Our community has long recognized the need for safe, decent, affordable housing options. Olmsted County's housing market is working well for renters and home buyers with higher incomes, but there is a crisis of need for people with moderate or limited incomes who are seeking affordable rental or for-sale housing.
Affordable housing can be defined as housing that the occupant is paying no more that 30 percent of his or her income for housing costs, including utilities. The people who are in need of affordable housing include working families of moderate income, older adult households, very low-income households, single-parent families with limited income, persons who have special needs and those who are homeless.
As Olmsted County commissioners, we are considering facts collected in last year's Maxfield Research Inc. Comprehensive Housing Needs Assessment to help us identify ways to address the need for affordable housing in our area. One of these factors is the rental vacancy rate — the number of housing units available for rent divided by the total number of rentable units. A healthy market vacancy rate is considered to be 5 percent.
The Maxfield Study showed that within the affordable housing market, we now have a vacancy rate of 1.2 percent for affordable workforce rental housing. The study also found we need to be creating 288 units of affordable rental housing per year between 2014 and 2020. We have averaged a production of 66 affordable rental and 25 affordable for-sale units per year over the last 15 years, bringing the total, average yearly production to 91 affordable housing units since 1999.
There are almost no choices for limited-income working families. Similarly, low-income seniors face a comparable situation with a vacancy rate of 0.8 percent related to affordable rental properties.
Affordable housing can be defined as housing that the occupant is paying no more that 30 percent of his or her income for housing costs, including utilities. The people who are in need of affordable housing include working families of moderate income, older adult households, very low-income households, single-parent families with limited income, persons who have special needs and those who are homeless.
Why aren't developers able to create even more affordable housing? Much of the answer lies with the high cost of producing housing units. The increasing price of land and cost of construction materials are examples of significant factors in the overall costs of a project. Developers need a way to pay for those costs.
One way is through the rents charged to tenants. However, in order to achieve affordability for workers employed at low-paying jobs or a senior living on a fixed income, rents need to be lower than what the market can produce. At these lower rent amounts, rental income does not support the construction of affordable housing units, and the development is left with a "gap" in the financing.
A second way to pay for housing development is through financing. Just as a homeowner may have a mortgage on their house, developers have mortgages and loans on affordable housing developments. Often, the available financing is not enough to pay the costs of the project. This is a problem nationwide, and it is why our community needs to work with others to pool resources in order to create more affordable housing.
Olmsted County Housing and Redevelopment Authority is committed to creating and preserving affordable housing. We need to build a network of affordable housing options that aid moderate and lower income working families, seniors and individuals with disabilities to move toward self-sufficiency and thrive as our communities grow.
This is the reasoning supporting our intention to collect a HRA property tax levy next year. Not having a local funding source, such as the HRA levy, has created a barrier when it comes to providing tools for builders and developers to create affordable housing. The introduction of local funding enables our community to use other public, private and humanitarian investments.
Solutions to meeting affordable housing needs go beyond building new structures to rent or own. In addition to helping Olmsted County communities compete for outside resources, HRA levy dollars will be used to preserve affordable rental and homeownership housing; allowing seniors, families with limited incomes and those with disabilities to stay in their homes. In Olmsted County, the HRA levy will be used in surrounding smaller, contributing cities to develop affordable housing or to provide gap financing to developers to help make properties more affordable.
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