The Edina Housing and Redevelopment Authority approved two changes to its multi-family affordable housing policy late last month.

The changes, which both have the goal of bolstering the city’s affordable housing offerings, were unanimously approved by the HRA March 25. One change decreases the cap on the sales price for affordability, making the definition of affordable for multi-family owner-occupied units narrower. The other change increases the buy-in amount for developers who choose not to build affordable units per the city’s requirement.

The city’s Housing Strategy Task Force recently completed its final report, which included an outline of Edina’s allocation in meeting the Metropolitan Council’s forecasted affordable housing demand by 2030. To meet the regional need, the city’s goal is to produce between 992 and 1,804 new affordable units within a decade.

Both recent changes to the multi-family affordable housing policy are meant to further the city’s progress on acquiring more affordable units, and thus, getting the city closer to meeting the Met Council’s goal.

Lowered price cap to meet affordability

Until the most recent changes, $425,000 was the most that could be charged in the sale of a condominium, co-op or similar unit that is dedicated for affordable, according to city policy.

But Stephanie Hawkinson, the city’s affordable housing development manager, said in an interview with the Sun Current that this number, especially for multi-family units, does not seem affordable, nor would it count toward the Met Council’s affordable housing goal. For an owner-occupied home, the Met Council defines affordable as $293,500, deemed within reasonable reach of a buyer earning 80% of the area median income, often referred to as AMI.

“It’s an important step because I think it was disingenuous to think that $425,000 was affordable for a condo or a co-op, I don’t think many people would deem that as affordable,” Hawkinson said. “We really, really needed to change it to have a policy that was truly affordable.”

Now, with the HRA approval, the city is in line with the Met Council’s designation for affordable for these types of units, she said. “Edina is not in a bubble,” Hawkinson observed. “We are part of a regional network. ... We need to look at our role within the region.”

The new policy would apply only to new developments.

Mayor Jim Hovland, who is chair of the HRA, asked how the lowered number would work realistically. “We’ll be hard-pressed to find anybody that can accomplish that,” he said. Hawkinson replied that a way to achieve this lowered cost could be through granting variance requests, parking reductions or in some cases, subsidies, for new development.

Increased developer buy-in cost

Per Edina’s multi-family affordable housing policy, in developments with 20 units or more, the developer must make at least 10% of the units affordable to renters who make 50% of AMI, or 20% of units should be affordable for renters who make 60% of AMI. This policy was approved in 2015. A few years later, the city added a buy-in option that allows developers to instead pay a sum of money to forgo the construction of affordable units.

Those buy-in funds would go toward the Affordable Housing Trust Fund, which furthers affordable housing goals in other ways, such as in providing single-family homes through the Homes Within Reach program or giving a subsidy to developers to build affordable units, Hawksinson said at the HRA meeting.

During that meeting, City Councilmember and HRA Commissioner James Pierce mentioned that the existence of a buy-in option could give the impression that the city is letting a developer “off-the-hook” in terms of building affordable units.

But he said it’s important to remind people that those funds do go toward furthering the city’s affordable housing goals.

Prior to the vote on March 25, the buy-in fee was $100,000 per unit. The newly approved fee is $125,000.

Hawkinson said there were multiple reasons for this change. Even with the increased amount, the buy-in fee is still lower than other metro-area cities like Bloomington, according to the March 25 presentation.

And, she noted, the cost of construction has been increasing, so for developers, the buy-in option was becoming more viable.

Increasing the buy-in cost should disincentivize use of the buy-in option and encourage developers to instead build the units themselves, Hawkinson said.

Bower Residences, which was approved in April 2018, used the buy-in option instead of building affordable units. This development contributed $1.86 million toward the city’s affordable housing fund as a result.

The developer for the Pentagon North site, which brought a site plan review to the Edina City Council in February, still hasn’t decided whether to include the affordable units or opt for the buy-in option per the affordable housing policy, said Curt Gunsbury of Solhem Companies, which is leading the project, located 4660 77th St. W. Gunsbury said it depends on the construction costs.

Smaller units that would fall into the 80% AMI range are already part of development plans, Gunsbury noted at the February City Council meeting. But this project would not be included in the new policy since the developer had already gone to the city with the sketch plan, Hawkinson said.

Hovland said he was concerned about the loss of developer interest as a result of an increased buy-in amount. “We might have ... developers deciding they’re just not going to develop in Edina,” he said.

“We (need to) make sure we’re not chasing off development. ... That has a dual effect. We lose the housing and we lose the opportunity to use the money on the buy-in.”

Hawkinson responded by letting the HRA know that some other metro-area cities do not offer a buy-in option at all, including St. Louis Park, Minneapolis and St. Paul.

Gunsbury said in determining whether to build a project in a particular city, different economic factors must be considered, but “adding cost to a project makes it less viable.”

“We want to continue encouraging development,” Hawkinson said. “But we want to make sure that including the units is a viable option to just buying in.”

And inclusionary housing policies only work in strong housing markets, Hawkinson said.

To ease concerns about possible implications of policy changes and to keep up Edina’s housing market, she noted that the policy is a “live document” that can always be changed in the future.

– Follow Caitlin Anderson on Twitter @EdinaSunCurrent

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