construction trims about 25 percent off the cost of building a new home, Mitchell said, and a whole house can built in 45 to 60 days.

"We can operate much more efficiently using modular construction," he says. "We can realize a significant savings in the time needed to build a house because the framing of the house in the factory can start at the same time we start the foundation work on site."

The modular process also results in much less material waste. All houses will include a detached garage — one- or two-car, depending on the pricing of the house — and the houses will be highly customizable, including cabinet styles, countertops, appliances, floor coverings and exterior siding and trim colors.

The houses will also have built-in smart technology to monitor security cameras at the front and rear doors, and remote-controlled thermostats, lighting and garage door openers, controlled by smartphone apps.

Special financing and down payment assistance is also available for those whose annual income totals no more than 115 percent of the median income (AMI) for the metro area. Right now, that's $98,670.

Norman said that aside from boosting homeownership in the area, he's hopeful that one day the modular model might be imported by building a factory in the city.

"The longer vision would be that could we get a plant that could be in north Minneapolis," he said. "It could be a wonderful job-creation tool."

Staff writer Neal St. Anthony contributed to this report.

Jim Buchta • 612-673-7376