A $469,751 infrastructure grant awarded to the city of Hutchinson will go toward rental housing rehabilitation projects. The 907 Dale Street Apartments will be the primary beneficiary of the grant.
The Small Cities Development Program is part of the Community Development Block Grant Program administered by the U.S. Department of Housing and Urban Development and is funded by Congress. Hutchinson was one of 43 cities in Minnesota chosen to receive money from the program.
“Otherwise blighted or unhealthy spaces are a drain on a community’s economy,” said Minnesota Department of Employment and Economic Development commissioner Steve Grove. “These investments lead to future economic growth.”
According to a press release, to be eligible for Small Cities funding, a project must meet one of three objectives: it must benefit people of low and moderate incomes, eliminate slum and blighted conditions, or eliminate an urgent threat to public health or safety. Projects must be completed within 30 months, depending on size and scope.
In preparation, city officials surveyed the housing needs in 2018 and found a 2.76 percent vacancy rate for market rate workforce housing. It was recommended to set a goal of 5 percent to allow for optimal unit turnover and consumer choice.
According to a 2018 employer survey, 3M is projecting 250 job openings paying $16-$20 per hour, or $33,280-$41,600 per year, that will need rental housing within the next three years. At these rates, affordable rents at 30 percent of monthly gross income would range from $832-$1,040 per month.
Other employers are projecting 60 job openings within the next three years ranging from $10-$13.78 per hour, or $20,800-$28,662 per year. At these rates, affordable rents range from $520-$717 per month. The survey also states that 210 additional rental units are projected over the next three years.
With a short supply of affordable workforce housing, the Hutchinson Rental Registration Department listed the buildings at 907 Dale Street Apartments as “substandard and in need of rehab” in order to bring them back up to standards. The buildings were originally built in 1974 and have had limited repairs since then.
“It’s in a high-visibility area,” said Jean Ward, Hutchinson Housing and Redevelopment Authority director. “We had done a project in the Main Street downtown area, and as we looked for other apartment buildings, this one stuck out for the (HRA) Board and City Council.”
Money from the grant will be given out on a Small Cities Development Program deferred loan structure, which will cover up to 70 percent of the rehab costs per unit with a maximum SCDP loan amount of $12,500 per rental unit. The property owner would have to put in the other 30 percent, whether it be a loan or cash.
“It’s loaned out in this program to the owner, and then it’s forgiven after five years,” Ward said. “Fifty-one percent of those renters would have to meet ... income restrictions.”
Those restrictions are, for example:
- $40,150 for a single person
- $45,900 for a household of two
- $66,550 for a household of six
A second set of requirements mandates the following rent limitations:
- Studio apartment: $562
- 1 bedroom: $649
- 2 bedroom: $858
- 3 bedroom: $1,226
- 4 bedroom: $1,392
- 5 bedroom: $1,600
Rent can’t be increased during the five-year compliance period.
The Dale Street Apartments are currently a naturally occurring affordable housing project as defined by the city, which means their rent is considered unsubsidized and affordable. Rent at the complex currently ranges from $425 for a studio apartment to $750 for a three-bedroom apartment. City officials believe it’s important the apartment building be preserved for local rental inventory.
General tenant notices are scheduled to be sent out this July, and a pre-construction meeting will be held in December. Construction will begin in February 2020 and completed by October 2020.