A proposed housing development in downtown Duluth highlights challenges in balancing market rate and low income housing.
In my long and winding coverage of Minnesota’s 8th Congressional District this year I often remarked that the district resembles its own small state. It’s got an urban area. Suburbs. Regional centers. Poor rural and rich rural. And, with only a few exceptions, these areas behave politically and culturally like they do elsewhere.
If Duluth is the urban core of the 8th, it shares one distinct problem with its much bigger urban counterparts: The cost and availability of housing. Housing is an issue in rural areas, too, but the urban housing arguments are far more formulaic.
This struggle flared up in a recent debate over a proposed new high-rise apartment building in downtown Duluth.
Landmark Company, a Madison, Wis.-based developer, aims to build a 15-story, 204-unit apartment complex on the site of the current Voyageur Lakewalk Inn on Superior Street. That’s a big project for Duluth, one that will literally change the way the city looks.
Nevertheless, the project hit a familiar political snag. Like many urban areas, Duluth struggles with a rising cost of living. Rents aren’t much cheaper than you find in Minneapolis or St. Paul, especially if you want to live in a popular neighborhood or near the lake.
So some city leaders said they wouldn’t support a tax deal that the developer asked for if the project didn’t include some apartments reserved for low-income housing. As proposed, the high-rise would support market-rate housing, averaging $1,500 per month for a studio apartment.
The Duluth City Council, with Mayor Larson’s support, approved the $6.2 million tax increment financing package anyway, over the objection of two city councilors. The $75 million privately-funded project will move ahead.
That’s probably for the best. There is a need for market-rate housing in Duluth. Nevertheless, there is also a need for affordable housing. Highlighted here is an important fact. Developers will always prefer investing in market-rate, due to the higher rents they can collect.
The city of Duluth might well benefit from this project, but it must also address affordability. And that solution won’t come as easily as approving a TIF district.
This discussion closely resembles the same debate happening in expensive cities around the state and country. I suppose it’s a good sign for Duluth’s economy that we have the same problem. But it also means that the city has to keep growing in order to afford itself. And that could be a problem.
Duluth is experiencing a mini-version of the same thing that is happening in almost all viable cities around the country, with a very significant shortage of housing in ranges that can be afforded by people who work in retail, many service positions, low end manufacturing and processing, and other low-paying jobs.
The new development represents one of the two things that are causing these problems: gentrification. The new apartment building is going to be located literally across the street from the largest employer in town, Essentia Health, and within walking distance — a lot of that walk indoors in the skyway system — of both the downtown business district and the St. Luke’s complex, where many other jobs are located. It will have excellent views of the lake from many apartments. It will add a lot of tax base to Duluth, give people a place to live in the largely full-up Duluth — especially East Duluth — city area, and will provide housing that is very energy efficient with a markedly lower carbon footprint than individual houses. In particular, it will offer housing to young people beginning well-paying jobs in health care, business, and technical fields, and to older people in those fields who no longer want or need larger single family housing. But it will do that as part of an accelerating trend of turning the East Hillside into an upper middle-class neighborhood, gradually displacing lower income people from substandard housing in the area as the neighborhood gentrifies. The same thing, to the amazement of some observers, is starting in the Lincoln Park area of West Duluth.
The second and certainly more important trend has been the long and ongoing retreat of the federal government from the business of housing lower income people, something going on since at least 1980. Housing “projects” of all sizes pretty much have ceased to be built and in many cases to exist, and section 8 subsidies have become less available, and when available are often too low to help people find affordable housing.
Given that people still want their buildings cleaned, their retail shelves stocked, their food served and dishes washed, and want to buy products from low-cost manufacturing and processing, that creates an insoluble problem. Local and state government does not have the tax base to undertake this job, and when they have tried to accomplish it by using fiat to force the job on private developers, as some people in Duluth are suggesting, the results have been unsatisfactory in almost all settings.
So things just get worse and worse, as affordable low income housing becomes more and more unavailable. Decisions to demolish older low income projects without replacing them, as Duluth did with the Harborview Housing, makes things even worse.
Duluth for now benefits from being able to force low income people across the bridge into Wisconsin or down into Carlton County, where there still are reservoirs of cheaper, often substandard, housing. But that substitutes issues with transportation for issues with housing, something that will become a crisis when fuel prices inevitably climb from their current historically low levels.
The long term solution to this problem has to come from one of two approaches, or a combination of them. One would be to raise wages for all sorts of jobs that are now low-paying to high enough levels to be livable, inevitably passing on the costs to consumers. The other would be to return to paying enough for housing for low income people out of public money, inevitably raising taxes. Either solution means that upper middle-income people and upper income people will shoulder the costs of the services that they now enjoy from the work of people not payed enough to live.
If none of this sounds attractive, welcome to one of the critical challenges of the 21st century.
This thread is probably dead, but an interesting new development has the Duluth City Council offering a pledge of $250,000 to facilitate the efforts of One Roof Community Housing to get a grant from the Minnesota Housing Finance Agency to fund the Decker Dwellings project, a planned building in the Miller Hill area that would have apartments limited to people making less than 80% of the city median income and as little as 30% (that would be about $14,000 to $32,000 a year,) with four units reserved for people with a history of homelessness.
It can easily be argued that the tax income from buildings like the high rise discussed above and other similar projects is what is financing the city support of this low income housing project.
One other thing: in an editorial comment in the Duluth News Tribune, an opponent of the above high rise project argued that the taxes it will generate would not be needed because of the high tax collections that the big Essential and smaller St. Luke’s building projects would bring. This was an unfortunate display of lack of knowledge, since both of those non-profits are exempt from property taxes.