The St. Peter Economic Development Authority narrowly recommended transferring $500,000 to an account for building speculative homes in Traverse Green.
The new fund would use money accrued through interest on the revolving loan fund. Beginning in August, the money would be available for building homes in the recently approved workforce housing subdivision for four years. Afterward, the full amount would be repaid to the revolving loan fund.
At the EDA meeting on April 28, city officials emphasized that the concept was one used in Nicollet Meadows and Washington Terrace in 2000 and 2003.
“The EDA would undertake the same activities that they undertook in the first two subdivisions,” Community Development Director Russ Wille said. “Under any consideration, it has to be seen as a success.”
The great difference this time is that the EDA’s money is the source. In the previous occasions, the city received a $700,000 no-interest loan from the Greater Minnesota Housing Fund for speculative home construction.
“The fund no longer has that program as it has been focused on foreclosure prevention in recent years,” Wille said.
The $500,000 amount would likely allow the city to put three homes at a time out for bid.
“From a staff and council perspective, we believe that spec homes are an important part of this,” City Administrator Todd Prafke said. “People want to be able to walk in, see something and touch it before they buy. With the income range we are targeting, they are not likely to be able to buy a home off building plans.”
Prafke said local contractors could work on a small number of homes at a time. Three would allow some efficiencies of scale and still allow small, local contractors to get involved in the homebuilding.
The EDA board was not altogether supportive. Jay Hansen asked whether the EDA had a policy or procedure for the housing support.
“You don’t have a written policy on this, but it is acceptable in the statutes,” Wille said.
“I think it would just be nice to have a policy, especially when we’re kinda competing with our neighbors who are building houses and paying taxes,” Hansen.
Prafke said, “I would challenge the thought that this is in competition with local developers in the community. There is not interest on the part of contractors and developers at this cost.”
He offered that the council will solicit proposals for building higher-price homes on 15 acres north of the workforce housing development.
“If the EDA does have concerns on policy, you can send loan revenue dollars to the City Council to do it themselves,” Prafke said. “If you didn’t want to deal with it, that is certainly something you could cede to the council.”
James Dunn also voiced opposition to the program.
“My concern is that we’re going to make it a lot harder for families to sell their homes,” he said. ‘If our goal is increasing the workforce, there are quite a few homes for sale in that price range in St. Peter right now.”
Wille said, “That concern is no different than concerns that existed in 2000 and 2003.”
Board member Corey Abels said that while 80 homes seemed like a lot to be for sale in St. Peter, it was actually a small percentage. “In my opinion and if you talk to some of the Realtors, we have a low housing inventory.”
Abels warned the $500,000 would no longer make interest for the EDA if it were moved.
Wille said the current interest rate was less than 1 percent. He also said the EDA could pull money back if a large business or industrial project required it.
Hansen and Dunn voted against the recommendation, making the vote 3-2 with two EDA board members absent.
The EDA will continue to be involved in the housing project as it will approve bids from contractors on speculative homes. The city and Southwest Minnesota Housing Partnership will select varied floor plans for each cycle.