Entrepreneur talks housing, business

By Robert Williams

Editor

As an owner of multiple businesses in Frazee, along with being a member of the Economic Development Authority (EDA), Heath Peterson has a front row seat to the business and housing climate in town.

Having been a heavily-involved for a decade-and-a-half, Peterson has been a part of the uphill climb from the subprime mortgage crisis to the pandemic.

“It seems like we’ve been fighting the same thing for a long time,” he said. “Back in 2007, when I first came to town there was absolutely nothing going on. The housing market had crashed. Everybody was worried about Red Willow and how that was going. I think for new housing we haven’t done too bad. We seem to get one or two-a-year and to be honest, that’s kind of the way it goes. What I’m seeing, especially in a post-COVID world, is that inflation and budgeting has made home ownership something that is going to take longer to do. Unless Frazee wants to get progressive and open up the rental markets I don’t see us growing.”

Peterson and other EDA members want to push forward with affordable housing, something he says has gotten a bad reputation by name alone. Frazee is also limited by its rental unit density ordinance, which states no more than 10 percent of the lots on any block shall be eligible to obtain a rental unit registration, unless a temporary rental unit registration is granted by the city council.

“For example, Red Willow Heights,” said Peterson. “We had a developer come to us and say we want to put twin homes in, but if we can’t sell them we want to be able to rent them out until we can sell them. The City of Frazee comes back and says you can only do that for two years. What if they can’t sell in two years? The developer doesn’t want to fight that fight. We’re not going to build them then because that’s too much of a risk. Why do we have that rule? Just say the house needs to be marketed and be done with it. Let’s make Frazee an inviting town, instead of a we don’t want you here town. I think Ken Miosek (former Mayor) said it best when the density ordinance passed. Basically, what you’re saying is we don’t want you here in Frazee and that was hard for me.”

Peterson cited other small towns in the region and their use of affordable housing in expanding their populations, thus providing more customers for local businesses.

“Look at Perham, behind McDonald’s there, those apartments are full and filled,” said Peterson. “My feeling is we need to hire a professional firm to come in and just say here are the ideas and let’s get a select group of people together and make it work.”

Peterson is not shy about his opinions on the activity of recent city councils and the current group. He wants to see a communal effort to make the necessary changes to improve the climates for both housing and business here.

“The biggest problem I see is I listen to this council member and this council member and it’s always, ‘These people don’t want this and these other people don’t want this,’ and if you go with that instead of what’s best for Frazee nothing is ever going to change.”

Peterson is also not short on ideas and has put those visions into action. He purchased The Baldwin building that will become the new pub downtown.

“We’ve got the coffee shop and the Gobbler coming, so there is some excitement,” he said.

The pub is a smaller example of what Peterson says Frazee needs and that is teamwork.

“Until everybody gets on the same page it’s going to be hard to make a real difference,” he said.

With two new businesses opening soon, one across the street and one down the block from the major retail investment that was made, there is reason for excitement in hopefully finding some neighbors for Seip Drug.

“I’ve told people with the retail development space, at least it’s gotten people excited to where we are filling some of these other empty buildings,” Peterson said.

Frazee has plenty of room downtown for more business, something neighbor towns, like Vergas, would be very envious of. Vergas is scrambling to locate any space for more business, basically the exact opposite problem of what is happening in Frazee.

“We’re capable of so much more,” he said. “That’s the hard part after the 16 years I’ve been in town. There is so much potential.”

There is also the continuing mystery of what is going on at the former Hostel Hornet, where rumors of a once revived restaurant have been replaced with rumors of overwhelming costs needed to bring the building up to code. Either way, having that spot not be a part of the downtown business district is another Frazee issue.

“When you have a corner space that’s closed, that’s tough,” Peterson said.

Part of the problem here is a marketing issue. Peterson found success in Frazee, but also knows what happens when you try to open a business in a town and it simply does not work out. He recently closed his grocery store in Osakis at the end of 2023 for just such a reason. He’s seen others try to come to Frazee only to leave for similar reasons.

“It’s not like Frazee, for some reason, when I came to town and I fit in and it worked,” he said. “There’s been a lot of people that have come to town that basically, they got pushed out. Brad and Amber Bender are prime examples. They would have made a huge difference in Frazee, but it was, we don’t want you here. I heard a council member say the other day, ‘People don’t want to move to Frazee.’ I don’t believe that. I think we’re preventing people from moving to Frazee.”

Other business owners are joining the fight with Peterson to enact change. Dan Pifher opened D&K Designs on West Main last year and Karen Pifher’s Creating Community Consulting has joined the EDA in an effort to push the Frazee sales pitch, something Pifher and her team are great at doing.

“She’s very good at bringing people together,” said Peterson. “I look at what she has done with CornerStone. What she’s done behind the scenes on a lot of things.”

Frazee also suffers from a geographic position. The town sits mere miles from the Otter Tail County (OTC) line. There is a big difference when it comes to housing markets on either side of that line. Much of that success for the county south has been because of their Big Build program.

The Big Build initiative brought continued housing growth to OTC in 2023. Last year, over $100 million in housing investment was added in the county from 491 new and rehabbed housing units, 410 of these being new construction and 81 being rehabbed units.

The success in 2023 is progress toward The Big Build’s goal of 5,000 new or significantly rehabbed homes by 2025. Since launching the initiative, 51 percent of that goal has been completed. More homes are still needed to meet demand and achieve the big goal.

The Otter Tail County Community Development Agency (CDA) launched The Big Build at the end of 2019 as a housing growth and investment initiative. The initiative was created because the expansion of housing opportunities is a countywide priority to address workforce needs and existing residents’ needs. 

With more than 1,000 available jobs in the county right now, increasing the housing supply will help meet the needs of newcomers filling these job openings and existing residents seeking more suitable housing options.

“We are seeing the success of partnerships for housing investment in Otter Tail County, even in the changing and more difficult market for development,” said Otter Tail County Board Chair and CDA Board Member Kurt Mortenson. “We want to make sure housing partners making these investments know that the county can be additive and supportive with resources, financial and otherwise.”

A strong need for housing remains even with the investments to date, and the CDA can provide support and resources to housing projects in Otter Tail County. Programs available to support homeowners, homebuilders, rental property owners, developers, and cities include:

• Property Tax Rebate Program

• Down Payment Assistance

• Emergency Housing Repair

• Residential Owner-Occupied Loans 

• Rental Rehabilitation Loans

• Multi-Family New Construction Loans

• Community Growth Partnership Grants

Meanwhile in Becker County, there is no county-wide initiative for innovation. There are plenty of low-income assistance plans and many affordable housing units that are very strict when it comes to who can live where. It is not a solution for growth, more of a fix for now.

“You have to look at the economics you are in,” said Peterson. “We are the second lowest county in the state of Minnesota for income. We don’t have money in Becker County. You look at the apartment buildings that Perham is putting up. They just keep putting them up. Otter Tail County and even Perham, to me, are doing a much better job than Becker County and Detroit Lakes are.”

There are other large-scale affordable housing projects going on in the OTC, like a 60-unit development in New York Mills and a 58-unit expansion in Park Rapids (Hubbard County).

Peterson cited the well-known limitations of government being involved in any project, but both Hubbard and Otter Tail Counties are shining examples of providing the base that has helped affordable housing find roots.

“It’s one thing you learn when you’re in EDA,” said Peterson. “The pace that the government goes and the pace that entrepreneurs go are two different things. You have to learn to be a little patient. 

Peterson wants community members to speed that up and work together to bring more opportunities to Frazee and timeliness is as important as any other factor.

“We can come up with a solution that works for everybody but we have to be willing to do it,” he said. “You better be ahead of it, not behind it, because you’re just going to have people moving to DL or Perham because we don’t have housing.”

Unlike some towns, Frazee has the space.

“If you look at the Red Willow ordinances and the covenants that were established; I lived in Red Willow for about five years. It says, point blank, that the front spot is for apartments, multi-unit housing. That is where you get your teachers to stay in town, which would be huge. That’s where you could get your families who commute between Perham and Detroit Lakes but want to live in the center so they can each go both ways.”

Peterson knows how fortunate Frazee is to have the schools here. He also knows there is an unfortunate relationship between current landlords and the city. Keeping the former and fixing the latter are part of the way forward.

“Get involved with business downtown,” he said. “We’re fighting for that school. We know if that school goes, that’s even more than the grocery store. If that school goes we’re done. Sometimes you’ve got to look at yourself in the mirror and say, ‘What am I doing wrong?’ I do it all the time because I’ve made mistakes. We all make mistakes but are we man enough to admit them and fix them? It’s my way or the highway type of thing right now. We need to look at what is best for Frazee?”