Dozens of homeless families moved into the Steve O’Neil Apartments in Duluth two years ago, bringing hope to a drug-ridden block. Twenty youths without stable homes will soon have a refuge in the northern Minnesota city after the Center for Changing Lives broke ground last year.
But as Minnesotans struggle to find affordable housing in an increasingly expensive market, developers and city officials fear it will be much harder to carry out projects like these if President Donald Trump’s proposed $6.2 billion in federal housing cuts become law.
The Duluth developments and others like them around the state drew funding from long-standing programs that Trump is proposing to eliminate, and leveraged federal dollars to sell tax credits that helped cover building costs.
“We’re short in affordable housing and…we do not have adequate sources to subsidize that,” said Adam Fulton, manager of Duluth’s division of community planning.
Affordable housing developers and advocates fear the reductions would be devastating for Minnesota, where a recent report by the Minnesota Housing Partnership found that one in four households pay more for a place to live than they can afford. The report also found that in four of the state’s fastest-growing industries, workers can’t afford rent for a two-bedroom apartment or a mortgage for a median-priced home.
Reduced federal spending on housing would affect constituencies as diverse as working families, seniors and people with disabilities, and those with criminal histories.
Half of Trump’s proposed cuts to the U.S. Department of Housing and Urban Development would come from ending Community Development Block Grants, one of HUD’s longest-running programs. In 2016, that program distributed $48 million to cities including Minneapolis, St. Paul and Duluth to fund housing and economic opportunities. Trump’s spending plan also eliminates the HOME Investment Partnerships Program, which gave $13.5 million to Minnesota last year to create affordable housing for low-income citizens.
The Trump administration said the block grants haven’t demonstrated results or been well-targeted to the poorest people, and that state and local governments are better positioned to carry out the missions of HOME and other eliminated programs. A more detailed spending plan is expected to be released in May, and the budget is likely to change as Congress puts forth its own proposals, but affordable housing advocates are bracing for difficult times.
“It’s rather discouraging that at a time when the needs are growing greater, the federal government is backing off even farther from providing as simple a thing for its citizens as a home,” said Alan Arthur, executive director of Aeon, a nonprofit housing developer that has built 2,700 affordable apartments and townhouses in the Twin Cities.
Arthur said well over half its affordable housing projects included HOME or CDBG funding. Over the past decade, Aeon relied on $500,000 from HOME to build Indian Knoll Manor in Mound, $305,000 from HOME to build Children’s Village Center in Minneapolis and $1.7 million from HOME to build the Crane Ordway in St. Paul.
Such programs are often a small part of the cost of affordable housing developments, which rely on an assortment of state, federal and private sources but can be integral in securing much larger investments.
Arthur noted that the challenge goes well beyond the Trump administration. It’s the latest of more than 30 years of unfavorable moves on housing from the federal government under both Republican and Democratic administrations, he said. Federal housing programs have seen a sharp decline in funding over the years even as rents and building costs rise.
The Twin Cities Habitat for Humanity receives $1 million a year from the HOME and CDBG programs, which it uses to leverage another $11 million to build affordable homes in the metro. The federal dollars help Habitat for Humanity acquire and remediate land. Trump’s plans to eliminate the Americorp volunteer program would also be a blow to Habitat for Humanity, which relies on those volunteers to help build houses.
As evidence of the enormous housing demand, CEO Susan Haigh said that 2,500 people came to the nonprofit seeking help over the past year, even though Habitat for Humanity’s goal was to house just 64 people.
As a single mother of four, Farrah Kennedy left a rat-infested rental for a clean four-bedroom Habitat for Humanity home in Crystal. Kennedy voiced dismay at the talk of housing cuts. She said with a stable place to live, she and her children have become more involved in their community.
“This kind of program…betters a whole family,” said Kennedy, a 40-year-old administrative assistant.
Nearly half of the state’s HOME dollars are distributed by the Minnesota Housing Finance Agency, largely to preserve multifamily rental housing. But lately it’s used them to help build new housing. One of the agency’s largest HOME awards, $5.3 million, is going toward rehabbing low-income apartments in Robbinsdale and New Hope. Another nearly $2 million from HOME will go toward Solace Apartments, a development in St. Peter that aims to provide a stable environment for people coming out of prison, along with their families.
“I’m not sure any of these would have worked without HOME funding,” said Jessica Deegan, the agency’s director of federal affairs. Eliminating the program “puts a lot of deals at risk.”
Minnesota would also see the loss of 2,821 Section 8 housing vouchers, according to an analysis by the Center on Budget and Policy Priorities. The program helps subsidize low-income tenants of privately owned apartments.
Chip Halbach, executive director of the Minnesota Housing Partnership, said there’s been very little expansion of the housing supply beyond high-density student housing and luxury buildings, so government money is needed to support the “middle market.”
Fulton plans to make his case about the importance of federal housing funds with U.S. Sen. Al Franken, who is scheduled to visit the Center for Changing Lives on Thursday. Franken said in a statement that he plans to fight proposed housing cuts.
Also in Duluth, nonprofit developer One Roof Community Housing built the Steve O’Neil Apartments with the help of federal money and has developed about 280 community land-trust homes. The organization partnered with another developer to buy the Gateway Tower apartments and save them from foreclosure, using CDBG as one of many funding sources to renovate the building.
Executive Director Jeff Corey said that Duluth doesn’t have the capacity to easily invest in low-cost housing, so federal money is especially important. He added that the city has some of the oldest housing stock in the state.
One Roof Community Housing has 120 units of affordable housing in the works that would be in jeopardy if the federal housing reductions become law.
“If the federal government…isn’t going to invest in housing, then who is?” he asked.
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