Affordable housing crunch begins to hurt job and business prospects in Twin Cities suburbs

A lack of affordable housing and the labor shortage now throttling the growth plans of suburban-based employers such as FedEx, Shutterfly Inc. and Amazon.com are closely linked, and need to be addressed together if the Twin Cities metro region is to avoid risking the loss of those jobs.

That was the sobering message delivered by business leaders and workforce experts to an audience of suburban civic leaders, housing advocates and others this week at an annual housing summit conducted by the Minnesota chapter of the Urban Land Institute and the Regional Council of Mayors.

With a metro-wide shortfall of more than 114,000 workers expected by 2020, according to the Greater MSP economic development partnership, employers seeking lower-skilled laborers such as warehouse workers are already feeling the crunch.

The panelists warned that if suburban cities can't overcome their reluctance about allowing affordable housing, and companies aren't more proactive in working with local governments, the result could be the loss of major employers.

Bill Goins, a worldwide account manager for FedEx and chairman of a statewide freight industry group that advises the Minnesota Department of Transportation, said his company is typical of what big employers are facing in the Twin Cities.

"We've grown from 150 local employees to 4,000, and we see the opportunity for that number to go up," he said. "But one of the big concerns we hear is, 'Where is the housing for our employees?' In a lot of cases our employees are right out of high school or young, college-age workers. Affordable housing is very, very important for them."

That dynamic is especially apparent in Shakopee, where Shutterfy and Amazon.com have created thousands of jobs in the past few years and are looking to add more.

But they are being frustrated by the lack of affordable housing in the suburb, forcing them to shuttle workers in from areas where the labor supply is available, such as Minneapolis' Cedar Riverside neighborhood. Many of those workers are Somali immigrants who can't afford to provide their own transportation for the daily 55-mile round trip.

"Much of our business is done in November and December, and so we have a huge dependence on a seasonal workforce," said Jamie Riddle, senior director of manufacturing operation for Shutterfly's Shakopee facility. "We really saw the stress of the labor market in 2016. We needed around 700 seasonal workers. We got them, but we had a 40 percent turnover rate. We had to pay hundreds of thousands of dollars in transportation costs to get them to Shakopee."

The need to shuttle in workers was in large part because of the lack of new affordable housing development in the city.

Market-rate apartment developers are making their presence felt there. For instance, Doran Cos. this month announced it would build more than 600 luxury apartments next to Canterbury Park; Sand Cos. is planning as many as 300 market-rate units at Southbridge Crossing; and Kami Inc. is set to construct a 130-unit building adjacent to the city's new Hy-Vee grocery.

But the only recently approved project with rents affordable to workers making less than $20 per hour is the Sarazin Street Flats, a 57-unit building from St. Paul-based MWF Properties slated for a spot near a Target store; an additional second phase of 46 units is possible. The proposal passed the Shakopee City Council in October with a bare 3-2 majority and its construction is dependent upon obtaining state housing tax credits.

The same developer pitched a similar affordable-housing project in 2015 that was soundly defeated by the council, despite the strong support of former Shakopee Mayor Brad Tabke, who is credited with helping to lure the big employers to the city. He told the ULI group that his decision to form an economic development consulting firm in his post-political life was informed by that setback.

"My goal now is to try to learn from the massive failure I had in communicating the importance of housing then, and to get cities and employers to work together to move the needle on this issue," he said.

Don Jacobson is a freelance writer based in St. Paul. He is the former editor of the Minneapolis-St. Paul Real Estate Journal.