Olmsted County's $3.7 million project shows what housing affordability looks like

Yahoo

11-03-2025

Mar. 11—ROCHESTER — The construction of 10 homes on Red Hawk Drive Southeast might seem small against an estimated need for more than 3,500 new for-sale homes in Olmsted County by 2030.
Jennifer Woodford, president of Rochester Area Foundation, which includes the First Homes program, said it's about perspective.
"It's been so nice to be able to have those homes to offer to people who've been really waiting for years to potentially fulfill their dreams of homeownership," she said of the project led by Olmsted County.
A little over a year after Olmsted County's Housing and Redevelopment Authority agreed to purchase 10 lots for $680,000, eight of the resulting homes are sold, and Woodford said the remaining two are expected to be off the market soon.
The project was initiated to test the market for homes built for approximately $250,000 in a market where prices are typically higher.
First Homes was enlisted to put them in its community land trust to reduce sale prices, and Bigelow Homes was contracted to build the houses .
"This is something that is truly innovative," Olmsted County Housing Director Dave Dunn said of the combined effort casting the county as developer and financier of the project with funds initially earmarked for homebuyer assistance payments.
The resulting 10 two-bedroom, two-bathroom homes — five split levels and five with a single floor — feature two-car garages and all appliances typically needed by a first-time home buyer.
While the single-floor homes have fully finished interiors, the split-level homes have largely unfinished lower floors.
A potential family room, two bedrooms and a third bathroom are roughly outlined in the split levels, but the lower-floor walls would need to be completed, along with electrical work, flooring and other fixtures.
"I see folks starting to finish this off, even if it's not completed," Olmsted County's Housing Program Manager Mark Engel said of the incomplete spaces.
Mike Paradise, president of Bigelow Homes, estimated the potential cost of completing the lower-level work at $35,000, depending on homeowner choices.
Engel said the unfinished portions of the five homes were designed to provide flexibility while keeping the purchase prices within county goals.
The initial proposed home design was akin to homes built in Rochester's Country Club Manor, but Engel said tweaks sought to ensure the homes remained timeless and could blend into any neighborhood.
It doesn't mean the homes are of a cookie-cutter variety. Measures were taken to vary colors inside and out, with floor and cabinet finishes and other features varied throughout the project.
"The builder offered items that were available in this classification, and they spread them across the homes, so that even though you might be another home of this model, it may not have these light fixtures," Engel said.
Paradise said the homes are comparable to some his crews have built in the open market. When it comes to pricing, however, he said variables exist.
"I don't think you are going to find a single-family lot for $70,000 any more," he said. "It's probably going to be $80,000."
Since the Red Hawk homes are in First Homes' land trust, the cost of the land is not included in the sale price. First Homes will maintain ownership of the property parcel, while the homeowners own everything on it as part of the program aimed at generating long-term equity for participants.
The land trust also means buyers will evenly split generated equity from a future sale with First Homes. As a result, future decks, patios or finished basements will come at the buyer's expense with the need to split potential value if the home is sold.
Woodford said other land trusts provide credit for such work but also claim a higher percentage of the remaining equity — 75% rather than a 50/50 split — to ensure a home remains affordable to the next buyer.
While the land trust maintains the affordability of the homes, Paradise said it also means a similar home built by a private developer would likely see the sale price increase from $251,900 to at least $320,000 or $330,000.
Paradise said another factor is financing. Since the county financed the entire project at one time, crews and subcontractors saw cost-cutting efficiencies in building 10 homes at once, rather than financing two to three homes at a time, which is typical in the market.
"They just walked down the line," he said of the work that was completed in less than half the time it might have taken under traditional financing. "From an efficiency standpoint, I think it even proved to be better than what my subs thought it would be. They knew it would be good, but when you can have a handful of guys out there and you can work on two or three projects at the same time, the efficiencies are huge."
He said the potential savings come with risk for developers, builders and financiers, who might need to pay for property upkeep if the homes aren't immediately sold.
As it stands, Engel said the Red Hawk properties came with some unexpected expenses to maintain the sites, but it amounted to approximately $2,000 per property.
It means the county will recoup the $2.5 million it spent on building the homes once they are sold, but approximately $700,000 will be invested in the land trust.
Engel said the recouped funds will be available for future projects, with one option expected to be presented to the county's HRA board during its 4 p.m. meeting Thursday in board chambers of the city-county Government Center.
The project proposed by Bigelow Homes is seeking a $1.7 million county loan to help create eight homes with price tags of less than $350,000.
The proposal isn't expected to include the First Homes land trust, which limits buyers to households earning 80% or less of the area median income.
Engel said the project is seen as the next step after the Red Hawk test, and Paradise said it will show the ability to provide a variety of housing through public-private partnerships.
"I personally think there is a big need for that next step," he said.