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Bill could bring more rental housing to Worthington

Minnesota Rep. Rod Hamilton of Mountain Lake looks through paperwork Thursday, Feb. 18, 2016, during a Legislative Water Commission meeting. (Forum News Service photo by Don Davis)
  1. PAUL — A bill introduced last week by Rep. Rod Hamilton, R-Mountain Lake, aims to provide more incentive for developers to build rental housing in Greater Minnesota cities that have too much demand and not enough supply.

The bill, sponsored by Sen. Mike Goggin, R-Red Wing, would provide the Department of Employment and Economic Development with $40 million to give workforce housing tax credits to developers who build market rate rental units in Greater Minnesota cities. The tax credit would be equal to 40 percent of the total investment.

To be eligible for the tax credit, the project must consist of at least three units, cost between $75,000 and $250,000 to build per unit and receive more than half its financing from non-state sources.

The project must be located in a Greater Minnesota city with at least 500 jobs where the rental housing vacancy rate has been 4 percent or lower for two of the last five years.

The city must also have a population density over 200 people per square mile according to the most recent United States census data available, or be located in an area served by a joint county-city economic development authority.

Worthington meets all of the criteria listed in the bill — the city has dealt with a shortage of market-rate housing for more than 30 years.

The city has a jobs-to-employment ratio of 146 percent, with an estimated 2,687 workers commuting to work.

Part of the reason, according to Abraham Algadi, Worthington Regional Economic Development Corp. executive director, is employees cannot find housing in the city upon being hired.

“I talk to local employers all the time who tell me they're having a heck of a hard time bringing people in for a number of reasons, and it would be a lot easier they could give them immediate access to market rate rental,” he said.

The bill’s language specifies market-rate housing, excluding units for tenants who qualify for federal housing assistance. Algadi argues the market for income-assisted living is already covered in Worthington, while apartments for middle-income workers who don’t qualify for income assistance, but cannot afford more expensive living, are harder to come by.

“This would help supply a specific segment of the market — to accommodate young professionals that are looking to become part of Greater Minnesota communities and often times are prevented from doing so,” he said.

A 2013 housing study found that Worthington needed 500 additional housing units by 2020 to meet demand. In 2014, the WREDC, in an attempt to incentivize housing development in the area, helped launch the Nobles Home Initiative tax initiative, which forgives taxes for five years on homes built in Nobles County.

Algadi, who testified for the bill alongside Hamilton and Greater Minnesota Partnership Executive Director Dan Dorman during a House committee hearing on Wednesday, said the tax credit, alongside the tax abatement program, would provide enough incentive for developers to make increased investments in the city.

“It’s another arrow in our quiver,” he said.

The House bill (HF 1020) is currently in the House Taxes Committee, while the Senate bill (SF 785) is in the Senate Taxes Committee.