Guest column: The magical world of affordable housing

By Hope Melton

Guest Columnist

A friend and I discussed affordable housing. She supports affordable housing, but only low density development (single family, duplexes, townhomes), and preferably no multifamily buildings near single-family neighborhoods. When I explained that high land and construction costs make affordable housing financially feasible only with higher levels of density, she responded, “I understand what you’re saying, but I can’t accept it.”

This is magical thinking about affordable housing. It goes like this: “We support affordable housing. We’ll preserve the affordable housing we have, including single-family homes, build new low density owner-occupied affordable housing, and turn the maintenance and management of our current, naturally occurring affordable housing over to non-profit developers. If we have to build a few multifamily rental apartments, we’ll keep them at Southdale or Pentagon Park. That will suffice. And if it doesn’t, folks who can’t afford Edina can go live elsewhere.”

The reality is that this approach will not get us anywhere near the Metropolitan Council’s updated forecast need for affordable housing in Edina — an additional 1220 units by 2030. We can only do that by using a full array of tools — some low-density models with a majority of multifamily buildings, using for-profit and non-profit developers, and all available funding sources. Here are the facts:

According to Homes Within Reach, the cost to preserve a moderate Edina home as affordable, by placing it into a land trust, costs about $350,000 per house. Conversely, Aeon was approved for a deferred loan for their multifamily development that amounts to $34,286 per unit – 10 units of affordable multifamily housing created for the same price it takes to preserve one affordable single family house.

Even with multifamily housing, the public cost per unit decreases with increased density due to fixed development costs such as land, demolition, and environmental remediation. A 20-unit building needs $200,325 per unit in public financing whereas an 80-unit building requires $59,938 per unit. Capping density at low levels increases the amount of public financing needed to develop the housing.

Preservation of naturally occurring affordable housing properties makes sense — but that alone is not enough. It is less expensive to preserve what we have rather than replacing it. It should be noted that the City is working to preserve naturally occurring affordable housing properties. Their web site advertises grants to property owners in exchange for keeping properties affordable.

Housing production is a very big-ticket item. Other advanced countries regard safe, stable housing as a core human need or public good (like health care and education) — and they fund public goods through progressive income tax policies. But we’re the land of the free market, so we turn funding and construction of affordable housing over to the private sector. That complicates the system and raises its costs.

Our federal government has cut funding for affordable housing since the mid-1980’s. The largest source of Federal funding for its production now comes through Low Income Housing Tax Credits with individual or corporate investors using the tax code by deducting their investment in housing development over ten years, and reducing their income tax liability. The IRS establishes guidelines, such as the minimum 15-year affordability period on new construction and substantial rehabilitation developments. There are other state, county, and local sources — Minnesota Housing, Metropolitan Council, Hennepin County, the city of Edina. A few private philanthropic entities may commit some capital or operating funds.

Bottom line: Funding for affordable housing is scarce, fragmented, highly competitive, and none of it is sufficient to the scale of need. No one is satisfied with the 15-year affordability limits and if the city can lengthen it, it will. Otherwise, the City of Edina is doing an excellent job with the resources at hand.

We cannot have it both ways — supporting affordable housing while denying the increased density, and the use of both for-profit and non-profit developers, that make it financially feasible. Also, past experience proves that concentrating affordable housing in isolation from residential neighborhoods reinforces the negative effects of segregation.

Finally, we cannot stand still in the face of population growth and a worsening affordable housing crisis. Let’s live up to our community values of equity and inclusiveness. Where there’s a will, there’s a way.

A former urban planner, Hope Melton serves as the coordinator for the Edina Neighbors for Affordable Housing.

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