Delta Airlines wants to hire 100 people to expand its facility on the Iron Range, but they don’t know where to house them. A dentist in Cook wants to hire a dental hygienist, but there’s nothing available nearby where this person can live. A man from Richfield wants to move to Duluth to retire but says the ads for affordable rooms to rent are mostly clickbait.
Local community leaders are quick to point out that this is a national problem. Nevertheless, the problem wears a different face in our various Northland communities. All agree that there is a serious housing shortage with widespread ramifications. What’s happening in Bayfield, however, is very different from the Iron Range. Here, we hope to shine a light on causes and potential solutions.
What does “Affordable Housing” mean?
“Affordable housing is not drug dealers,” said Duluth City Councilor Gary Anderson. “It’s kids fresh out of college looking for their first home and what I like to call ‘workforce housing.’” Stressing that semantics matter, Anderson asserted that language can lead to misunderstandings. “Affordable housing means housing that is affordable for recent grads, young families, working people trying to purchase a first home.”
Jill Keppers, executive director at HRA Duluth, provided this definition based on current Federal guidelines: “Affordable housing generally means that a person is not paying more than 30% of their income on their housing costs (rent + utilities). To differentiate between ‘affordable’ and ‘market rate,’ you could say that with market rate housing there is no rent subsidy attached to the unit. With affordable housing there is either rent subsidy attached to the unit, the unit is rent restricted due to a government or funding requirement, or it is ‘naturally occurring affordable housing’ (NOAH) which means the rent is affordable to a household whose gross income is at or below 80% of the area median income.”
No homes on the Range
Whitney Ridlon, community development representative with Iron Range Resources & Rehabilitation, said there is a need for housing of all kinds. “Housing means so many things. New construction, rehab, workforce, newlywed couple, multi-family units. Employers have a difficult time hiring because of the lack of housing. We continually hear from businesses who say this is a major issue.”
Ridlon said there’s some progress, but not like on the North Shore. “How do we get bus drivers to move to our communities if there is no housing? How do we make it easier for our people to access resources? The contractors I’ve spoken to are very busy. Construction is happening, but not at a fast enough pace where it’s needed.”
St. Louis County Community Development Manager Brad Gustafson agreed. “There’s lots of challenges. We need every kind of housing – low income, homeless, move up housing, senior housing. The cost of construction is so high now that it prices people out of the market. We’re having multiple meetings with regards to housing with all sorts of stakeholders to determine what can be done to spur development.”
Another problem Gustafson pointed out is the age of housing stock here. “Housing stock is really old in St Louis County and on the Iron Range.”
According to the 2021 State of the State Housing report, the Northland has some of the oldest housing stock in the state. “By 2019, 52% of all owner-occupied homes were built before 1970. Saint Louis County has the highest proportion of aging owner housing in the region, with 36,961, or 60%, of owner homes built prior to 1970.”
Difficulties in Duluth
Matt Baumgartner, president of the Duluth Area Chamber of Commerce, is keenly aware of the local housing crisis. “We know we need housing of different types. Workers have a variety of needs for housing. Workers within the hospitality industry have different housing needs than physicians, nurses or engineers. Therefore, we need housing of all types. Think of it as a housing ecosystem.”
According to the most current State of the City housing report for Duluth, housing prices have risen dramatically and the cost of renting has also jumped. In 2020, the median sale price for a house was $205,000. In a single year this jumped to $240,000. Average rent in this same period rose from $1,125 to $1,346. In light of this year’s property assessment increases, higher taxes will propel higher rents. At the same time, wages have not kept up with these rising costs.
Tom Henderson, treasurer of Lake Superior Area Realtors (LSAR), said there are other challenges on the housing front. “Realtors are having a hard time getting people into affordable housing,” he said. “First, there is a lack of land available. Also, banks want builders to pre-sell.”
Wisconsin woes
In May, Mayor Jim Paine acknowledged that Superior is likewise in a housing crisis. The crisis, he believes, is caused by “a combination of available housing inventory, high interest rates, lack of access to capital.” These factors, and not income, are primarily what’s keeping people out of houses.
Bayfield is battling a different kind of threat. “Bayfield is becoming a bedroom town rather than a hometown,” said Marieke van Donkersgoed, a realtor serving South Shore communities. “Little properties are being bought up and converted into Airbnbs and short-term rentals. We need workers. Without workers, you don’t have schools, the economy can’t function. Things are off kilter and it’s a real concern. I don’t want to see more of our small, beautiful homes go to investors who are not in our community.”
A multi-faceted dilemma
One local rental property owner expressed frustration regarding the spike in property taxes. “The No. 1 thing preventing affordable housing in St. Louis County,” he said, “is the greed on property taxes.” After detailing the increases on his various rental properties, including an empty lot that more than doubled, he said, “A man like me doesn’t like raising rents. When taxes go up this significantly, I have to pass it on. If a house needs a roof, I don’t pass that on. That’s my expense.”
Scott Zahorik, executive director of the Arrowhead Economic Opportunity Agency (AEOA), called the current situation “almost a perfect storm. The supply chain is horrible. The cost of everything is up on a daily basis. Staffing issues are a problem here, too. Local contractors are having the same problems. Everyone is looking for workers.”
Baumgartner said that “Duluth has long been negatively impacted by its reputation that it is difficult to do business with the city of Duluth when you’re going to build. That is both perception and reality. And through our research, it is a situation that dates back many decades. Fortunately, the chamber has partnered with the city with the shared goal of improving that process.”
For many, the obvious problem is Economics 101, a matter of supply and demand. We lack supply. Every effort to make it easier to increase housing supply is a step in the right direction, experts say. Unfortunately, a combination of market forces – the pandemic, inflation and rising interest rates – are contributing to the restricted supply.
According to rockethomes.com, home prices continue to rise at a heart-quickening pace. The median price on a house sold in Duluth in June this year was $250,000, an increase of nearly 20% over June 2021. Of the 160 homes that sold in June, 70% sold for more than their asking price.
The most current Duluth Housing Indicator Report stated that the need for additional housing, particularly affordable housing, has increased significantly over the past 10 years. The report noted that the average rent jumped 17.3% over the previous year. It will continue climbing as new property tax increases kick in.
Exploring solutions
When the Iron Range saw a growth in mining jobs, it was the mines themselves that built the city of Hibbing in order to house its much-needed workforce. Is this something that is no longer a possible consideration for the region’s larger employers who wish to expand?
One example of a non-governmental entity working on solutions to the Northland housing crisis is Habitat for Humanity. The mission of Habitat for Humanity is to help individuals and families in need of affordable housing. “A subsidized apartment is not a long-term solution for people,” said Nathan Thompson, executive director for the organization’s North St. Louis County branch. “We are the builder and the bank. We loan the money at zero interest. This is the piece that makes it affordable.” Since 1995 Habitat has placed 111 families in 15 different North St. Louis County communities from Cotton to Ely.
In response to complaints that zoning and land use policies have inhibited development, Theresa Bajda of Duluth’s Planning & Development arm, stated that the city has not been inflexible with regards to zoning. “There have been positive changes in the zoning code. The city has reduced the setbacks in order to enable the building of homes within some of the vacant 25-foot-wide lots. Houses can be built with a combined eight foot setback on the two sides. That could be four feet on each or three feet and five feet, which adds up to eight feet. This allows the building of pre-fab yard homes, tiny homes and accessory dwelling units.”
Bajda noted that there is a trend toward smaller footprint homes. In the Fairmont area, a Cottage Home Park is being planned. In addition, the state and city have adjusted codes to permit the use of modified shipping containers for housing. The city is also working with HRA to help homeowners rehab older homes.
In response to the permitting delays contractors complain about, Bajda said, “Permitting can be an involved process requiring many approvals and sometimes action by the planning commission and/or city council. City staff work diligently to work through the process and issue permits in a timely manner. If there are wetland, geotechnical, elevation or environmental concerns, for example, additional layers of review and requirements are likely present.”
In Duluth, Baumgartner detailed three areas for improvement the chamber has been working on with the city. One area is reducing the time for the entire process, from submitting plans to receiving permits to final occupancy. A second area is improving the overall relationship between the resident and the city, so that it is a partnership and not adversarial, particularly when people are taking a financial risk to build. The third area is aligning plan reviews, approvals and inspections. Key items like code issues can be interpreted differently, said Baumgartner, and a lack of consistency can result in frustrating, expensive changes late in the process.
Baumgartner said there is an incredible amount of interest – locally and from the outside – to invest in Duluth. “Investors that would typically look at the Twin Cities have shifted their focus to Duluth. This is due to a number of factors including transformational development in the medical district, investments from our higher education institutions (including the medical school move), and the growth in the advanced aviation cluster. To support that growth, we must prioritize the housing ecosystem and the permitting process to develop that ecosystem – making this a friendly, welcoming, safe place to settle.”
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Sunshine and clouds mixed. A stray shower or thunderstorm is possible. High near 80F. Winds light and variable..
Partly cloudy skies this evening will become overcast overnight. A stray shower or thunderstorm is possible. Low 61F. Winds ENE at 5 to 10 mph.
Updated: August 23, 2022 @ 7:00 am
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