Approximately 500 housing units will need to be introduced over the next five years in Northfield to keep up with demand.

That’s according to a Northfield Housing Study undertaken by the consulting firm Hoisington Koegler Group. The results of the study were released March 23, during a Northfield Housing and Redevelopment meeting. The city signed an up to $21,000 contract with the group last August to conduct the study. 

The study came after affordable housing was identified as one of the city’s top strategic priorities in its 2018-20 study plan and included three components: A demographics inventory/analysis, housing inventory/analysis, and housing demand and supply analysis.

The report noted 114 for-sale housing units and 149 rental units being brought online this year. Another 38 rental townhomes have already been approved for development. This year, plans are underway for 17 housing units on the site of the former Manger Inn on Hwy. 3, 62 units as part of a market rate apartment complex on the southeast corner of Jefferson Road and Honey Locust Drive, and the 79-unit Fifth Street Lofts project in downtown Northfield. Still, the report found that Northfield is expected to need at least an additional 68 housing units, 88 senior housing units and 39 rental units to be developed through 2025 to keep pace with expected growth. The report states the city’s aging population and smaller households will hike demand for smaller, rental, affordable, and lower-maintenance housing.

“Substantial demand exists for affordable housing units,” the report states. “Due to the necessary construction costs of new owner-occupied/for-sale housing, it is extremely challenging to construct affordable single-family homes. Affordable new construction for-sale housing will most likely need to be in the form of townhouses or similar attached housing types.”

Housing Coordinator Melissa Hanson said Northfield "cannot meet these goals alone."

"Most housing is built by the private market, with nonprofit entities filling some need for the lowest income households," she noted. "It is recognized that expanding options for lower-income and workforce housing is difficult without financial incentives and/or assistance."

Though Hanson interest in the housing market over the last two years has shown promise, she believes there is a further need to attract more developers into the market. She noted the city had not had a housing study done since 2004, adding best practices call for such work to be done every three to five years to maintain awareness.

The report will reportedly need to be updated every two-three years and is based on the American Community Survey through the U.S. Census Bureau.

During the HRA meeting, Hoisington Koegler Group Vice President Brad Schaub noted Northfield’s housing market in some ways mirrors national trends, with construction peaking in the first decade of the 21st century before the Great Recession stymied further development and caused an avalanche of foreclosures. He expects affordable housing, seen as a challenge in Northfield, a city considered one of the most expensive to live in Minnesota, will always be in demand. Also due in part to the city’s aging population, Schaub said an increased demand for health care and requests for accommodations for residents with disabilities and multigenerational housing will also play a role.

A balance Schaub said the city will need to strike is reducing the burden of zoning regulations while maintaining quality housing. In Northfield, a majority of households have two children or less. Schaub noted the relatively high number of people who travel to Northfield (7,243) for work is also a sign the city needs more housing.

Report: Northfield to grow at a comparable rate to regional cities

Northfield has approximately 2,351 rental units. Of those, 546 are identified by the U.S. Department of Housing and Urban Development as being affordable and 187 are new units planned for construction.

According to the report, Northfield will grow by 450 new households — 90 per year — over the next five years, a number that accounts for the impacts of the city’s lagging housing construction rates over the past decade, its near-zero vacancy rate, and major increases in home sale prices. Based on that, Schaub noted the city is projected to grow at 6.75%, ahead of Hastings (5.8%) and a little less than other cities in Dakota County (8% to 11%.)

Northfield Economic Development Coordinator Nate Carlson said introducing more housing into the local market is needed to stimulate job growth and allow local employers to have a sufficient pool of workers. He added Northfield is fortunate to be close enough to the Twin Cities to stimulate growth while attracting employees from the more rural southern region.

“There’s been just such a cap on our ability to grow as a community in the ways that we want to because we haven’t been able to capture that potential growth,” he said.

Carlson said the city needs all types of housing. To help with that, the Economic Development Authority approved a resolution in support of the use of $1.8 million in tax increment financing for the Fifth Street Lofts project along with a $250,000 loan and contribution of 510 Washington St. for the development

Carlson said despite the importance of such reports, he believes they are “snapshots in time,” and need to be taken in context with other information the city has.

Reach Associate Editor Sam Wilmes at 507-645-1115. © Copyright 2021 APG Media of Southern Minnesota. All rights reserved.

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