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Mayor, councilmembers weigh in on workforce vs. market rate housing at old YMCA

 

A discussion during the Austin City Council’s April 5 work session on a proposed apartment complex showed a clear divide between councilmembers.

The proposed complex, Mill Pond Apartments, was put forth by Three Rivers Community Action, Inc., the same developer responsible for Fox Pointe Townhomes. The plan is to build a 48-unit low to moderate income (LMI) workforce housing complex at 704 First Dr. NW, where the old YMCA building sits. The project is supported by the Austin Housing and Redevelopment Authority (HRA).

But while councilmembers agree that there is a definite need for housing in Austin, a fact verified by a housing study conducted in 2017, some councilmembers, along with Mayor Steve King, argued that the location of the project would be better suited for a market rate housing unit.

The council voted during the work session on a motion to table the discussion on the project for two weeks, resulting in a 3-3 vote with one abstaining. King then cast the tie breaking vote in favor of postponing the discussion until the April 19 work session.

Councilwoman Joyce Poshusta (Third Ward) abstained from voting because she is employed by the HRA, but said she would have supported the project if she had voted.

“Because I work in subsidized housing, I realize the need as I see it on a daily basis,” she told the Herald. “The HRA has several hundred applicants on our waiting list for subsidized programs.”

“Three Rivers has been a great partner in our community, providing quality subsidized housing, and has proven their interest by providing specific details,” she added. “No other developer had come forth as of the Monday meeting.”

Joining Poshusta in her support for the Three Rivers proposal are Councilmembers Jeff Austin (At-large), Oballa Oballa (First Ward) and Rebecca Waller (First Ward).

“The issues as of late which have hampered getting a project done have been finding developers for projects and being able to make the projects work dollarwise,” Austin said. “That is what is nice about this project – we have a developer with whom we have worked in the past, and the dollar contribution requested of the City is money that will be recouped over time.”

“This is the only real proposal that has been brought before the council and we need to act on it before this opportunity escapes us,” Waller said.

King said that in the rental category, the 2017 Housing Study showed a greater need for market rate housing (207 units) than subsidized housing (139 units).

“I am concerned that we are out of balance on our rental housing options by having a very limited supply of market rate apartments,” King said. “Prior to 2020, when a private developer completed and filled an 82-unit complex called the Flats on 21, it had been nearly 50 years since a private developer built any market rate rental housing in the City of Austin. But in that nearly 50-year time span, at least six income-based housing complexes were built in Austin. Even with the construction of the Flats on 21, we still have a significant deficit of market rate rental units based on the 2017 study.”

Councilmembers Jason Baskin (Second Ward), Mike Postma (Second Ward) and Paul Fischer (Third Ward) agree with King about wanting to see a market rate housing complex built at the old YMCA location.

“With zero market rate units available and less than 40 homes actively listed on Realtor.com, we have to get serious about putting our best foot forward and attracting developers to invest in Austin,” Postma said. “We’ve had some success with our 5-year tax abatement on single-family homes. A few dozen more homes have been built in the last 5 years than were built in the years preceding it and more building permits have been taken out this spring. Last year Flats on 21 opened; it was the first market-rate apartment built by an outside developer in 50 years. It filled in one summer! This has proven the demand for market-rate and the YMCA site is a prime location to further this growth.”

“Market rate apartments, built by outside investors, are the hardest to bring to town because we compete with places like Mankato and Rochester,” he added. “For Austin to be chosen over those cities, we need to offer our best opportunity. A three-acre site on the edge of downtown Main Street is that best opportunity.”

“We have struggled to find market rate developers and the lack of production is well known as part of our discussion on housing,” Fischer said. “Strength is being shown in our housing market, with increasing values that increase the likelihood of new construction, and concerns over our lower prevailing rents become less of an obstacle as market rate units prove successful at the new Flats on 21 and, hopefully, another project.”

During the April 5 work session, King stated that other developers have expressed an interest in the old YMCA location, though no proposals have yet come before the council.

“What has occurred over the past six weeks has created a debate on housing options as there are multiple developers interested in the former YMCA site,” he told the Herald, saying that two other developers have expressed interest in the site.

Austin, however, stated that developers have not been “beating down our doors to do projects.”

“City Administrator Craig Clark has been trying in earnest for the past few years to entice a project with no success,” he said. “Now he and Mayor Steve King think that because a workforce housing project, which they do not support, has been brought forward by Austin Housing and Redevelopment Authority Director Taggert Medgaarden and Three Rivers Community Action, Inc., they can use the facts and figures of this project to entice a developer to do a market rate project on the old Y site.”

Proponents of the Three Rivers proposal noted that location is important for the project to successfully apply for the Minnesota Housing Tax Credit.

“The project location is key, especially when they are scoring,” Oballa said, referring to the process Minnesota Housing uses to determine which project will be awarded the tax credit. “Market rate units do not need this type of scoring for them to build an apartment. Flats on 21 has proved that market rate works in most parts of the city.”

“The location of the Y building provides the needed points for Three Rivers to receive funding,” Poshusta said. “No other location in Austin would have provided these points. The location would also have given easy access for tenants to utilize and patronize nearby businesses.”

Supporters of the Three Rivers proposal have also noted that selling the old YMCA building will help alleviate costs the current Y has been paying to maintain the old building, which Poshusta called a “drain on staff and resources.”

Another issue they point out is the timeliness of the application process for the Minnesota Housing Tax Credit.

“Three Rivers basically wanted to know within the next couple of weeks of the council’s decision,” Austin said. “It is my understanding that they have been trying to present this project for some time and have been put off by the mayor and city administrator. If we would have been able to consider this project earlier, I am sure we could have taken as much time as some councilmembers are wanting to take now. Unfortunately, because of the circumstances we are in a time crunch to decide on this project and may end up having no project, workforce or market rate, to consider in the end.”

“Tabling the discussion only prevents this from happening because time is critical for the project to get the funding applications processed by a July deadline,” Poshusta said.

Austin and Oballa also said the subsidized housing project would not cost city residents anything.

“We have up front dollars, but everything will be paid back over time,” Oballa said. “Market rate units will have a direct cost to taxpayers. Will that  be 2, 3 or 4 million dollars? That number will depend on the proposal from the market rate developer. The affordable units give the lowest cost option to the City: zero. I don’t want our city to miss such an opportunity and regret it five years from now.”

“Of the market rate projects that have been presented to Council over the past few years, monetary requests have been similar in amount, but there has never been a way for the City to get our money back,” Austin said. “One question we need to ask is how much is the average citizen willing to pay in additional property taxes to subsidize a market rate project?”

But those that favor market rate housing at the location have noted that the lack of market rate homes has prevented many individuals, particularly young professionals, from making Austin their home.

“We hear so often from young people who work in Austin and would love to live here, but end up in Rochester because there is nothing available here that meets their needs,” Baskin said. “They are especially attracted to downtown living with easy access to restaurants, bars, bike/running trails, and amazing community assets like the Rec Center.”

Postma echoed Baskin’s position.

“I’ve heard multiple stories from people who tried to move to Austin for work and could not find a place to rent,” he said. “Young adults are clamoring for an urban downtown apartment offering. We often lament that our young people leave for other places and don’t come back. Austin has great work opportunities for them; there are hundreds of open positions in Austin. We have a reinvigorated downtown with retail, restaurants, breweries and a new recreation center. Austin has done a great job setting the table for growth, but it will all be for naught if we don’t have a place for people to live here.”

Adding to that, Fischer noted that the recent decision by NuTek Biosciences to build a new facility in Austin’s Creekside Business Park will raise the demand for market rate housing.

“Encouraging market rate options for employers like NuTek and others has to be a priority,” he said. “The tax credit project would find all of these prospective employees as being ineligible to live in these units.”

Austin Area Chamber of Commerce Community Concierge Kristen Olson, who helps welcome new residents, provided quotes about the lack of market rate housing from recent newcomers to Austin to City Administrator Craig Clark. Fischer provided these quotes to the Herald.

“There were very few rental properties available at the time we were looking, and most of those were not very nice,” noted Alyssa Williamson, a newcomer from Arizona. “There were two properties that we would have considered, but they rented out before we could put in our application.”

“I had a hard time finding market rate housing in Austin,” said Kate Blocker, who works for Mayo Clinic Health System. “I currently live in an apartment complex that is mainly older adults, which initially made it challenging to meet young professionals in the area. I didn’t have the funds for a down payment on a house and at the time was nowhere close financially to think about owning. I feel it would be beneficial to have more upscale apartments/condos here in Austin to attract young professionals.”

“We know first hand from the Chamber’s Community Concierge program, which helps connect professionals in Austin, that they can’t find comparable housing and in many cases end up living in Rochester,” Fischer said. “We want to have them not just work in Austin, but call Austin home, be engaged in the community and spend their dollars locally.”

King said that not only could having a market rate housing complex at the old YMCa location appeal to young professionals, it could also be of interest to retirees looking to downsize.

“The benefit of having folks with more disposable income living downtown would have an immediate positive impact on our downtown merchants and store owners now and for generations to follow,” he said.

For now, Three Rivers is going to see what the council decides at the April 19 work session, according to HRA Director Taggert Medgaarden.

While they disagree on what should be built at the old YMCA a location, the council and King all agree that housing is needed.

“I am not opposed to the development of income-based housing, and I know there is a need there as well,” King said. “But we are fortunate to have multiple developers interested in a very unique site within our city, and I believe we should explore all of those options and make an informed decision that’s in the best interest of all of our citizens.”

“The affordable building is a great project that I have no trouble supporting if market rate doesn’t prove to be viable,” Baskin said. “There has been a lot of progress on market rate over the past several weeks, and we owe it to the community to make sure that we fully understand all options when making a decision that will impact our downtown for decades to come.”

Those in favor of the Three Rivers proposal said they understand the need for market rate housing, though expressed concerns about the council not approving the project.

“I am highly in favor of and realize the great need for market rate developments and am encouraged to hear that there is interest in that as well,” Poshusta said. “The options for market rate developers are plenty, whereas options for subsidized are not.”

“I will support other housing projects, including market rate housing, if they make financial sense,” Waller said. “But we must not let a real opportunity pass us by waiting on some aspirational idea.”