 Lakeland Public Television presents Currents. And welcome to Lakeland Currents. I'm Bethany Wesley. Tonight, we focus our spotlight on housing. More specifically, we will be discussing a growing need in outstate Minnesota for the development of more workforce housing. While you may occasionally hear about the need for some job growth throughout greater Minnesota, in some cities the jobs are there, or could be there. But the companies that are wanting to expand or establish themselves there are reluctant to do so because there is not enough middle-income housing for would-be employees. So what exactly is workforce housing, and why is there a shortage of it? To answer these questions and to discuss potential solutions, tonight we welcome to the program Dan Dorman, the Executive Director of the Greater Minnesota Partnership, and Tim Flathers, the Executive Director of the Headwaters Regional Development Commission. Welcome. Welcome back. Thanks, Bethany. Thank you for having us. As we get started, why don't you tell us a little bit about what Greater Minnesota Partnership is? Greater Minnesota Partnership is an advocacy organization that works on economic development issues in Greater Minnesota for Greater Minnesota. So our goal and our mission is to try to create better jobs, improve job quality, improve the quality of life, helping to build tax-based, vital cities, vibrant cities, but exclusively in Greater Minnesota. One thing that we noticed that the metropolitan area, just because of that's where everybody's at, you're all herded up together, easier to organize, they have a stronger voice at the capitol, so our job is to try to make sure Greater Minnesota doesn't get lost in the hubbub and the mix, and so we advocate again for Greater Minnesota economic development programs. Tim, our viewers hopefully will recognize you from an earlier appearance, but tell us a little bit about what the HRDC's role is with housing specifically. Well, housing is an issue that is pretty broad within our organization, and we're really interested in meeting housing needs of communities throughout the region. It includes development of housing. We've focused on affordable housing principally. We have a non-profit subsidiary corporation that does housing development work. We also provide staff support to a couple, or three right now, housing and redevelopment authorities, and we do things such as housing rehabilitation work, down payment assistance, and trying to make sure that people have access to affordable mortgage financing products, particularly on the home ownership side. So we do a variety of different things in the area of housing. And will you remind our viewers, if you'd be so kind, in terms of what your footprint is, in terms of what the HRDC manages? Yeah, the HRDC Regional Development Commission serves five counties. We're headquartered here in Bemidji. We go down to Park Rapids and serve Harbour County, and then west we go to Clearwater County and Minoamon County, and then north Lake of the Woods County. So we serve Badat, for example. Okay. All right, so as we turn our attention to workforce housing, Dan, can you tell us, how do you define workforce housing? How does it differ from, let's say, low-income housing? I think Bethany, the easiest way to think about it is middle-earners. And if you think about, like, specific jobs, it isn't about low-income, like, food manufacturing workers or something, because there's already programs for that. But it could be anyone from a beginning nurse, beginning teacher, or, of course, the manufacturing jobs, kind of that pay range of maybe $15 to $25 an hour right there. You make too much to qualify for low-income stuff. But for some reason that I really can't explain, the market isn't responding like it should in creating, in this case, what we're advocating for is more rental housing that will lead to single-family home ownership. But it's about making sure that there's a housing supply available for those people when those jobs are created. And it's an issue, it's a growing issue as you mentioned earlier in almost all parts of Greater Minnesota, from the southwest corner to the northeast, northwest, central Minnesota, it is a, like I said, it's a growing deal. It's starting to hurt our economic development and job creation in these cities. And so we think it's important that the legislature take some action. Tax credit proposal, we think, would work, sort of copied it from our neighbors in North Dakota and Iowa. We cobbled something together, you know, better to, you know, not reinvent something, you know, steal an idea that seems to work. And we think it would really help these communities continue to grow and prosper. When did the issue really kind of start to emerge? When did you start to hear things from communities that said, you know, we really could use some more of this market rate or middle-income housing? From my perspective, we first started hearing about workforce housing back in the mid-90s and it became an issue. But I think the characteristic over the past few years, in my estimation anyway, we started to hear more and more about workforce housing for moderate-income people or higher-income people. I don't think that's a traditional part of the issue. The market's being broken, I think, is a new twist on a very old problem that we've had. I live in Albert Lee and it's funny to say the mid-90s, because that's when it started to become an issue there. It started to talk about it, you know, form committees and how are we going to do this? And our local communities really don't have the tools they need to respond to it. But I would agree with what Tim said. So there it was more, maybe rehabilitation, low income. That seems to have worked its way through in many communities, but it's that, you know, you don't make enough, you know, you don't make $50 an hour, but you've got that, again, that new teacher or new technician. They're having a hard time finding quality place to live. And what does that do? Well, it becomes a competitive issue. Well, why do I want to live in this community? I want a decent place to live and raise my family. And so we think that it's an important issue to be solved. But I would say it started in some ways in the mid-90s, but really over the last probably 10 years, that middle income has really grown in importance and the legislature so far hasn't reacted. You know, there's always that lag, right? It makes some sense, but it's really on the forefront. The state is very active in housing. We've spent roughly almost $100 million a year in primarily low income stuff. So the state does have an active role and plays an active role in housing. In a lot of ways, we think this is just an area that needs some attention. Tell me a little bit about how widespread the issue is. We talk a lot about rural or out-state or greater Minnesota. Is it throughout all those areas? Are there pockets of it that are experiencing more than others? You know, I think there definitely is. I think when you look at, you know, the news lately, Thief River Falls and the possible expansion by Digi-Key, they've got a problem. Roso, down in my neck of the woods, both Albert Lee and Austin, you know, the interesting thing, the city manager from Austin was in St. Paul this week to testify on behalf of our bill. They haven't built a market rate apartment building in Austin, right, home or formal, haven't built a market rate apartment building in 45 years. And it is getting to be a problem for them. So we hear it, you know, there. It's maybe not quite the same issue, even though they have different housing issues in communities like St. Claude Rochester, Mankato. They probably have some different issues, but still an issue for them as well. There are some pockets in the metropolitan area that would say they have needs, but it's really different because in the metropolitan area, they have seen growth in this area. People are building apartments. And, you know, the one thing that I think makes the case for state investment is if you think about other state investments in the metropolitan area, it's really helped their housing market. You look at the light rail, the green line light rail or the proposed southwest light rail corridor, when that was being talked about. I remember there was an article in the Star Tribune, and there was a big fight going on over, you know, what kind of housing was, might create too much high income, not enough of low income and all this. And I'm thinking, you know, what a good problem to have, right? We don't have those mega investments by the state that help create housing in greater Minnesota. And I think one of the reasons that we're advocating makes sense and would bring some equity to the distribution of state resources. So as I was preparing for this, you know, you look at different articles and different research out there, and they said that there are businesses that want to expand or, you know, either relocate or expand, but they are hampered because there's not enough housing. You're hearing that repeatedly then. Right. And they're writing checks. You know, you look at Agco and Jackson, you look at Digi-Key, you look at Polaris. You try to help stimulate this. That's not occurring in the metropolitan area. There's another program that doesn't quite work like we'd like it to with maybe some help it could, but it's called a challenge grant program, right? And I was interested this week by the data sheet that was put out by the state and had all the projects on one side and what they did. And the last column was local investment and all of the corporations that had contributed to help do this were in greater Minnesota. All the metropolitan projects, because it's so much easier to do there, hadn't required that contribution. You know, sometimes I think that if those guys had to write checks to see this happen and probably get solved a lot sooner, but we'll deal with what we have to deal with and advance our cause and tell our story. And I think it's compelling and hopefully will result in greater economic development opportunities in greater Minnesota. Tim, in your conversations with the clients and the areas that you represent, have you heard similar concerns in terms of needing more of that middle income housing out there? Absolutely. First of all, I'd say when I have discussions in communities about housing, it's usually broader than just the workforce housing issue that we're describing. It's usually we have a lot of housing needs, including the workforce housing need as we're discussing it. One example I'd use is Black Duck because we've been having a lot of current conversation with them, but Anderson Fabrics, major employer, key critical employer not only wants to expand, they have been expanding, but unfortunately their expansion is taking place in Chicago. They're contracting for employment because they don't have the housing to support an expanding workforce. And like Dan suggested, they're a willing partner in trying to make something happen, but they're dealing in a pretty tough housing market at the same time. So we need to find ways including what we're talking about here to try to help Black Duck meet those needs. As you talk about this issue, I'm assuming you've talked with developers in terms of what would it take to get more development happening? How do they respond? What is the problem? Our chief author in the Senate is from Red Wing, Senator Gaggin. When I first met him, because he's new, met him this year, before I can even start going through the proposal, he said I know exactly what you're talking about, because I've got a couple of developers in our area that tell me they can build high-end stuff and they can build low-end stuff or affordable stuff because there's a lot of subsidies. What they can't figure out how to do is this middle-income stuff, because whether it's financing, there's a whole lot of reasons that seem to have broken the market. And I wish it was different, it just isn't. So yeah, that's what it is. It's kind of that gap of what are the rents in the community? How does this translate into a performer to build a new apartment building? And it just isn't working out very well in greater Minnesota. You have some issues with if you build it, you go get the appraisal and you try to borrow money against it, the appraisals don't match what you're putting in like they would in the metropolitan area. So you have a problem with financing. There's a whole lot of problems. That's why we think that we've got a sort of a market-based solution, a tax credit program that would help address that. And we really believe that this doesn't have to be, I think we're going to be in the affordable or low-income business forever. We're always going to have to take care of that. We hope that after four or five years of a program like this, that the market starts to correct and say, hey, we can make money, we can cash flow these projects in greater Minnesota. So we're hoping this jump starts the market and doesn't need to become a permanent program. Do you hear concerns too about, I mean you talked about Black Duck in terms of these smaller or more rural cities that might just have one or two key employers, are they hesitant because there's always the chance they could pick up and relocate? There's no question about it, because if you think about it, if we all decide we're done with this, we're going to go form a housing corporation, we're going to go build apartments and lease them out. If we go to the Twin City metropolitan area or Rochester or St. Cloud, we're not dependent on one or two manufacturers. But when you're dependent on that one manufacturer, boy you hope you've got your eggs are in that same basket as theirs. That is another one of the concerns that developers have that I think is impeding some of the development. And it's not only the developers, the developers have to get financing, so you have to think about it from that standpoint too. So there's risk on both parts. And the risk is heightened if you run into that situation. In some ways it's got to almost sound almost like a good problem for communities to have. You have businesses that want to invest, that want to grow in your community, but they're being hampered. That's what you're hearing, that communities are losing out on potential. And they just don't have the tools available to them that even in the low-income area, say whatever city, black duck, but midgy, they could do a low-income TIF or tax increment financing package for I think up to 25 years to do a low-income project. They can't do that for workforce. And so there's a bill that we support to help change that to allow communities maybe more local tools. But that still isn't going to be enough to I think spur the kind of development that is really required. Tell us a little bit about what it is that you would like to see happen. Tell us a little bit about what the proposal is that you've really been trying to work with legislators on. It's a tax credit proposal. It is a 40% tax credit up to a million dollars per investor. Up to 2.8 million dollars a project. So we want to make sure there's more than just one project done. We don't want to see it get gobbled up one project a year. But really the ask isn't that large. It's 6.6 million this year. That's not going to fix the problem in one year. But it would be a good start. And so what would happen is the developer would apply for the credit. They'd get the credit, build the project, and then be able to take advantage of that tax credit. So we think it's also a good way to target this. Because sometimes there's been overproduction of low income units that you have a higher vacancy rate there than you might want to have. If you create that investment or the incentive for a developer, it's just an area where it's needed. Otherwise, even with that tax credit, it's not going to work out if there's not enough people there that will lease these new units. So we think our proposal will target this a little better as well. Are you finding support? It varies. Last year we did make it into the Senate tax bill. Not the final tax bill. It didn't get passed anyway. But after two years we finally got into there. It varies. I think that we've got some work to do with legislators because I think they hear what we're talking about and hear low income and then see all those dollars that are going there and figure, well, this is already being taken care of. So it is an education process to get the new people up to speed on it. But yeah, I'm optimistic that we're going to see something happen this year. There was a grant program that was started a couple years ago. We supported it. We thought there was going to be some issues surrounding the budget. So if you look at the project in Roso, I think the first year was like a $700,000 grant. They had to come back the next year and put in almost the same amount to make the project happen. So there are some issues in that program that could be worked out to make it work better. But we think our tax credit proposal would actually result in more units being built in a quicker fashion. Is it fair to say that when you're talking about this, you have to be really careful to make sure that you want resources like perhaps taking some away from low income housing, you know what I'm saying, to make sure you can get both? I'm pretty passionate about that because frankly I think from a state perspective we, this is a tool that's really, really needed, but we still have a really big need for affordable housing. I don't characterize it just as low income, but it's low and moderate income. But income assisted housing of some level is still needed in at least in the region that I serve, it's pretty universal. And so yeah, I do think we do want to be careful with that because this is all about an additional investment in housing in an area that has not been addressed in the past. But it shouldn't replace other things. I mean, you know, if you think about it probably the highest priority would be homeless people, right? I mean, it would be hard for me to say, oh no, don't do that and do this, right? And so it is, it's an additive, it's a need that we have, but I do think it's justified again because if you look at how the state influences the housing market, the metropolitan area we talked about, the light rail, Viking stadium, these things do create housing and we just don't have, because we're sort of located all over, right? We don't have that light rail, but we do have a good interstate system, we're trying to you know, improve that all the time as well and I should point out we've got those good roads and stuff, it's important to use those, drive safely on those roads, put that cell phone down when you're driving and obey the speed limits. I think that's important too, plugging that for a totally different reason. So, tell me, I know that some companies have really gotten kind of creative in terms of how they're going to stay, they don't want to leave these communities, I think is there one that's like busing people an hour or so to try to keep their employees going and so, you know, have you heard from companies that they really do want to be in rural Minnesota? I was just at a board meeting last night and one of my commissioners lives in Shevlin and he was talking about people in his community that are busing up to Thief River Falls and working at Digikey and you know, it's pretty successful and people are willing to do that because it's a good job opportunity and there's no housing available close by so they're, they want to be in their community anyway, but they don't really have an opportunity to move because there's just no opportunities for them. There's companies in the southwestern part of the state too that are running their own transit systems to bring people to work Mayo Clinic in fact does one, they run their own buses around that area to make sure they can get people to work but yeah, that's how, honestly, desperate but I mean, they don't want to do that right, they'd rather be spending their time and resources improving their business and selling more product and employing more people, but part of that for some of these companies has been transit systems and it's not an area and so again, we're not trying to take anything away from them, we're just trying to say, hey, we've got different needs and they need to be addressed. Each community has its own unique needs I'm sure as you guys hear repeatedly. Yeah, I think Tim was right that you know, it depends on where you go, it's a different mix, some areas need a lot of both, some areas need more of affordable than others, some people say, hey, we've got plenty of affordable but this middle income so I don't think it's a cookie cutter I think every town is almost different, there's not a one size fits all solution. Do you find that there's communities that exist that have some housing available, it's just not what they need so like the low income housing for example, they could live there but they don't meet those income requirements? Yeah, I can't speak specifically for this area, I live in Albert Lee and you know one way, we hear a lot from the school district, this is a problem and I know a guy that manages a section 8 building, it's a nice building down by the lake and he can always tell when the new teachers are in town because there's a knock on the door hey, you've signed me up, right? Well great, what do you do? I said, well just took a job at the school district, sorry you make too much money, so those units sit empty, it's not a high rate but there's always empty units there, they sit empty where you've got these other people saying, well maybe I don't want to move to this town maybe I want to go to the cities because I can live in a better apartment and that is happening it's a strange deal but it is happening and I think you can see more and more school districts start to talk about this, which is really different than what you think the mindset is underpaid factory workers this nefarious evil, it really isn't that, it's really people that are making a decent wage but they also want a decent place to live and who wouldn't, what's wrong with that? Let's talk about some of the tools that do exist, you referenced TIF earlier in terms of the way that it can be used to develop certain types of housing is there an option for housing development such as this? Not for market rate housing, it is for low income but the legislature restricts which always bothers me it seems like in full disclosure I'm a former state legislator and when we run for election, we're all in favor of local control, it seems like too many of us who get to St. Paul now want to control the locals so they do not let cities we've joined with the league of cities trying to change that, the coalition's a partner in it trying to make sure that we could use TIF but in the cities that I've talked to they're going to use it, no question about it but it isn't going to be enough in and of itself, so I think that would be a needed tool and it's local dollars there are no state dollars in TIF programs so you know why St. Paul restricts it that way is beyond me I think our communities are responsible if the city council says hey this is what we want to do and this is this makes sense for our community I have no idea where the state's standing in the way but that's a tough sell in St. Paul and why is it a tough sell? It's because I think some of the abuses that people have seen and they've occurred in the Metropolitan area well don't ring us up for that you know in fact one senator will go unnamed but this particular senator was originally against TIF for anybody but then kind of moderated their positions that you know I guess this does make sense in the Metropolitan area because you kind of sit down with them and have that conversation about it's a little different game out here again it's not the same as better, worse or anything it's just different and so you might need different tools in the Metropolitan area they've got different tools, we may need some different tools, there's nothing wrong with that Is that a big part of your process right now trying to educate in terms of the problem for metro based legislators? Absolutely and even the even the new greater Minnesota legislators because for some of them you know you're learning so many things there's LGA, other issues are flying at you transportation, what do all these things mean and you've got to try to figure this out, now somebody's over here talking about housing but you know we're spending all this money over here so yeah there's an education piece to it that's why we're there That's one of the reasons like that we're really interested in being part of the partnership is that we don't have the ability to be spending time in St. Paul we're four hours away and so it's just difficult and being a member of the partnership allows us to be part of a voice that's going to be heard because we don't necessarily think individually we're going to be heard very loudly at least and so it's been a good thing for us to be a member of a group of communities throughout the state that are engaged in these dialogues and willing to provide some leadership to try to get things done The Center for Rural Policy they were in St. Peter they came out with a report about four years ago who speaks for greater Minnesota the Capitol on these issues and at the end of the report said nobody they also didn't think anybody could do it it would be too hard to do what we're doing but we don't believe that we think we can get it done but one thing they noted in that was that you know the Metropolitan Area has their own organizations but also the statewide organizations and not again intentionally but are picking up a Metropolitan feel and Tim hit on one of the reasons right there's one organization that has a meeting right before session to put their priorities together it's an afternoon like a Friday afternoon typically in St. Paul you don't get people driving four or five hours to come down for a three-hour meeting right so who's in the room tends to be and I've been there tends to be people like if you do the dot and then draw the area unless there's a board member it's people that are within 75 miles of the Metropolitan Area right and that's a statewide organization but that's who's there at the meeting and that's what their priorities begin to pick up that Metropolitan feel even though it's unintentional and that's what that Center for Rural Policy report talked about was that you know somebody needs to be out there talking about hey don't forget us you know again it isn't it isn't we're not taking anything away from we're just trying to say hey like I don't think people in the Metropolitan Area wake up in the morning and say boy let's put the screws to those guys up in the midgie or that dormitory let's go you know make things hard for them it's just not top of mind because they've got their own stuff they're dealing with and it's just it's important it's important to get them to have that voice at the Capitol on a consistent basis. Do you have any idea in terms of what kind of number of units could be beneficial statewide I mean has there been any research into actual figures in terms of the stats in terms of how much could be used I think Minnesota Housing Finance would say you should have brought the brochure but as I recall it's about 6,000 units right now I mean today that they could fill them today if they were constructed so I mean there is a big that's why in one of the committees this week people were like well why don't you do this as well why don't you do this as well trying to help the bill right well just you know do some low or do some single family home stuff and another representative pointed out it's only 6 million dollars a year it's not you know this isn't going to solve all housing issues you know if you think of the scale we're talking about 6 million a year versus 100 million a year in low income again that's not bad I'm not saying take that money I'm just saying you think of the scale we can't solve that at 100 million dollars a year I'm not saying a big dent in it at even 6 million dollars a year the deed program I referenced earlier is only 2 million dollars a year and while nice it just isn't enough to really bend that curve very much Is the leg time concerning then in a way you know that the need is here now and even if you got funds yet this year it's going to take what two years to get them constructed and operational The nice thing and the one reason you know that we're trying to establish this program within deed or the department the other the big housing players Minnesota Housing Finance Agency and because of the nature of their programs they've got federal tax credits it's a much more complicated process but we were at a meeting in Thief River Falls with the League of Minnesota Cities Minnesota Chamber trying to understand the issue get more information and one of the cities talked about when they did a MFHA project it was a two year process the deed grant program they were able to get it spun around less than a year so that's one reason why we want to work with deed because we think that this is economic development not low-income housing and so deed seems to be much more responsive that's not a criticism I'm going to throw that in there so I don't get a bunch of angry people it's just different and it's a different need so hopefully it's not two years Are you feeling kind of confident at all? I mean do you feel like there might be a chance of success yet this year? I do I don't know I hope it's the whole six million that I don't feel as confident about but I think we're going to see some action we've seen growth each year that we've tried this first year we couldn't get any traction next thing you know we're in the senate tax bill so hopefully this is the year that we're able to push it over that end line and actually get it signed and go on I want to thank you both for joining me today thank you for tuning in if you'd like to learn more about the greater Minnesota partnership or this issue I encourage you to visit the website on the bottom of the screen thank you join me next time