Olmsted County HRA approves $1.72M loan for affordable housing project

Yahoo

14-03-2025

Mar. 14—ROCHESTER — Olmsted County's Housing and Redevelopment Authority board approved an up to $1.72 million loan to support the creation of eight new for-sale homes priced under $350,000 in southeast Rochester.
Bigelow Homes proposed the project, dubbed Woodcrest, on the heels of a county-driven project on Red Hawk Drive Southeast , which created 10 homes with $251,900 price tags.
"The more we can prove that this product will sell and more developers do it, we are going to help the whole housing continuum," Bigelow Homes President Mike Paradise told the HRA board Thursday of building on efforts to produce homes for sale at less than $400,000.
With $2.4 million spent on construction of the Red Hawk Drive homes returning to the county as soon as the sales close, Olmsted County's Housing Program Manager Mark Engel said the funds will be added to $1.3 million remaining in an HRA program designed to help spur housing development.
Those are the funds that will be provided as a zero-interest loan for the new Bigelow project near the intersection of 15th Street Southeast and 24th Avenue.
The goal is to continue testing the housing market and determine whether such loans could be a long-term model to help produce needed housing as the HRA maintains its efforts to support various avenues toward more affordable housing.
The proposal calls for development of an agreement that will require Bigelow Homes to build a mix of homes priced between $336,000 and $348,000.
Two of the homes will be similar to split-level homes built on Red Hawk Drive and the other six will be ramblers with unfinished basements. A big difference is all the homes will be sold with ownership of the land, rather than putting it in the First Homes Community Land Trust to reduce the sales price.
County Commissioner Laurel Podulke-Smith questioned the ability to keep the homes affordable through future sales, which is considered an advantage when working with First Homes since all sales are income restricted.
Jennifer Woodford, president of Rochester Area Foundation, which includes the First Homes program, said she supports the effort, because it will meet a local housing need for residents above the First Home income requirement but earning less than what's needed to purchase a $500,000 home, which is what is most commonly built locally.
Paradise said his company has agreed to limit initial sales to people earning 120% of the area median income or less, which is similar to a program led by the city of Rochester.
He said the price range fills an affordability gap between renting and purchasing a $500,000 home while also opening opportunities to create movement in the housing market that could benefit others.
"The stronger the inventory we have in housing will actually lower prices," he said.
County Commissioner Bob Hopkins cast the sole vote against approving the loan, stating the housing is needed and the project appears valid, but he questions whether the decision should be made without seeking other proposals.
"I'm just not comfortable at this point," he said, noting he's the newest member of the HRA board composed of county commissioners and a resident representative.
Senior Assistant Olmsted County Attorney Tom Canan also raised concerns about the lack of a competitive loan process, but HRA Board Chairman Mark Thein pointed out that any developer could have brought a similar presentation to the county, and the nature of the loan means funds will be available for future projects if other builders come forward.
Since the funds aren't being depleted, Paradise, who is a member of the Coalition for Rochester Area Housing Board of Directors, said the Woodcrest project can serve as a test for broader use.
"I think it's important that we realize this might be a tool that other for-profit builders can use to build the housing we need," he said.
Engel said the Woodcrest loan will be designed to cover construction costs as work is being done, since Bigelow Homes already owns the property, which is prepared for development. It means Bigelow Homes won't see a financial benefit from the project until the homes are sold.
The financing agreement, however, will allow the company to build all the homes in succession, rather than waiting for financing between builds. It's an efficiency Engel said cut approximately $17,000 from the cost of the Red Hawk Homes.
The HRA plan calls for developing the required loan documents in time for construction to start in April or May. The homes would be listed for sale as early as May, which is expected to provide time for additional efficiencies in the process.
The first Woodcrest home is expected to be completed in August, with the remaining available as they are completed through November.