Sustainability

By Lydia Peterson
Lydia Peterson, a lifelong Duluthian, serves as a Lead for America Community Resiliency Fellow in the Sustainability Office. She is a graduate of the University of St Andrews, where she studied International Relations and Anthropology. This fall, Lydia will leave us to head to law school at the University of Michigan.

Sustainability and affordable, accessible housing are inextricably linked. Duluth’s aging housing stock offers opportunities for thoughtful rehabilitation that incorporates energy efficiency and resiliency improvements while minimizing loss of units to blight and neglect. New construction and conversion projects provide opportunities for energy efficient or net-zero design practices. In addition, a national conversation on climate migration has also highlighted Duluth as a refuge city, raising questions of future housing demand should our population rise.

Under the administration of Mayor Emily Larson, the City is working to alleviate Duluth’s housing crisis. The City’s Housing Team, imbedded in the Planning and Economic Development, was created in 2019 to create and preserve housing units – and thus resilience and sustainability – in our community. Public Works and Utilities staff continue to tackle a record number of miles of street improvements each year, along with water line replacements and repairs, and other infrastructure needs in neighborhoods. Community work through the City’s Love Your Block program is helping reduce blight and connect neighbors through mini-grants, workshops, clean-ups, and gatherings (click here for more, and follow @loveyourblockduluth on Instagram). Several goals of the City’s Climate Action Work Plan are reflected in housing work. Sustainability staff received a technical assistance grant from the American Council on an Energy Efficient Economy, resulting in an Energy Equity for Renters final report and recommendations that we are working to advance for energy affordability.

City staff work closely with federal, state, and county partners to provide funding and technical assistance to both private sector and non-profit organizations to meet housing preservation and construction goals. Below is a summary of some of the data, funding sources, and collaborations that contribute to housing work in Duluth.  

Data-driven

Each year, the City publishes a Housing Indicator Report which provides basic information on the housing market, demographics, and workforce statistics in Duluth. The Report uses, as a point of reference, a 2019 study by Maxfield Research and Associates that determined the demand for roughly 3,600 new affordable housing units between 2019 and 2024. Since 2019, Duluth has seen a net gain of 1,183 units. Staff continue to work with private and non-profit developers on both affordable and market rate housing projects for homeownership and rent.

In 2019, Mayor Larson convened a group of City staff and partners from public, private, and nonprofit sectors to form a Housing Task Force. The group sought to respond to the shortage of affordable housing in Duluth, with the overarching goal of making the city more affordable for residents earning $50,000 or less per year. The Task Force presented the following five recommendations in their Mayor’s Housing Task Force Report (March 2020):

• Establish a Housing Trust Fund
• Offer loan Guarantees
• Establish General Obligation Bonds
• Deploy Revenue Bonds 
• Prioritize assistance for homeowners to improve use of existing space and create additional units on their property (e.g. streamlining permitting and planning processes, education, and marketing)

Several steps have been taken to put these recommendations into action, and one recommendation has been fully established: a Housing Trust Fund. 

Housing Trust Fund

In November of 2022, the leading recommendation from the Mayor’s Housing Task Force – the creation of a Housing Trust Fund to bundle and leverage funds to channel investment into affordable housing projects – was made a reality. The City and the Local Initiatives Support Corporation (LISC) partnered to create the Fund with administrative support from the Duluth HRA. The Fund addresses five goals: increase housing stock in Duluth (particularly affordable units), invest in Duluth neighborhoods (making affordable units citywide), remove blight, improve safety and encourage pride in our neighborhoods, leverage existing municipal infrastructure, and promote density wherever possible.

To reach these goals, developers are encouraged to apply for one of three City sub-programs within the Fund (LISC provides two separate sub-programs, more information may be found here). These programs seek to incentivize the creation and preservation of housing units. The Comprehensive Rehab and Conversion Sub-Program (CRCP) provides low or no-interest construction loans for conversion projects, or those needing substantial rehabilitation, which create up to 20 new units of housing. If affordable units are created (defined as units rented to those earning 80% or less of the area median income (AMI) or sold to those earning 100% or less of the AMI), projects may be eligible for loan forgiveness. The same is true for the second sub-program, the Infill Development Sub-Program. The Infill program provides low or no-interest loans for new single-family, multifamily, and accessory dwelling unit (ADU) projects of up to 10 units on infill sites citywide. Finally, the Flexible Multifamily Fund Sub-Program provides zero interest loans for multifamily projects with 10+ units where least 20% of units are rented to those earning 60% or less of the AMI.

State and Federal Funding

In addition to the Housing Trust Fund, the City serves as a conduit for state and federal funding opportunities that support local housing projects. 

The City receives approximately $3 million annually from the U.S Department of Housing and Urban Development (HUD) via Community Development Block Grants, the HOME Investment Partnership Program, and the Emergency Solutions Grant Program. These funds are utilized to provide decent housing and opportunities to expand economic opportunities for low- and moderate-income persons. The 2020-2024 Duluth Consolidated Plan, which identifies local funding priorities may be found here, and information on how to apply for funds may be found here.

Extra federal funding sources, spurred by the COVID-19 pandemic, have been carefully applied to housing projects in Duluth. The City received $58.117 million in American Rescue Plan funding – the third largest allocation in Minnesota. Of this funding, the City Council – per a recommendation by Mayor Larson -- dedicated the largest amount, $19.2 million, to housing. This money, like community development funding, is currently being invested in specific projects and initiatives. Said projects include the development of Plover Place (a 24-unit development that will provide stable housing for individuals facing or at risk of homelessness), rent buy-downs of existing projects to increase the number of affordable units, and the creation of new multifamily, mixed-income developments such as Fairmount Cottages.

Finally, City funding from the U.S. Department of Housing and Urban Development (HUD) is allocated to help fund the Duluth Housing and Redevelopment Authority’s homeowner and rental rehabilitation programs. The Healthy Homes Homeowner Rehab Program provides zero interest deferred loans of up to $30,000 to qualified homeowners for single-family home repair projects (i.e. - energy efficiency, roof repair/replacement, window replacement, HVAC, etc.). The Rental Rehab Program similarly provides zero interest loans of up to $15,000 per rental unit ($10,000 per studio unit), and up to $30,000 for a single-family rental home. The Healthy Homes Pilot Program provides thirty-year deferred loans (of up to $25,000) to qualified homeowners for single family home repair projects, and owner occupied small multi-family homes of two to four units whose rents are affordable to low and moderate income households. Finally, Exterior Housing Renovation Matching Funds allocate deferred loans for renovation costs of up to $15,500 through MN Housing. 

Through the Inflation Reduction Act, Federal resources via tax credits and rebates are now available for home energy retrofits. 

Special Financing Tools

Specialized tax agreements are another tool the City may employ to encourage the development of affordable housing projects. Low-Income Housing Tax Credits (LIHTC), which provide housing developers or their investors a 10-year reduction in tax liability in exchange for capital to build affordable rental housing units, have been utilized for several housing projects in Duluth. The City supports applications to these Credits, which are allocated by the Minnesota Housing Finance Agency. Applications for 2024 opened in April of 2023. More information may be found here.

Tax Increment Financing (TIF) is another financing tool deployed for housing projects in Duluth. TIF captures the increase in value resulting from new construction or development projects via property taxes. This captured tax capacity is utilized as a source of financing for housing developers. Recent projects in Duluth that utilized TIF include the Board of Trade redevelopment, which created 84 units, and the Greysolon Plaza Rehab, which preserved 150 units.

Land Acquisition

Through collaboration with St. Louis County, DEDA, and the Duluth HRA, the City has worked with local developers and nonprofits to find suitable property for new construction projects.  Whether via donation or for a reduced fee, the City and DEDA convey property to support housing projects that meet local demand and priorities of the Duluth Comprehensive Plan.

For more information:

• Visit the City’s Housing in Duluth website 
• Follow @duluthsustain on Instagram for more info on the intersection of housing and sustainability