A staggering statewide report shows Minnesota needs to build an additional 10,000 homes per year to alleviate the state’s housing shortage. One Minneapolis developer is actively working to add more affordable homes to help solve the problem.
A special task force on housing outlined the scope of the state’s housing shortage in a report released in August 2018 along with recommendations to begin addressing the crisis. A key component to adding more affordable housing is empowering local governments to do more to support private developers of affordable housing. Since 1989 Lupe Development Partners, owned by Minneapolis developer Steve Minn, has partnered with state and local governments to build affordable projects throughout the Twin Cities metro area.
Lupe Development’s most recent project is a 114-unit apartment complex in Saint Paul known as East Side Apartments. East Side Apartments offers one-bedroom, two-bedroom and two-bedroom plus den apartments that feature Energy Star appliances, laundry facilities and faux-wood flooring. Each unit also features spacious rooms, eight-foot ceilings and over-sized closets. Residents can also enjoy the building’s fitness center, Wi-Fi-connected community room, business center, outdoor pavilion, courtyard, bike racks and underground parking.
Wall Companies and Lupe Development partnered in 2014 to acquire the nearby circa-1970s Wilson Ridge Apartments – and then undertook a building-wide renovation program. New windows, doors, kitchens, appliances and fixtures as well as a new fitness center were added. The building remained a naturally occurring affordable housing property. It has 102 units, all of which were quickly leased upon completion of improvements in 2015. East Side Apartments and Wilson Ridge Apartments combined create a 216-unit affordable housing campus with green common space in between. Both properties are located along the future Gold Line, a bus rapid transit route in development along the Interstate 94 corridor between Saint Paul and the East Metro suburbs.
East Side Apartments and Wilson Ridge Apartments are examples of a developer preserving existing affordable housing. “The recent market-wide reinvestment in rental properties has come at the loss of existing affordable housing,” said Minn, vice president and chief financial manager of Lupe Development. “Local governments should work with private developers to help keep older properties affordable – something we did with Saint Paul City Council Member Jane Prince and the East Side Apartments.”
Steve Minn has worked extensively on Twin Cities area development projects, with a particular focus on affordable housing. In 2017, Lupe also developed 253 units among its Broadway Flats and Mill City Quarter projects. Both projects offer amenities and mixed-use development not typically seen in affordable projects.
Lupe Development Partners plans to break ground on an affordable housing project in spring 2019 in the Whittier neighborhood of Minneapolis. The firm received a $1.2 million grant from the Metropolitan Council’s Livable Communities Demonstration Account, a $2.4 million loan from the Minneapolis City Council’s Affordable Housing Trust Fund and approximately $800,000 from Hennepin County.
But Steve Minn doesn’t expect the favorable housing market to continue forever. “We are in the 8th or 9th inning of the market rate housing expansion,” he explained. “Most projects still on paper will probably have to wait for the next cycle.”
The founding of Lupe Development
After getting married in 1987, Steve Minn and his wife Lucy moved to Minneapolis. The two had new jobs in television advertising, and they planned on living in Minneapolis and working in that field for only a couple of years. At that time, Steve Minn already owned a few rental properties. He continued that as a side business, beginning with student housing at the University of Minnesota.
As Steve Minn’s rental property business started to boom, the local television advertising industry started to wane. Steve and Lucy Minn decided to turn their real estate hobby into a full-time business. Although interest rates were high and banks shied away from student properties, the Minns persevered. Steve Minn and his brother initially did all the renovation work themselves, with Steve being the electrician and his brother being the plumber. Lucy Minn handled all the leasing. The company grew, and throughout the years it expanded from duplexes to fourplexes and then finally onto larger developments.
Later in his career, Steve Minn began to take an interest in developing affordable housing. After serving as an elected member of the Minneapolis City Council and Minnesota Gov. Jesse Ventura’s administration, he was appointed to the Minneapolis Public Housing Authority.
When discussing the expansion of affordable housing around the Twin Cities, Steve Minn is clear as to what it would take. Saint Paul and Minneapolis can improve the supply of affordable housing by giving existing affordable property owners incentives to keep older properties affordable, and by giving new construction developers a critical new incentive to fund affordable housing.
First, property owners can take advantage of the Low Income Rental Classification (LIRC). Under this program, Minnesota cities can enter into contracts with existing property owners to keep rents and income restrictions below 60 percent of the area median income. This effectively decreases their taxable rate by 40 percent. Second, the Housing Choice Voucher (Section 8) payments program should pay private landlords competitive rents to help make vouchers acceptable to landlords.
These incentives would encourage a property owner to keep an older building and make some improvements while holding rents steady.
“If we can educate local government about these economics, that could be really exciting,” said Steve Minn.