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        P       M        M
 Marshall arkway: arshall, innesota

 Addressing continuing labor shortages, the Southwest            D
                                                           General escription
 Minnesota Housing Partnership joined with Schwan's        Marshall is located in rural southwest Minnesota, about
 Food Company (SWMHP), the major employer in the           30 miles from the South Dakota state line and 150 miles
 town of Marshal,l Minnesota, to develop affordable        from Minneapolis. With a population of 12,735, it is the
 housing for company employees to encourage the re-        largest city within a 100-mile radius. In the 1920s, food.
 tention of workers. The unique partnership included a
                                                           processing industries began to grow in importance, and
 significant financial contribution from Schwan's.         today are the leading economic activity there. Schwan's
                                                           Food Company, the largest brand of frozen food in the
             P     FACTS
      MARSHALLARKWAY                                       United States, is headquartered in Marshall. With 2,500
         Use: nehundredwenty
      Land  O         t    unitsof mixed-                  employees in Marshall, Schwan's is the largest single
           single-family
     income,                 o
                      housing n40 acres.                   employer in the city. Schwan's and all other major em-
                 Marshall arkwayonsists 82
     Affordabillty:      P     c      of                   ployers in Marshall reported labor shortages and prob-
                 lots,threeduplex
     single-family               lots,18 moderate-         lems recruiting and retaining necessary employees.
                     u                      a
     incomemultifamily nits,and30 multifamily nd
                                                           As part of their effort to create an area plan for the city,
                unitsranging
     mixed-income                        o
                            from30 percent f
                                                           the Marshall Area Plan (MAP) committee was charged
             median
     statewide            to
                   income marketrate.Home-
                                                           with developing goals relating to the future economic vi.
             w                byincome.
     ownership asnot restricted       Thevarious
                                                           tality and livability of the city. Through its analysis, the
                     wereavailable
     fundingmechanisms           onlyto house-             MAP committee identified the lack of affordable hous-
                certainincome
     holdsmeeting                    Theper-
                            thresholds.
                                                           ing as a key barrier to sustainable economic develop-
          m       products
     manent ortgage               income
                         hadvarying
                                                           ment in Marshall. A subsequent study of housing needs
               from80 to 115percent f the
     requirements                 o
                                                           confirmed the shortage of residential options. The stud-
             median
     statewide           G
                   income. apandentry-cost
                                                           ies found that the average sales price of housing units in-
              w                   below percent
     assistance ereincome-restricted   80
                                                           creased from $59,600 to $105,200 between 1990 and
     of thestatewidemedian      R     h      is
                          income. ental ousing
                                                           1999. This represents an increase of 8 percent per year,
                 at      a
     alsoavailable market ndaffordablerates.
                                                           significantly outpacing inflation and gains in income.
     FUNDING/PROGRAMS                                      The local workforce was being priced out of the market;
           Taxincrement
     Funding:                 USDA
                     financing,  Rural                     41 percent of Marshall's population earned less than
               502DirectLoanprogram,
     Redevelopment                 USDA              "t.
                                                           $43,S20,which is 80 percent of the statewide median in-
         D         ParticipationoanProgram,
     Rural evelopment          L                           come in 2000. Because of the region's rural nature, the
     USDA          Loan
          Guaranteed Programandsingle-family               profit margins of market-rate housing are very slim,
            r      b          mortgage
     mortgageevenue ondpermanent                           leaving little room to price homes below market rate
     products.
             Zero-interest
                        closing
                              costloansand                 and make them affordable to low-income workers.                I
                                                                                                                          ~
     grants, ndmarket-rate
           a             firstmortgageloans. .        '"                                                                      i
                                                           With the adoption of the MAP in 2000, the city real-               i
     Programs:
     homebuyer
                   employer
               Major
               education.
                                   a
                             support nd
                                                           ized that it had an affordable housing problem that            I
                                                           was affecting its ability to compete economically.             I
                                                                                                                              ,
              Southwest
     Developer:              H
                     Minnesota ousing
     Partnership.
     Architects:
              Cermak hodes
                   R     ArchitectsSt.Paul,
                                  (                                                                                       I

              andJames
     Minnesota),          McKellin
                     Nelson      III,
             (         Minnesota).
     ArchitectStillwater,                                                                                                 !




62
           Development Process                                            infrastructure improvements. The cost for individual
           The Marshall Economic Development Agency (MEDA)                lots was only $3,200. Construction costs were reduced
           began examining strategies for developing housing that         through a Schwan's construction loan. Schwan's Food
           would be affordable for families earning 50 to 80 per-         Company built four homes using out-of-pocket funds.
           cent of the statewide median income. MEDA engaged
           SWMHP to help develop an action plan.                          Planning and Design
                                                                          The site plan for the project, now called Marshall Park-
           Planning for the project began in 2000, when MEDA and
                                                                          way, called for 78 single-family units, three duplex lots,
           SWMHP began evaluating potential sites. They settled on
                                                                          and two multifamily buildings, one with 18 units and
           a 40-acre site located just northwest of Marshall's down-
                                                                          the other with 30. Homes and duplexes are built in a va-
           town. The land was purchased with funds derived from a
                                                                          riety of styles that include ranch, neocolonial, and split-
           tax increment financing (TIF) bond issue. The construc-
                                                                          level. Some homes have front porches. The site plan was
           tion plan was to build in two phases, with sales from the
                                                                          designed to integrate into the surrounding neighbor-
           first phase helping to fund the second. SWMHP was ex-
                                                                          hood, with the goal of stimulating more adjacent resi-
           pecting a six-year time frame to build out both phases,
                                                                          dential development. The streets were laid out in a grid
           but the whole site was built and occupied in only three
                                                                          pattern that created six blocks. One long block on the
           years. Phase I, which consisted of 42 single-family lots
                                                                          east side of Marshall Parkway would transition into the
           and 18 rental townhomes, was sold out by January 2003.


           Rnancing     and Programs

           The Southwest Minnesota Housing Partnership was
                                                                                                        Concerned about employee
           founded in 1992 by four community-based organizations                                        recruitment and retention,
           concerned with population loss and the stabilization of                                      Schwan's Food Company finan-
                                                                                                        cially assisted the develop-
           the region's economic base in order to stay vital. SWMHP                                     ment of affordable homes at
           serves its original 14-county service area. It has devel-                                    Marshall Parkway.

           oped, rehabilitated, or financed 4,079 units to date, bring-
          ing an investment of over $150 million to the region.
          SWMHP has formed a staff of 11 professionals with ex-                                         All single-family detached
                                                                                                        homes-the affordable as
          perience in planning, construction, finance, and asset                                        well as the market-rate ones-
          management. The partnership continually works to ex-                                          have a two-car garage.
          pand and improve its services and now offers planning,
          construction management, program administration,
          project fiscal management, lending, grant writing, mar-
          keting, education, and mortgage counseling.
                                                                                                       The market-rate single-family
                                                                                                       homes in the community are
          In order to make Marshall Parkway affordable for lower-
                                                                                                       slightly larger, and have more
          income residents, SWMHP had to employ a number of                                            expensive finishes and more
                                                                                                       exterior detail.
          different affordable financing strategies. These strategies
        - can be divided into four different types: reduction of
          land costs, reduction of construction costs, first mort-
          gage products, and special mortgage products. Land ac-
          quisition costs were reduced using tax increment financ-
          ing. TIF funds were used to purchase the land and make




                                                                             Case       Successful
                                                                                 Studies:                         Parkway63
                                                                                                DeveJopments-Marshall

.....
,...   ~   --~-         ~-- "'~,..,.,.,...-                    -~-'."-               o~.   -..   ~~.   -


                   existing neighborhood. The multifamily dwellings               Marshall Parkway. In general, purchasers must earn less
                   would occupy the north side of the development. The            than 80 percent of the statewide median income.
                   remaining land would be divided into five blocks de-
                                                                                  SWMHP maximizes the affordability of homes through
                   signed around a park that would also function as a
                                                                                  the aggressive use of first mortgage products. SWMHP
                   stormwater retention area. These blocks each contain
                                                                                  used three different first mortgage programs at Marshall
                   between six and 16 single-family and duplex units.
                                                                                  Parkway: the Community Activity Set Aside program
                   The site plan works largely within Marshall's existing         (CASA), the HUD Rural Redevelopment 502 Direct
                   zoning, which is a standard suburban-style code. Lot           Participation Loan Program, and the Guaranteed Loan
                   sizes in the development are 60 feet wide by 125 feet          Program. Regardless of which program is used, the process
                   deep with 25-foot setbacks. Each home has a two-car            starts with homebuyer education and mortgage counsel-
                   garage, and all multifamily units have designated off-         ing for qualified buyers.
                   street parking. Streetscape enhancements include side-
                                                                                  CASA,a program run by the MinnesotaHousing Finance
                   walks and trees planted throughout the development.
                                                                                  Agency,is funded through the saleof tax-exempt single-
                   The affordable units in the development differ slightly
                                                                                  familymortgage revenue bonds. The program is an
                   from the market-rate units in two ways: they have
                                                                                  income-restricted product for first-time homebuyers
                   slightly smaller square footage, and they have less ex-
                                                                                  that range from one-half to one point below conven-
                   pensive finishing and exterior details.
                                                                                  tional financing.

                               a
                   Affordability ndManagementlMarketing                           Funded by the U.S. Department of Housing and Urban

                   MEDRs investment in the project leveraged additional           Development (HUD), the Rural Redevelopment 502

                   local money including funds from the Greater Minnesota         Direct Loan Program is a low-interest product designed
                                                                                  to help low-income rural residents acquire housing. The
                   Housing Fund (GMHF), the Minnesota Housing Fi-
                                                                                  product has interest rates pegged to income, with the
                   nance Agency, and Schwan's Food Company. These funds
                  went toward constructing homes and providing down-              lowest rate being 1 percent, over a 33-year loan term.

                  payment and other financial assistance to homebuyers.           SWMHP offered two special mortgage products to po-
                  All but ten of the single-family units constructed at           tential Marshall Parkway homebuyers: an affordable
                  Marshall Parkway are considered affordable. The afford-         gap loan and an entry cost assistance loan. If they wish
                  ability of these units is largely guaranteed by a number        to access the gap and entry cost assistance loans, all po-
                  of financing products available to potential homebuyers.        tential borrowers are required to take homebuyer edu-
                  These products come from a variety of agencies includ-          cation classes, work with mortgage and budget coun-
                  ing federal, state, and nonprofit organizations. SWMHP's        selors, and use 28 percent of their gross income for
                  role is to steer potential homebuyers to the financing          housing costs. Housing costs are defined as the amount
                  product that best fits their needs. The variety of financ-      of income that can be used to make principal, interest,
                  ing products has helped guarantee a mix of incomes at           insurance, and tax escrow payments. Since the gap loan




                                                                                                                 Twomultifamily buildings
                                                                                                                 were constructed, including
                                                                                                                 48 units of affordable and
                                                                                                                 market-rate rental units.




                  64   WorkforceHousing:InnovativeStrategies and Best Practices
       is based on the "gap" between the maximum loan a               LessonsLearned
       buyer can access and the cost of the house, the amount         . Employer-assisted housing is feasible in smaller towns.
       of the loan has varied from several hundred dollars to
                                                                      In fact, it is probably a better fit in smaller towns, where
       maximum amount allowed of $25,000. The GMHF also
                                                                      the relationship among firms, local government, and the
       offers a 0 percent gap loan, which is due when the             community is stronger than in larger metropolitan areas,
       mortgage is paid off or refinanced, or the home is sold.       where those connections are less tractable. There also

       The entry cost a~sistance loan is a 0 percent deferred         is a potentially greater need for companies to playa role
       loan offered by the SWMHP. It comes due when the               in providing affordable housing in smaller markets be-
       first mortgage is paid off or refinanced, the home is          cause fewer inexpensive housing options generally are
       sold, or it ceases to be owner occupied. The loan              available there.
       amount is determined by closing costs excluding "pre-          . TIF bonds, used to purchase the 40 acres upon which
       paid" amounts. Prep aids are the first year's real estate      Marshall Parkway was built, helped reduce the cost of
       taxes and insurance premium that is required by the            land acquisition, which was passed on to homebuyers.
       lender at closing. The entry cost assistance loan pro-
       vides two-thirds of the needed closing costs. Closing          . Shortly after Marshall officials decided to address
       costs for homes at Marshall Parkway have averaged              affordable housing in the community, they realized that

       $2,700 per home, with the entry cost assistance loan           they did not have the institutional capacity to develop a

       paying an average of $1,800 per home. The borrower             successful housing strategy on their own. By partnering
       must supply $900 (one-third), plus the required pre-           with SWMHP, they aligned themselves with an organi-
       payments on taxes and insurance.                               zation that could provide the technical expertise the
                                                                      community needed to succeed.
       The success of Marshall Parkway has prompted SWMHP,
       the city, and Schwan's to embark on the development of         . The involvement of a major employer was critical to
       Marshall Parkway II. All the stakeholders wanted to im-        the process. For years, Schwan's had been giving back to
       prove the master plan and individual building architec-        the Marshall community through a number of projects
       ture in Marshall Parkway II. They have partnered with          and programs. This resulted in a strong foundation for
       the Building Better Neighborhoods Program to achieve           cooperation between the city and Schwan's. Working
       this goal. The mission of the Building Better Neighbor-        together to build affordable housing for the communi-
       hoods Program is to foster the creation of safe, decent,       ty's workforce was an important goal for both parties.
       and affordable housing within cohesive, well-planned,          Besides contributing financial support for the project,
       and economically balanced neighborhoods. The pro-              Schwan's involvement added credibility and helped le-
       gram helps communities like Marshall that are new to           gitimize the concept of affordable housing development
       developing affordable housing to address issues of pre-        within the community.
       serving community character and appeal through good            . SWMHP's experience in Marshall and throughout
       planning, site design, and building design.                    rural southwest Minnesota has convinced the partner-
       In a small town, word of mouth is the best marketing           ship that homebuyer education is very important. Many
       strategy. Several sources provided the initial spark to gen-   people in rural areas feel they could never afford to buy
     . erate local discussion about Marshall Parkway. Schwan's        their own home. Showing people the path to home-
       helped pique interest by sending out information about         ownership not only improves lives, but also can be a
       the project in employees' paychecks. By holding an open        powerful marketing tool.
       house, SWMHP gave the community a chance to see the
       product available in Marshall Parkway. The Marshall In-
       dependent newspaper was vocal in its support of Mar-
       shall Parkway throughout its development.




                                                                             Studies:
                                                                          Case              Developments-Marshall
                                                                                    Successful                Par1lway
                                                                                                                     65

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