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Housing remains big issue in Worthington

WORTHINGTON -- With very limited options for rental housing within Worthington, being able to keep up with the demand of a growing community has been nearly impossible.

"We have had an issue with housing for all the 10 years I've been mayor," Worthington Mayor Alan Oberloh said. "It seems that it is extremely difficult to get private development to construct multi-family housing.

People who build single-family homes in this area, it is extremely difficult to get them interested in building spec houses," Oberloh continued. "We have communities around us, that with private development, build complete housing developments. I don't know why, but I would guess a lot of it has to do with the median income."

Worthington hovers around a zero percent vacancy rate on the multi-family units, making it extremely difficult on people moving into the community.

"In the rental side, you can give a better, definitive case that there is a need, we are behind schedule or behind the 8-ball, however you want to define it with the zero percent vacancy rate," Worthington Directory of Community and Economic Development Brad Chapulis said. "Normally you want to be at that three to five percent vacancy rate; that would show a healthy housing market. With these projects that we're doing and if private sector does step up and do a few projects, we're hoping to get to that point so there are choices, rather than taking the first available."

In 2009, a comprehensive housing study was done to assess the needs of Worthington and a few other surrounding cities.

The study stated the total rental unit inventory in 2009 was 1,632 units. There were no market-rate units reported as vacant in the survey, and many properties indicated they kept waiting lists of people that want to rent a unit. The survey states: "Some owners/managers reported that unit turnover rates were very low, as the lack of other rental housing options in the community restricted any movement of tenants."

"There are not many units available. It's not even in one segment of the market," said Southwest Minnesota Housing Partnership Chief Operating Officer Lisa Graphenteen. "We're seeing that in the subsidized properties all the way up through market-rate properties. The projects are hovering near that zero percent. Five percent is considered a healthy market standard. We know we've been below that."

Since the study in 2009, some strides have been made to help improve the situation.

"We've made a lot of strides. We have and the city has and other developers have to bring rental -- it's just at the same time, the community has had some great job expansions and growth with the employers being healthy," Graphenteen said. "It's not for the sake of not trying that we haven't solved the problem. It's trying to catch up to the need."

The study recommended the construction of 186 to 210 rental units between 2009 and 2014. One of the biggest projects that has been completed since the study was the New Castle Townhomes.

"As soon as the projects are getting built they are getting filled," Graphenteen said. "New Castle was that way. The waiting list was there before we were even finished."

According to Chapulis, the most recent number of rental units is 1,304, which does not include any housing requiring a state license -- such as nursing homes or assisted living facilities.

Is cost of rentals too high?

Another factor in the rental housing situation is the cost of those properties.

"It's trying to put your thumb as to truly identifying what that means in terms of numbers," Chapulis said. "You can ask 10 different people and you get 10 different answers to what their housing needs are. What the housing study allows us to do is to take the statistical information and determine where we need to go."

With construction costs continuing to rise, the rents are also continuing to climb.

"The other part of housing that is a conundrum, in my opinion, is how to address the cost of construction and equate that to rents needed to make the project's cash flow," Chapulis said. "Our area wages haven't kept up with the cost of inflation."

Worthington City Administrator Craig Clark agreed.

"Wages continue to be a primary contributor to the housing issue," Clark said. "When you look at the median income, it continues to be a struggle. When you look at the 30 percent rule of someone's income going toward housing, it's a challenge. There are no two ways about that.

"We have to be realistic about what we can expect in the marketplace with the resources that folks have," Clark added. "It's part of the equation and has to be factored into the solution."

For Rosie Rogers, executive director for the HRA, wages are also a big issue.

"I think as much as anything, we need to look at better wages so that people can come in, and you can't spend what you don't have," she said. "You may get a job that says its $40,000 a year and in reality, you take home $21,000. There's always that gap between.

"I know people make choices on whether I'm going to invest myself in housing or am I more inclined to have a new car?" Rogers continued. "We all make the choices about which way we go. We need to get that wage base up there. We need to do things to make small businesses attracted to this area and be successful."

As an example, Chapulis explained that for a multi-family project to move forward without any public subsidy and expect an industry standard rate of return, the required rent would be somewhere between $1,100 and $1,200.

"A good-paying job is probably one of the best housing programs that I think that could be had," Clark said. "The reality is there are still challenges, and it's still an issue and something the city has to take a role in It has and will take a role in providing a solution. You don't want to come up with solutions that might continue the problem; you want to try to find workable solutions."

Even Oberloh said the problem wasn't with the price of housing, but rather the wages paid.

"Do I want to see our rents low? Hell no, I don't want to see our rents low," he said. "I want to see our median income support the rents the community demands."

But with the prices and a lower median income in town, the people involved are trying to find a solution --and the extra money.

"It's created a bigger and bigger gap as we go along," Graphenteen said. "It's not an easy gap to fill because there are limited resources. Part of it is how do we do projects so the city can come forward, and the HRA (Housing and Redevelopment Authority) and employers, and it's feasible for them to participate. We can't go to the parties and say we have a $1 million gap."

Even if people can afford to pay the rates, Chapulis wonders if they would.

"What it comes down to, while your income may indicate that you can afford it, will you?" he said. "Will you be willing to make that payment? That's really an unknown."

Impact on community

With a lack of options, people within the city acknowledge it has an impact on Worthington.

"While it may be a little more difficult, there are opportunities just outside of the community, like a bedroom community to provide people's housing needs," Chapulis said. "One of the factors the housing does is it has limited our growth potential. It's hard to calculate, but personal opinion is that it has not completely impeded; it has been a hurdle in regards to our growth."

When asked if housing was holding back the community, Oberloh said it was "a great deal."

"At the time just prior to when school started this year, I was contacted on more than one occasion wanting to know does the city have any housing. I imagine people think, 'You're the mayor, maybe you know,'" Oberloh said.

"I had a guy come in here and told me he had just had a renter move out and said, 'Do you know of anybody who might be interested?' I made a couple phone calls and the people that I told about it had already heard about it. It was that quick that there was somebody in on it. It rented right away. They don't sit on the market."

Oberloh gave an example of teachers who moved to town earlier this year who couldn't find a place to live.

"There was probably 20-some new schoolteachers this year. Fourteen of them were having the greatest degree of difficulty trying to find a place to stay," Oberloh said. "Several of them rented rooms out at the Travelodge and lived out there. My thought on this whole thing is if we have people that are working in our community, but cannot find a place to live and they start choosing to live in a town 30 miles from here and commute in, we don't get them back. We need to make them part of our community as soon as they get here."

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Coordinator Aaron Hagen may be reached at 376-7323.