Itasca Project report lays blueprint for more Twin Cities area housing

Industry, government and nonprofit partners have a plan to economically accelerate housing production in the Twin Cities area to fill one of the largest availability and affordability gaps in the country.

The problem has been around for more than a dozen years. Now, there is consensus that the region must accelerate production to 18,000 units annually of owner-owned and rental units through 2030.

"It's a crisis," said Collin Barr, executive with developer Ryan Companies and volunteer chair of the Itasca Project's housing innovation and affordability task forces.

"We are losing workforce to other big markets because of better availability of housing, including my hometown of Denver, Colorado," he said. "More supply. More affordable. It's important for business and community leaders to pay attention. We're starting to get traction."

This also is an opportunity to grow the local workforce and our economy.

Barr and other industry, government and developer stakeholders last year started to study the problem through Federal Reserve, government and industry data. The recommended solutions are in Itasca Project's recently released Housing Innovation Report.

The Itasca Project is an employer-led, 80-member alliance that seeks "new and better" ways to improve economic competitiveness in the Twin Cities. People who have adequate housing at the cost of 30% or less of household incomes are happier workers and citizens.

Gov. Tim Walz's $1 billion-plus legislative initiative over the next two years for housing infrastructure bonds also would provide income-based rental assistance, targeted financial incentives, veterans housing and restoration of the historic building tax credit to accelerate construction and renovation.

"That's historic and will leverage billions in private sector investment and greases the wheel on production," said Deidre Schmidt, an Itasca task force member who heads CommonBond Communities, the area's largest developer-manager of affordable housing. "The Itasca study really connected the realities of production and assigned numbers and made the economic growth connection to the region's prosperity in a clear and transparent way. We must invest. Not just government. Developers and builders, business and welcoming communities."

The Itasca housing work group's "most promising" innovations include: assembling and preparing large parcels of land for more multifamily housing near transit and transport corridors; reduced costs with more modular, factory-built housing components that are less expensive than build-on-site "stick-built" traditional housing. And lower costs with lower property taxes on affordable housing, standardized local regulations and reduced parking requirements.

The Itasca study calls on government to provide low-cost land for development, shorten the permitting process and increase rental assistance for working poor. The Met Council says public agencies own 13,000 acres of land along existing or planned transit lines. And Itasca wants the private sector to invest in low-cost, long-term capital in housing, such as the $750 million invested by Microsoft in Seattle.

"Stable and affordable housing is the foundation for business and economic growth as well as a host of other positive individual and systemic outcomes," the Itasca task force concluded. "Increasing housing production and improving housing affordability will benefit families, firms and the entire MSP region for generations."

Project for Pride in Living (PPL) expects to break ground this year on a $50 million-plus residential-commercial complex at Nicollet Avenue and Lake Street of 110 apartments for households that make as little as 30%, or $35,500, of the Twin Cities median household income of $118,200 in 2022, according to Metropolitan Council. It will include a small-business center and a new Wells Fargo branch. It will replace the Wells Fargo complex destroyed after the police killing of George Floyd in 2020.

This would be the largest development since the riots in several Minneapolis-St. Paul commercial corridors in May 2020.

The Legislature is expected to drop the property tax on affordable housing from 0.75% to 0.25% of market value as part of the housing package. The tax on market-rate housing averages 1.75%.

"Property tax decreases for PPL alone and 1,600 affordable units would free up $1 million in operating costs annually," said Paul Williams, the organization's CEO and also an Itasca task force member.

PPL projects that it will lose $800,000 in 2023, mainly because people can't keep up with the rent, he said.

"Everything costs more, including energy, security and insurance. Property taxes are up 70 percent over six years," Williams said. "I run an annual deficit in services budget for people at lowest level. Anybody who owns and manages affordable housing is struggling financially.''

The GroundBreak Coalition of 40 corporate, civic and philanthropic leaders is focused on mobilizing $2 billion in flexible, patient private and philanthropic capital targeted at closing long-standing racial disparities by targeting racial minority growth in homeownership, rental housing, commercial development and small business.