Dominium exits North Loop affordable housing project
Plymouth-based Dominium has walked away from a proposed affordable housing development in Minneapolis’ North Loop after the developer and the city could not come to terms over its long-term affordability.
Dominium canceled a purchase agreement for buildings and property that were the former home of the C.J. Duffey Paper Co. at 508, 520 and 528 Washington Ave. N. The developer had planned to build up to 210 affordable apartments in three existing buildings and one new building. The project was expected to cost up to $110 million.
Project costs would have worked out to about $550,000 per unit, or about double what the city typically sees as a cost for affordable housing, said Andrea Brennan, the city’s director of housing policy and development. The higher-than-average cost of the Dominium project prompted the city to ask Dominium for a 30-year period of affordability to offset about $50 million in federal tax-exempt bonds the developer was seeking, she said.
That period was too long for Dominium, Brennan said Tuesday. Dominium was prepared to keep the project affordable for 20 years, said Nick Andersen, a Dominium vice president.
“We felt like that is something that would work and they didn’t,” Brennan said.
Dominium also sought low-income tax credits, which would have been allocated by the city, said city spokesman Casper Hill in an email. The city evaluated the project’s qualifications for bonding and tax credits on a point system it applies to affordable projects. A 30-year period of affordability would have helped the project reach the minimum point total needed for the city to approve it, Brennan said.
Had the project gone forward, the property would have been considered affordable to those earning an average of 60 percent of the area median income, which is $94,300 for a family of four and $63,300 for a single person, according to the Metropolitan Council. The lowest-priced apartments would have been considered affordable to those earning 30 percent of the area median income.
Andersen said maintaining affordability for 30 years would have put the project in a “precarious position.” The company did a study of the last 15 years of area median income growth in Minneapolis and found that it had not kept up with inflation. If that trend continued, the Duffey apartments would not generate enough income to pay for renovations and repairs the complex would likely need after three decades.
Actual project costs likely would have been in line with what is average in the city, Andersen said, because historic tax credits on the century-old buildings would have offset the high price of the redevelopment. With the credits, the redevelopment cost would have been cut to about $300,000 per unit.
“The cost is very much in line with other affordable housing construction,” Andersen said Tuesday.
Hennepin County would have issued the bonds for the project, Andersen said.
The city and Dominium have worked together on other affordable housing. Dominium is building a 184-unit affordable apartment building at 1500 Nicollet Ave., which is using $29 million of the city’s affordable housing bonding capacity.
The city has had a “really good working relationship” with Dominium, Brennan said.
More affordable housing is on tap for the North Loop. The city is reviewing a 109-unit affordable project Schafer Richardson is proposing at 1000 Third St. N., Brennan said.