Developers seek $73M from the state for The Heights
[Originally published by Finance & Commerce, written by Brian Johnson: View Source]
Twin Cities Habitat for Humanity plans to start construction on 147 affordable homeownership units in June at The Heights development on the East Side of St. Paul. (File rendering: LHB)
Sherman Associates and its development partners are asking state lawmakers for $73 million to close a funding gap for The Heights, a $450 million effort to bring more than 1,000 largely affordable homes to the former Hillcrest Golf Course site in St. Paul.
The development team — which includes Sherman, Twin Cities Habitat for Humanity and JO Companies — hopes to begin the first round of construction this spring on part of a 112-acre site at the southwest corner of Larpenteur Avenue and McKnight Road.
If all goes as planned, Twin Cities Habitat for Humanity will put hammer to nail on the first of its planned 147 affordable homeownership units in June, and Sherman and JO Companies will break ground on the first of a combined 899 multifamily units this fall.
But that timeline hinges on filling an approximately 17% funding gap, the partners say.
Johnny Opara, president and CEO of JO Companies, said the $73 million is “absolutely critical” to the development.
“Right now, we are at almost $40,000 a door in terms of funding we would need to fill that gap,” Opara said in an interview.
“It’s extremely rare to have 112 acres in the urban core, that’s going through remediation, to be set up for development,” Opara added. “I am confident that the state will recognize the importance of delivering housing that is affordable, that is high-quality, that is sustainable, that will help change lives.”
If the funding isn’t approved, “it would delay the timeline for various components” of the development, said Chris Sherman, president of Minneapolis-based Sherman Associates. “We would be back at the drawing board to identify pathways to fill our gap with public partners.”
Working collectively as The Heights Affordable Housing Partnership, the developers would use the $73 million to “reduce land and infrastructure costs and pay for predesign, design and construction of new housing” between 2024 and 2028, according to its legislative pitch.
The developers are looking to an already-approved funding source. In 2023, the state appropriated $1 billion for affordable housing, Minnesota’s largest-ever investment of that kind.
Finance & Commerce reported in May that the funding includes $792 million in fiscal year 2024 and about $274 million in fiscal year 2025 for housing construction, homeownership assistance and preservation of naturally occurring affordable housing.
Public assistance is moving forward on other fronts for The Heights.
In December, the St. Paul Housing and Redevelopment Authority authorized the establishment of three Tax Increment Financing Districts to support affordable housing at The Heights. The City Council approved the TIF District in January.
Other funding sources, along with the city, include Ramsey County, the Metropolitan Council, the federal government and private partners. The Saint Paul Port Authority, a partner in the development, hopes to bring 1,000 new jobs to the area with new industrial development at The Heights.
Citing research from the Minnesota Housing Partnership, Sherman and its partners note that 590,530 Minnesotans are “housing cost burdened, or at risk of needing to sacrifice basic needs like food and medicine to afford their home.”
What’s more, a city of St. Paul study reveals that 22.5% of renter households are paying more than 30% of monthly income for housing, which means they are “cost-burdened.” An additional 25% are paying more than 50%, which puts them in the “severely cost-burdened” category.
Twin Cities Habitat for Humanity’s role includes construction of 147 for-sale homes for income-qualifying households. Twenty-five percent will be for households at 30% to 60% of area median income, along with 50% at 61% to 80% AMI, and 25% at 81% to 100% AMI.
On the multifamily side, JO Companies is planning a 199-unit building with apartments ranging from studios to three-bedroom units. Twenty of the units will be affordable at 30% of AMI and the rest at 60% AMI.
Offering a mix of senior and workforce housing, Sherman Associates is proposing five multifamily buildings with 700 units in all. Ten percent of all units will be for households at 30% AMI, with other affordable units in the 50% to 60% AMI range.
Chris Coleman, president and CEO of Twin Cities Habitat for Humanity, said in a statement that the “investment from the State of Minnesota will provide the missing piece of funding to realize this once-in-a-generation redevelopment — bringing us one step closer to building a truly transformative community on the East Side of St. Paul.
“The Heights will be an ecosystem where up to 150 local families will have access to safe, stable, and affordable homes with Habitat. Residents will be able to build wealth through homeownership and pass it to the next generation, where children can grow and thrive. This development will allow us to turn the tide on our region’s affordable housing crisis and racial disparities in homeownership, and we are excited to build forward together.”