Rising costs affect Sherburne Collective affordable housing project

A long-awaited Frogtown redevelopment project is awaiting final action from the St. Paul City Council. The council, by administrative order, is to designate up to $949,500 in federal Community Development Block Grant (CDBG) funds and $386,279 in unobligated tax increment financing (TIF) dollars to the 625 Sherburne Ave. project. No date for action has been set.

The council, acting as the Housing and Redevelopment Authority (HRA) Board in October gave approval to convey 652 Sherburne Ave. and enter into a development agreement with Thomas-Dale/District 7 Planning Council, Inc. d/b/a Frogtown Neighborhood Association, Model Cities of St. Paul Inc., Rondo Community Land Trust and Hope Community Inc. The parties are referred to as the Sherburne Collective.

Some council members have expressed reluctance to support the project. Ward Five Council Member Amy Brendmoen said she is supporting the project solely because Rondo Community Land Trust is now involved.

Ward One Council Member Russel Balenger cited the benefits of the project. While acknowledging the rising costs, he cited the community benefits the project will bring for the families and children who will live there.

The HRA acquired the property in March 2018 for $634,000. It includes a vacant eight-unit apartment building of approximately 16,000 square feet and adjacent vacant land of approximately 8,000 square feet. The tenants were relocated at that time. The city’s first request for proposals went out in September 2020. Five offers came in with Sherburne Collective getting the nod.

Tentative developer status was granted in May 2021. That status had a deadline date of March 31, 2022, with specific tasks attached. Extensions have been granted, through March 31, 2023. The project kept moving forward, according to a city staff report.

Plans call for converting the building into six dwelling units with a mix of sizes, and adding parking, green space and gardens space for residents. Units would be earmarked for households at 30 percent area median income, a change from what was previously proposed.

Units are to be leased to qualified occupant households for five years. In year six, the developer would transition ownership of the property to some form of community/occupant ownership model, such as a land trust or residential cooperative, which will own and manage the property long-term.

The affordability level and transition to ownership meant changes in project financing. The current sources include a Ramsey County low-income housing fund, Twin Cities Local Initiatives Support Corporation and Metropolitan Council.

The project has faced challenges including rising construction costs, and deteriorated condition of the property. The total project costs have risen to more than $3.233 million.

The original proposal came in at more than $1.929 million, changing to $2.92 million in October 2022.

Tara Beard, who leads housing development for the HRA, noted the project has made considerable progress. This past fall a required environmental review was finished, as was a review by the State Historic Preservation Office.

She also cited the addition of Rondo Community Land Trust, a veteran nonprofit on housing and land trust issues, as a collective partner.

The development agreement has several conditions. The HRA will convey the property in its entirety to Rondo Community Land Trust (“RCLT”). RCLT will simultaneously convey the building-only (improvements) to Model Cities, retaining title to the land only and entering into a ground lease with Model Cities. Model Cities will close on the Ramsey County and City of St. Paul/HRA funding for the renovation of the building.

Model Cities will manage the rehab of the building, lease up the completed rental units to income-qualifying tenants, and manage the property. Model Cities will help the tenants prepare to become unit buyers after five years, with additional conditions to be met. If Model Cities doesn’t sell a minimum of four of the units/shares to qualified home buyers during this 12 month period, they will convey their remaining units/shares, or the entire building if no ownership was achieved, back to the land trust. The trust will maintain the affordability of the property subject to its bylaws and resale formula.

Purchase prices will be affordable at 30 percent AMI and must include homeowner association fees.