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Free Market Solves Housing Needs

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					Long-Term Recovery from Disaster

Free Market Solves Housing Needs Breckenridge’s solution to restoring housing a success From Northscape—The Grand Forks Herald Online BY RYAN BAKKEN HERALD STAFF WRITER BRECKENRIDGE, MN—Proportionally, this city of 3,700 people lost more housing to the 1997 flood than Grand Forks. As in Grand Forks, Breckenridge city leaders saw an urgency in restoring housing so that their citizens wouldn’t move away. Both cities moved quickly. But the similarities ended there: The city of Breckenridge was involved only in priming the housing pump, not flooding it with almost 200 homes. Except for its brief initial involvement in building, Breckenridge allowed the marketplace to set the pace, not on “build it and they will come” speculation. Government money went to the home buyers, not to developers, marketers, consultants and interest payments on unsold properties. Most of the new home prices are in the $80,000 to $90,000 range, not the six-figure homes of the Congressional 1 and 2 housing subdivisions in Grand Forks. So, while Congressional in Grand Forks has attracted few buyers, at least so far, restored housing is regarded as a huge success in Breckenridge. “When we moved out here, my husband (Doug) and I were so happy to be out of that trailer park that we bawled,” said Brenda Koppelman, a resident of the new Prairie View housing area on the south end. “Sometimes I think it should be illegal to be this happy.” “Stan’s the reason. Stan’s our hero.” Flood damage was extensive Stan is Stan Thurlow, a consultant who has assumed the title of Housing and Flood Recovery Director for the city. Thurlow’s office became a one-stop shopping center for flood victims. And there were plenty of them. Breckenridge has had 108 buyouts totaling $4 million, with another 19 offers pending. Grand Forks, with 14 times the population than Breckenridge pre-flood, has had 742 buyouts totaling $47 million, with 68 on the table. In both cities, and estimated 75 percent of homes took on water.

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While sister city Wahpeton, ND.,—with 12 buyouts—suffered minimal damage in 1997, Breckenridge was flooded twice, nine days apart. Complicating matters for Breckenridge is that the Otter Tail River flows east-to-west through town. That means the diking front lines are both sides of the Otter Tail, plus the east sides of the Bois de Sioux and Red rivers. The Otter Tail and Bois de Sioux meet to form the Red here. The first flood from the Otter Tail hit the north end and the more severe second flood from the Bois de Sioux swamped the south end. But Breckenridge has bounced back quickly from the devastation. Thurlow said the taxable valuation of property already has exceeded the 1997 figure. If any population has been lost, it’s been minimal, Mayor Cliff Barth said. “They stayed because of the city’s initiative,” Barth said. “People could see the momentum building. Every sector they looked, people saw progress. The progress includes 65 homes having been built and sold, with plans to build another 30 to 40 this summer. “Breckenridge has done everything extremely well in flood recovery,” said Louis Jamboys, director of community finance for the Department of Trade and Economic Development. “They had a sub-division in the works, so the housing recovery kicked off quickly.” Plan: Incentives, free market While Grand Forks joined forces with Grand Forks Homes to build close to 200 houses, Breckenridge combined with the nonprofit West Central Housing Partnership to develop 10. There was no commitment—real or moral—of city money in it, Thurlow emphasized. “We just did it to jump-start things, to show the developers that it would work,” Thurlow said. “They needed to see how fast they would sell.” Since five or six new homes a year was considered a building bonanza here, contractors needed assurance. The first three of those homes, 1,000 square feet each, sold for $66,500, two of them before construction was completed. That not only served its purpose of convincing developers that there was a market, but also was a cue for the city not to commit to a bigger partnership. “Once a government gets involved and starts signing contracts, people think it’s a license to make excessive amounts of money on you,” Thurlow said. “Once the city gets involved, costs escalate. People feel there’s an unlimited grant of money there.” Instead, more than 20 different contractors have built homes. “The concept of a free market is what made it all work,” Thurlow said. “The contractors knew that, if they had a fair product with a decent profit margin, they could sell them before they were done with them. And they did. “You get more product in a competitive market.”

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So the city turned its attention—and money—to the potential home buyer. The Port Authority, the city’s economic development arm, bought land and installed the infrastructure for two developments. The Gewalt Subdivision is more upscale. The covenants mean that that the lowest price home that can be built there is about $90,000. Eight homes have been built and at least 17 more will build this year in the 63-lot subdivision. The Prairie View Subdivision has fewer restrictions. Its homes include double-wide trailers, stick-built, Dynamics and other off-site built homes. Of the 19 homes already built in the development, the lowest-priced is $72,000, with almost all of the rest in the 80s. Ten other lots in Prairie View are scheduled for building this year, leaving only one of the 30 lots there unsold. Then, incentives, paid for by state, federal and private funds, were added to the mix. The amount of incentives dependent upon ability to pay, income and cost of the new home. Thurlow said 19 different programs were used with “lots of bells and whistles, lots of mixing and matching.” Assisting buyers There were two main programs to assist buyers of new homes. Under one, buyout recipients could receive up to $7,500 to cover lot and special assessment costs, and $15,000 in gap financing. The same state-supported plan as used in East Grand Forks, the gap financing comes in a deferred loan payment that converts into a grant after 10 years of owning and occupying the home. The other main program, not limited to flood victims but based on income, called for payment of specials and $12,000 in gap financing. “Take an $80,000 home,” Thurlow said. “It will cost a flood victim to qualifies $65,000, but it’s worth close to $100,000 (because of free specials and lots).” He said new home owners got up to $30,000 in incentives, with $15,300 the average. Those who qualified by income received more than $20,000. Grand Forks’ voucher program called for $15,000 for buyout victims who built a new home and $10,000 if they bought an existing home. In Breckenridge, the help extended to mobile home owners who were bought out. They received $5,000 toward home ownership in Breckenridge. And people who were bought out could repurchase their bare lot for $1. Because Breckenridge, oddly enough, isn’t in the 100-year flood plain, they could rebuild on the lot. While $15 million of public money has even been given or committed to Congressional, Thurlow said he has spent $1 million of his $1.4 million housing incentives’ pot. Varying needs, varied programs

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Denise and Pat Vold, who moved into their beautiful new home in the Gewalt Subdivision two weeks ago, just received a $7,500 lot grant. The Koppelmans and Leonard and Muriel Wanek, whose home was bought and demolished, received considerably more. The Wanek’s buyout was for $30,000, which was not rare for the homes lost there. As in Grand Forks, the homes along the river with the heaviest damage were old. “Of the first 50 buyout homes, the average price was $25,000,” Thurlow said. “I bought one house for $6,000. “So there were a whole lot of different people in different stations of their life with different housing needs. So if you controlled the development (like with Congressional), you would run contrary to people’s choices in prices and styles.” The Waneks lived in eight places in a little over a year before they moved into Prairie View last summer. They needed affordable housing because, while their previous mortgage was paid off, they lost virtually all of their personal property. “My husband and I were ready to retire,” Muriel said. “But with losing all that, we had to start over. Without the grants and other things, we’d never have been able to do it.” Thurlow, who also has worked in planning and economic development, said spending money on the likes of housing, infrastructure and parks is a city’s best investment. “You get more bang for your buck this way,” Thurlow said. “I’ve seen tons of city money spent chasing tons of industry. But I say you should try to make yourself stronger with things you can control. “I’d rather give the money to people on marginal incomes for housing than to investors. Residents are investing in the community by being here to stay. And if you have nice, affordable housing, industry will follow.” Koppelmans moved in over the 1998 Memorial Day weekend. Brenda’s a go-getter, shown by the fact that she built their deck by herself—in a day. Another project was fencing in the back yard because she runs a day-care center out of the home. Now she enthusiastically talks about plans to landscape. She’s received bids on rock and is shopping for shrubs. “The opportunity was there and we took advantage of it,” she said. “We’ve always wanted something of our own. I still can’t believe it happened and happened so quickly.”

Used with the permission of the Grand Forks Heraold

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