Report: More affordable housing built in cities, despite suburban demand

This map shows the location of subsidized housing in the Twin Cities metro area using 2012 data from HousingLink. Nathaniel Minor / MPR News

A new University of Minnesota report concludes that the state's subsidized housing policies are backfiring and hurting poor people and taxpayers.

State and city governments are steering too much subsidized housing to Minneapolis and St. Paul — at great societal and financial cost, according to the report issued today by the Institute on Metropolitan Opportunity at the University of Minnesota Law School.

Critics call the report's perspective "narrow."

There's growing demand for subsidized housing in the suburbs. In Dakota County alone, there are over 9,000 people on wait lists for low-income housing. Among them is Khadar Abdi, who arrived at the Dakota County Community Development Agency in Eagan the other day to update his paperwork — part of his ongoing bid to find affordable housing.

• Read the report

Abdi works at a grocery store in Eagan and makes $15 an hour. His wife stays at home with their three year-old child. They're paying about $950 a month for an apartment in Eagan and want something cheaper. But Abdi would not be willing to move to Minneapolis or St. Paul for it. The reason? "Safety," he says. He also thinks the schools are better in Eagan.

Abdi is the kind of person researchers at the University of Minnesota are worried about. Even as demand for affordable housing is surging in the suburbs, too many units are built in poor neighborhoods in the core cities, law professor Myron Orfield said.

That approach to housing policy is counterproductive, he said.

"It deprives families the opportunity to go to low-poverty, high-performing schools, if you build it all in very poor neighborhoods," Orfield said. "And it makes places like Minneapolis and St. Paul, which are already very racially segregated, over time more and more likely to house a larger percentage of the region's poor population."

Such policies also are bad for taxpayers, Orfield said, because their dollars could be better spent on low-income housing in the suburbs, where development costs are one-third as high as in the core cities.

"You have this period, kind of unique in our history, where you have the affluent, whiter suburbs requesting this money, offering to use it more cost effectively," he said. "And the state agencies are turning them down so they can build in poor neighborhoods already saturated by affordable housing,"

Orfield said the requirements and incentives that determine where housing dollars flow keep too much money in the central Cities.

He and his colleagues largely focused on housing developed by means of a complicated tax-credit program in which the state, Minneapolis, St. Paul and Dakota and Washington counties can allocate the tax credits to developers for low-income housing projects.

Developers then offer those credits to financial investors who help fund the projects.

Orfield found that in the last eight years, the state turned down $33 million in requests for low-income housing tax credits from suburban areas. He acknowledged, however, that state officials also said no to $73 million in requests from the central cities.

The study already has its critics, among them Chip Halbach, executive director of the Minnesota Housing Partnership, a non-profit housing advocacy group. It does not have a role in allocating housing dollars.

"It's a narrow view," he said of the study. "Absolutely a narrow view."

Halbach said that although Orfield and his colleagues make some good points, the need for affordable housing is great in the core cities, where it happens to be more expensive to build.

"When you develop housing in the central city, you're oftentimes cleaning up decades if not centuries of pollution," he said. "It's more work to assemble parcels. It's often tied with historic preservation, and on and on."

The U of M researchers say that even if land costs are excluded, building low-income housing in the suburbs is still $30,000-$40,000 cheaper per unit.

Halbach wants more proof. He doubts developers in the core cities are inflating their bids for work. "They do the development because they come up with successful projects in an extremely competitive award process that the state housing agency uses," he said.

What's more, Halbach notes, the state's housing finance agency has developed a competition for developers to determine ways to cut costs from low-income developments without sacrificing quality.

Alan Arthur, chief executive officer of Aeon, one of the biggest developers of low-income housing in the central cities, said he is not avoiding work in the suburbs and has done a few big projects in Chaska and Roseville.

He thinks demand is so acute that all areas should build more low-income housing.

"Those cities who ask us to come in and help them solve their affordability needs, we will jump at those," he said.

Still, Arthur disputes Orfield's contention that every suburb would embrace low-income housing.

Also, not everyone who needs affordable housing wants to live in the suburbs, said Mary Tingerthal commissioner of the Minnesota Housing Finance Agency, a major player in funding affordable housing projects.

Tingerthal said the agency has steered many tax credits towards the construction of larger, family-friendly apartments in the suburbs - more than in the central cities. But she said single people or those with health problems might prefer the urban core.

"For them it's more important to be adjacent to transit, be able to get to their health care resources and be able to navigate without a car," she said.

Even some people with families want to stay in the city.

They include Saynab Mohamed, who lives with her husband and three children in low-income housing near downtown Minneapolis. Mohamed said they like living in the Wellstone building near Franklin and Portland avenues.

"The reason I chose it is it's close to the city, right by my work and my family and relatives," she said.

With such support close by, Mohamed can rely on free babysitting -- which she wouldn't get in the suburbs.

Whether Minnesota puts housing in the right places is clearly a matter of debate. What numerous experts agree on though, is that there's just not enough affordable housing in the state.

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