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DMC aims to foster affordable housing.

Byline: William Morris

If Rochester is to meet the ambitious goals of its Destination Medical Center redevelopment initiative, it's going to need more, and more affordable, housing.

Housing costs are rising rapidly in the southern Minnesota city, as officials heard Thursday at the quarterly meeting of the Destination Medical Center Corp. board of directors. That could prove to be an obstacle as the board tries to hit its ambitious 20-year goal of $5.5 billion in new development and tens of thousands of additional jobs, and put huge burdens on current residents as housing costs balloon rapidly beyond what many can afford to pay.

Olmsted County Housing Director Dave Dunn told board members that the median sale price for homes has jumped from $189,000 in 2015 to $254,000 in 2018. Today, a buyer making $75,000 a year, enough to afford the mortgage on a $250,000 home, would find only 43 homes for sale at that price point or below anywhere in Olmsted County, he said. The median household income in the county is about $70,000.

"If you have less than that, homeownership is very difficult," he said.

For low-income renters, the need is intense and getting worse, Dunn said. As of November, Rochester had 1,771 subsidized housing units. Only nine were vacant.

"When we talk about the vacancy rates, especially for the affordable housing in our community, they're still incredibly low," he said.

Board members spent much of the meeting grappling with their options to address this challenge. Although the statute creating the Destination Medical Center Corp. does not mention affordable housing directly, it authorizes a number of public infrastructure tools and investments that the board has employed in the past to support market-rate projects in the downtown district around Mayo Clinic, said Kathleen Lamb, an attorney for the corporation.

"The overriding goal of the statute is economic development," she said. "When you drill down into that, you quickly get to jobs, and when you get to jobs, you quickly get to housing and being able to attract the people that you want for the economic development you are pursuing."

Even more than direct investment, the board can also have a role to play in collaboration with other groups working on the issue. Steve Borchardt, director of the Rochester Area Housing Coalition, said his group, backed by Mayo Clinic, has invested millions in creating and preserving affordable housing. Now it's in talks to create a dedicated investment fund as a vehicle for additional projects.

"It's become clear in the past year that straight-up philanthropy is probably not a reliable and sustainable long-term resource for the creation of affordable housing," he said. "The market can't access people that are making less than [area median income] for for-sale product, or making less than 60%, 65% for rental product. We have to be more intentional and purposeful about making it happen."

The board is also looking at encouraging affordable housing in projects it is specifically involved in, such as the proposed "transit villages" on either end of a planned bus rapid transit circulator route. In another proposal, the city and Destination Medical Center EDA are partnering to build affordable or mixed-income housing atop a new downtown parking ramp. A request for proposals on that project was posted in January, with proposals due back in June.

But it will take lots of work and creativity to meet the full scope of the region's affordable housing needs, board chair R.T. Rybak said, and he invited Dunn, Borchardt and other housing officials to continue working with the Destination Medical Center Corp. on additional avenues of partnership.

"This is not an issue we want to drop into for one meeting and drop out of," he said. "We're going to be in this for a long time and want to be a partner on this."

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Publication:Finance and Commerce
Date:May 23, 2019
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