Vergas EDA/HRA discuss affordable housing with county officials

By Robert Williams

Editor

The Economic Development Authority (EDA)/ Housing Redevelopment Authority (HRA) discussed “affordable housing” with Otter Tail County Community Development Director Amy Baldwin and Commissioner Wayne Johnson during the monthly meeting on Tuesday, April 2.

Discussions were centered around the financial conundrum that is the Sunny Oakes Development and limited purchasing ability of qualified buyers and the limits that are set under the term “affordable housing.”

Affordable housing is defined in a tax-increment financing perspective for a household of four qualifying at $119,000 of household income. A household of two qualifies at approximately $107,000. According to a statement by Baldwin last year, that is what is considered “affordable” at the high end.

To qualify for bank financing, a couple or family needs to make at least $100,000, so essentially, anyone interested in a lot in the development has to somehow make more than $100,000, but less than $107,000 or $119,000. 

EDA/HRA Vice President and City Council Liaison noted that this situation has been uniquely created by the rental and home building markets, relative inflation and cost of building products and his question to Baldwin was how does the EDA/HRA deal with such tight parameters to actually sell one of the open lots.

“To speak specifically to the EDA/HRA lots on Eva and Dianne, those lots were obtained because they were tax forfeit lots under the provision in the state guidelines for tax forfeiture…for the purpose of affordable housing,” said Baldwin. “That is the restriction with those particular lots because that is how the HRA in Vergas was able to access those lots for $1. Affordable housing is really tricky. It’s one of our top priorities, trying to support, and it’s tricky for all those reasons you mentioned.”

Otter Tail County owns three Sunny Oaks lots that are planned for senior housing in the form of two triplexes, but is waiting on the legislature-approved funding to move ahead with adding to the neighborhood.

Baldwin noted that the county has been successful in other areas, like senior housing that was added in Battle Lake last year, along with a similar funding award that will allow the construction of senior housing in Pelican Rapids this fall.

Vergas will be eligible for similar funding in 2025. The city can apply for the Minnesota Housing funds on its own by July 2024 or as a partner with the county, but the county would wait until 2025 to apply after the Pelican Rapids project is in progress or nearly completed.

Affordable housing numbers are based on a statewide median income calculation and do change annually, typically in the summer. Last year, it rose by $5,000, so it may change in a few months but not by much.

The county recommended the income guidelines, but the EDA/HRA could determine their own numbers as there is no specific language in the tax forfeiture statute that defines exactly what affordable housing is when it relates to the purpose of affordable housing.

Should the EDA/HRA decide to change the affordable housing qualifying numbers, it will need to be defensible to the state.

Commissioner Johnson noted getting any assistance from the legislature to change the law regarding affordable housing this year would be difficult and there is also a chance of the act backfiring as perspectives on just what affordable housing is different in metropolitan areas, compared to rural areas, particularly in regards to tax forfeiture law changes.

In discussing Vergas’ ability to determine their own definition of affordable housing, assuming it meets the intent of the tax forfeiture statute, a standalone daycare facility project was raised, but that would not be allowed given the specific tax status of the properties and it not being constructed as affordable housing.

The most likely recommendation for the future is to pursue the same avenue of state funding that Battle Lake and Pelican Rapids did successfully.

Johnson provided another suggestion, building a city-owned apartment complex.

“The biggest challenge we have seen in our housing needs analysis and what is not being met at all by the private market are the entry-level, smaller scale, single-family homes and senior rental,” said Baldwin. “That is where we have put our effort and our cash and capacity to support those two particular housing products because they are so hard to build from our perspective.”

After a lengthy discussion that included local developer Josh Hanson, the EDA/HRA passed a resolution to revisit the income restrictions at the May meeting and to have the county apply for state funding and oversee the project in 2025.