St. Peter, a college town an hour south of the metro, hopes to attract new home buyers by offering something other cities can’t: a new house for as little as $115,000.
The houses will be factory-built and part of a novel manufactured home community collectively owned and managed by residents.
The project, a partnership between the city of St. Peter and a Twin Cities-based nonprofit, could become a model for rural communities across the state. There’s a deepening shortage of housing for the working-class that has impeded expansions at factories and made staffing at hospitals and schools difficult, city officials have said.
Already, builders can’t sell new houses outside the Twin Cities for what it costs to build them. Rising mortgage interest rates are also worsening the crisis as monthly payments are becoming less affordable.
“You just can’t grow at a sustainable pace in a place where there’s no place for people to live,” said Mayor Shanon Nowell, who works in the faculty recruitment department at Gustavus Adolphus College. “We see housing as an economic development issue.”
Earlier this month, St. Peter officials signed a development agreement with CoNorth, the Twin Cities nonprofit, to build New North, the resident-owned cooperative with upwards of 60 homes.
Those homes are expected to sell for $115,000 to $250,000. The land under the homes will be collectively owned by residents who will pay a small, one-time fee to buy a “share” of their community.
“There is enormous demand statewide for quality, attainable homeownership, particularly for first-time buyers and seniors who increasingly find themselves priced out of traditional new construction,” said Victoria Clark-West, CoNorth’s executive director, in a statement.
Factory-built homes, partly because of the scale of production, are cheaper to build than on-site houses.
Most of the St. Peter homes will be “double-wides” that look like compact suburban ramblers, but there also will be smaller starter homes as well.
At the top of the price range are “cross mod” homes — a hybrid housing style that incorporates more design elements from site-built homes, including roof dormers and covered porches.
Known as mobile homes until the mid 1970s, when the federal government adopted construction and safety standards for the industry, the design and manufacturing standards for these kinds of homes have changed dramatically, but the operating model hasn’t.
In most of the 800 or so manufactured home communities throughout the state, residents own their home, but rent the land underneath them, said Mark Brunner, executive director of the Manufactured & Modular Home Association of Minnesota (MMHA).
Rents vary dramatically depending on age, location and amenities. Outside the metro, monthly lot rents are about $400, while the cost of a narrow lot with a tiny yard, if any, in many inner-ring suburbs can easily top $900 per month.
Most of these communities are still locally owned, Brunner said.
Increasingly, though, they’re being bought by out-of-state investors and private equity firms. In August, Brookfield Asset Management said it had acquired the nation’s largest privately held manufactured home portfolio.
The backlash against this trend has been intense. Some residents say rents and utility costs have risen dramatically and lease terms have become egregious.
CoNorth is hoping the resident-owned cooperative model it has championed will ease some of those concerns by putting ownership and management in the hands of homeowners by enabling them to elect their own boards and manage their own budgets.
St. Peter city officials see promise in the concept as well. For years, city officials have been trying to develop a vacant 15-acre light industrial parcel on the northwest edge of the city.
At the same time, CoNorth was looking for a place to build a ground-up, resident-owned cooperative and expand its mission. Up until now, it has helped homeowners in existing manufactured housing communities acquire the land under their homes.
In St. Peter, CoNorth had an unusual advantage: The city is providing the land free of charge. CoNorth will pay for infrastructure improvements, including new utilities and roads. The roads, though, will be owned and maintained by the city, reducing the risk that residents will have to pay for expensive repairs.
Construction is expected to begin next summer. Mayor Nowell is eager to see it happen.
The town, she said, simply doesn’t have enough housing. In recent years, the city of about 12,000 has added an average of only 58 new housing units annually. The majority have been rentals, according to a recent housing study.
That’s not enough, Nowell said. The city’s unemployment rate is low and several large employers, including Gustavus Adolphus and several manufacturers, are struggling to expand at a time when home buyers outnumber sellers.
“I know how difficult it is to move around,” she said, citing her own family’s struggle to sell their starter home and trade up.
Nowell said there are move-up options, but they’re expensive. Adding more housing, she said, will create more mobility for buyers and sellers.
“It’ll be very important for young people to move into homeownership or for people who are downsizing,” she said.
Building New North from the ground up will be a new process for CoNorth.
The nonprofit has facilitated the conversion of about 15 manufactured home communities in Minnesota to resident-run cooperatives, but has not built one. The latest happened several weeks ago in Wabasha.
CoNorth plays an advisory role, offering residents access to a variety of legal and financial resources that help them become more self-sufficient, Swisher said.
“It creates a system that’s mission-driven, not profit-driven,” she said.
The nonprofit recently received a multimillion-dollar grant from the Bush Foundation that has enabled the group to leverage state funding to expand its services.
New initiatives will help resident-owned communities with acquisition loans and lines of credit enabling them to put new homes on vacant lots and improve the infrastructure in old ones.
Also new is CoNorth Homes, a dealership that enables residents to buy homes directly from the manufacturer.
As the industry evolves and the need for more affordable housing grows, lawmakers are also getting involved.
New legislation being considered would make it easier to finance a manufactured home, Brunner said. At the local level, several communities are repealing zoning rules that make it difficult to put factory-built housing on privately owned land.
“We’ve overcome a lot of those kinds of discriminatory barriers,” Brunner said.
At the same time, the uptick in purchases by private equity groups has led to a swell of consumer protections for buyers. Many states, including Minnesota, have considered a Manufactured Homeowners Bill of Rights that, among other things, would limit rent increases.
Though the New North project in St. Peter is still months from groundbreaking, CoNorth and city officials say the project is already garnering significant attention from officials in other communities.
“There are lots of groups that are watching this really closely,” said Todd Prafke, St. Peter city administrator. “We really believe that factory-built housing has the opportunity to provide a fantastic base for workforce and other affordable housing options.”
In Renville County in rural west-central Minnesota, for example, there’s a dire need for housing that’s affordable to lower-income workers, including farmworkers.
Jordan Zeller, a Renville economic developer, said the dearth of affordable housing is overwhelming and efforts to build more of it are failing. A 2020 housing study found the county needs to develop an additional 1,300 homes and apartments by 2030. So far, only a fraction of that goal has been achieved.
Zeller said that because construction costs far exceed home prices, it’s difficult to attract developers.
One, he said, recently considered building a new subdivision in Olivia, but couldn’t get financing, so quickly abandoned the project.
“The development costs were through the roof,” Zeller said. “If you build a $400,000 house and it appraises for only $375,000, good luck getting a bank to finance it.”
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