The Edina Housing and Redevelopment Authority opted to err on the side of caution last week when it rejected a proposed pilot program aimed at financially struggling homeowners.
Homeownership isn’t necessarily a marker of financial stability, Edina Affordable Housing Development Manager Stephanie Hawkinson told the HRA July 25. “So you’re thinking, ‘Yeah, is there a need in Edina?’” she said.
Various aid agencies in the area say yes, according to Hawkinson.
“When talking to VEAP, Senior Community Services, the Edina Resource Center, Meals on Wheels, the State Energy Assistance Program, we learned that there are people, homeowners in Edina, who are really living on the financial edge,” Hawkinson said.
She was proposing a grant agreement in which Edina would use $825,000 from the city’s Affordable Housing Trust Fund for the acquisition of four to six pieces of property. In partnership with the West Hennepin Affordable Housing Land Trust, the program would buy the land underneath the home in question. That money would then be used to address deferred maintenance, health and safety issues and unpaid mortgage bills.
The homeowner would continue living in the rehabilitated house, but retain only 35% of its equity.
“So over time, the house becomes increasingly affordable,” Hawkinson said.
Such an arrangement would give instant relief to people who lack the financial resources to maintain their home, she said.
“We are fearful there are some deferred maintenance issues going on in these homes. I had a call from a woman who thought she had to sell her home because a tree fell in her back yard and she didn’t have the $5,000 to pay for the removal,” Hawkinson said.
The HRA, however, opted to wait until a more detailed picture of the city’s affordable housing strategy develops – and until an ongoing housing study is completed – before investing $825,000 to preserve naturally affordable single-family homes.
“I think this is a really creative approach,” HRA Member Kevin Staunton said, “but my concern is, how does it fit together with everything else?”
Staunton pondered the opportunity cost of the program.
“Are we forgoing something else that might be more bang for the buck? Have we decided those priorities?” Staunton asked.
“It’s a fairly significant amount of money for a fairly few number of homes, units, but it’s long-term,” Hawkinson said. “It’s to keep these affordable not for 30 years, not for 15 years, but up to 99.”
Staunton and HRA Member Ron Anderson were skeptical there would be an adequate number of qualifying homeowners – those under enough financial duress to qualify but not so far underwater that available aid would be insufficient.
“That’s a pretty narrow pool,” Anderson said.
In outlining the need for aiding low- to moderate-income homeowners, Hawkinson noted the Edina School District has 800 students who receive free- or reduced-price lunches, an increase of 200 from five years ago. She added that 70-80 Edina residents receive help from Senior Community Services because they can’t afford to hire help for the jobs they can no longer do themselves. About half of those clients have incomes at or below 60% of the area median income.
To further illustrate her point, Hawkinson noted that 262 households in Edina were eligible for Energy Assistance benefits in 2018. The average household income among that group was $15,725, and 27% lived in single-family houses.
Hawkinson stopped short of unequivocally predicting success for the would-be affordable housing preservation program, but said anecdotal evidence suggests the existence of qualified and interested homeowners.
Testing the waters
“This is to try to address and see if there’s an appetite,” she said. “When I talked to those other nonprofits, they were like, ‘Yes, this would be great. Get a brochure, and we’ll market it. We have people coming all the time.’”
She admitted, though, that the owner wouldn’t get fair market value when they sold, “so it won’t be for everyone,” Hawkinson said.
HRA Member Michael Fischer asked how the city would avoid acting akin to predatory lenders who prey on the financially vulnerable. “We would have to be completely and utterly transparent,” Hawkinson responded. “Lay out the numbers, show them, have them sign off.”
Fischer questioned how a homeowner would be able to move forward and buy another home after such a transaction. But Hawkinson pointed out that the program would be used by people who otherwise would have to give up a home that’s already in disrepair, having to then rent somewhere else while retaining no equity whatsoever, she argued.
But considering how much the program would deplete a homeowner’s net worth, even if that money would be locked in equity anyway, the program’s proposed terms gave Anderson pause. The goal is a long-term solution, Anderson said, “but is it at the expense of the person who has the most trouble today?”
In pitching her plan, Hawkinson advocated for an open-minded approach to affordable housing.
“This seemed like a source where you could try out something to meet the goals,” she said. “I have heard in the year I’ve been here that we need to address single-family ownership affordability. And so, for a year I’ve been racking my brain trying to figure out how to address single-family ownership affordability.”
To achieve its goals, the city will have to eventually give an idea a chance, she said.
“I don’t know what the next best thing is, but it seems like we have to try and see what works, see what sticks. I mean, it has some legs. There is some history of this type of program working in Minneapolis, so it wasn’t completely out of thin air,” Hawkinson said.
“I applaud your creativity, and I agree,” Staunton told Hawkinson. “I think your job is to keep getting us opportunities to try.”
This proposal came with too much uncertainty for the HRA, however.
“I just think that there are a lot of unanswered questions,” HRA Member Jim Hovland said.
At the same time, the HRA didn’t rule out the prospect of a similar program being instituted in Edina one day.
“It really will be good to think this through and continue talking about it and learning about it, but it has just huge potential,” HRA Member Mary Brindle said.
“I don’t think this is an idea that’s going to die and go away,” Hovland said. “But I think we’ve got to make sure it fits within the broader spectrum.”
– Follow Andrew Wig on Twitter @EdinaSunCurrent