The roots of the housing shortage in northeastern Minnesota

Opinion editor’s note: Strib Voices publishes a mix of guest commentaries online and in print each day. To contribute, click here.

•••

From Duluth to Grand Marais, there is a growing recognition of a housing shortage afflicting northeastern Minnesota. With proximity to the Boundary Waters and picturesque views of Lake Superior, the natural splendors of northeastern Minnesota have made the region one of the most desirable places to live in America. In 2017, Mikkel Haas was one such individual attracted to the region.

“I lived in Grand Marais for five years,” Haas recalled. “I was a K-12 music teacher at the county school, met my wife there. She was a fourth- and fifth-grade teacher.”

As a full-time resident, finding housing in Grand Marais was a struggle for Haas. “There aren’t a lot of rentals there, and the rentals there are pretty expensive. That was always the hardest part of moving [to Grand Marais].”

In 2022, the high cost of housing was a consideration that saw the Haas family leave for Bemidji. “We just had our daughter, we were living in a one-bedroom home. Hopefully we could have a family of four but that would be out of our price range [in Grand Marais].”

According to Zillow, the median home price in Grand Marais has nearly doubled over the past decade, rising from $231,000 in 2016 to $404,000 at present — a 75% increase. Grand Marais is not unique in this regard: The median home price in Duluth has risen by 67% over the same period.

“The community is great — we loved living there a lot. The hiking, the nature, it’s kind of a double-edge blade for being further away from the Cities. The school was great, our coworkers were great. The biggest thing for us was the cost of living and lack of accessible child care,” Haas said.

“There’s nothing affordable for the working stiff, whether you have one child or two children there’s nothing for under $300,000,” said Sarah Hamilton, founder and CEO of Hamilton Habitat, a Grand Marais nonprofit that builds housing to sell at cost. “There just isn’t anything available — it doesn’t matter if you’re single or have a small family.”

For decades, Cook County residents have identified the cost of building as a primary factor behind the region’s housing shortage.

“Why is it so expensive to build [in northeastern Minnesota]? It’s government-driven; it’s planned exclusivity,” said Israel Malachi, a commercial developer based out of Duluth. In 2016, Malachi approached the city of Duluth with a proposal to build three single-family homes on an acre each. “What city doesn’t want that?” Malachi asked.

The problem? Malachi would have been required to spend $25 million to build a paved road in front of the three homes, a proposition that killed the development’s feasibility. Malachi proposed swapping his land for tax-forfeited properties suited to infill development. “Let’s get it on the tax roll, let’s do something,” he said. ”So [former Mayor Emily Larson] had her people look into it, and she gets back to me, ‘I’m sorry, the city has no interest in doing a deal like this.’ "

For developers like Malachi, there is a feeling of disconnect between cities’ words and actions. “Their stated objective has always been to have nice houses that bring in a lot of tax revenue that fit the zoning. The problem that we ran into is the disconnect. Nobody can see the full picture, everyone [at City Hall] is doing their job, and in their mind their job is to find a reason to say no.”

No matter where or what developers attempt to build, they can face strong opposition from established residents. One tool cities frequently use to mitigate opposition is elongating the development process and holding public meetings. The Gunflint Vue Apartments, Grand Marais’ first significant multifamily development since 1992, required 22 months of pre-construction process and eight public meetings before the project was allowed to break ground.

Mandatory public engagement meetings and long approval processes come at a high cost. “My process wasn’t that long, it was 8 [months] … and when I put a number to it — it was about $200,000, and that was without doing anything,” said Nick Ericson, a developer with deep ties to the region. Ericson recently proposed building a cottage home park in Duluth. “I had to drop it because the city [of Duluth] was offering contradictory things.”

“The neighbors didn’t want anyone there. Some people felt like, they truly believe, they own this property and it’s for them,” Ericson said. “What you’re really up against is that the people who are making the laws, making the decisions, they have a stake in the game. Either individually or professionally, they have a stake in the decisions.”

The problems that home developers face in Minnesota require system-level reforms to tackle. It remains to be seen whether municipalities possess the will to reform themselves, or if the cities with the greatest shortages of housing are content to wait for the Minnesota Legislature to act, however long that may take.

David Schafroth is a freelance journalist based out of Duluth.