The AFL-CIO Housing Investment Trust (HIT) reached a key milestone in 2021, investing $1.6 billion in 100 multifamily housing projects in Minnesota. The projects include a mix of affordable, workforce, mixed-income and market-rate housing.
According to HIT, these projects have provided about 22.8 million hours of union construction work, 13,142 units of housing that are 47 percent affordable and a total economic impact of $4.8 billion.
These projects have been essential in Minnesota. It’s no secret that the supply of affordable multifamily housing remains far below the demand. There are too many people who can’t afford to live in apartment units located close to where they work.
Any influx of new affordable apartment units, then, is an important benefit.
“There was a big stretch, especially during the Great Recession, where it was difficult to find financing for construction projects,” said Kevin Filter, who has financed affordable housing in Minnesota for more than 40 years and is now a member of the HIT Board of Trustees. “But because the HIT partnered with us, we were able to spur revitalization and significant growth in the Twin Cities and statewide.”
HIT, then, has been a key player in the development of new affordable and market-rate multifamily projects across the state. Its investment in 100 multifamily projects here is providing at least some relief for renters seeking apartment units they can afford.
And in good news, HIT officials have no plans of slowing down. They are continually looking for more affordable and market-rate housing projects to fund.
“Minnesota is only our second state in which we have been able to accomplish 100 deals,” said Paul Sommers, HIT’s regional director of marketing. “The other state is Illinois. We are very proud to celebrate our 100 deals in 34 cities across the state.”
Of the 100 financing deals that HIT has closed in Minnesota, 71 are in the Twin Cities metropolitan area, Sommers said.
Several of the projects that HIT has funded are under construction now. Those in Minnesota are:
• Bassett Creek Apartments– Minneapolis
• Parker Station Flats– Robbinsdale
• Sundance at Settler’s Ridge– Woodbury
• Gateway Northeast– Minneapolis
• Zvago Cooperative at Stillwater– Stillwater
• Morrow (University and Fairview)– St. Paul
• Wilder Square– St. Paul
• Amber Union– Falcon Heights
“In the last five years, there has been no busier market for us than Minnesota,” Sommers said.
During this five-year stretch HIT has provided financing for 27 housing projects, with about 51 percent of the resulting units being affordable.
And as far as recent history goes? HIT has provided financing for seven multifamily housing projects since the start of 2020. Of the units from these projects, 84 percent were affordable, Sommers said.
It’s clear from the numbers, that not even the COVID-19 pandemic slowed HIT’s work.
“We invested without a pause,” Sommers said about the pandemic. “We were able to keep our pipeline healthy. There was a little bit of a hiccup and work stoppage for about a week at the beginning of the pandemic. But the building trades are considered frontline workers and worked throughout the pandemic. Sometimes a construction loan might take a little longer. But we all recognized that affordable housing was a crisis before the pandemic. And as we were dealing with the pandemic, we understood that affordable housing was more important than ever.”
Why has the Twin Cities area been so busy for HIT? Sommers pointed to the long-term relationships that HIT has built here with the mortgage-lending community. He also credits the building trades in the area. They, he said, have been committed to providing affordable housing projects on time and of good quality.
And in like most major markets across the country, demand is simply high for all types of multifamily buildings, including those falling into the affordable and market-rate range.
“Every metropolitan area is in need of more rental housing,” Sommers said. “There are large demographics of young professionals that prefer a metropolitan area. The older population is downsizing, and they want to live in apartment units without worrying about maintenance. Many renters are increasingly interested in transit-oriented developments. The demand is there and is rising, here and across the country.”
What’s interesting about the projects in which HIT is investing is that many of them are indistinguishable aesthetically from higher-end multifamily buildings. This means that they include higher-quality finishes and more of the amenities that all renters today want.
This means a focus on common areas in which residents can gather. With more people working from home, it also means more common-area spaces in which renters can work during the day.
Other HIT-financed properties include first-floor retail, including grocery stores.
“It’s very rare that we do just an apartment building with nothing else,” Sommers said. “There is some retail. The projects that we finance have evolved. The quality of everything from the appliances and the interior spaces to the high ceilings have made these projects attractive and allowed people to have a quality affordable place to live.”
Since the start of the pandemic, demand among renters has shifted a bit, from core urban buildings to those in the suburbs. Some of this has to do with the ability more people have today to work from home. Other renters were seeking more space as the pandemic continued.
Sommers, though, said that there will always be demand for apartment buildings in or near the Twin Cities core urban neighborhoods. HIT, for instance, is working on two financing deals for new apartment projects slated for the Minneapolis urban center and another in St. Paul. HIT hoped to close the financing for all three deals before the end of 2021.
“In terms of entertainment and sports, a lot is located downtown,” Sommers said. “We will see what 2022 brings. There is plenty to bring people back downtown. It’s not only work and the return to the office. It’s also entertainment. It’s true that we have been financing more projects in the first-ring suburbs right now. But I do expect to see people returning to downtown, too.”
While HIT remains busy, it – and the developers with which it works – still faces challenges in 2022. As the new year begins, there is little evidence that the supply shortages that the construction industry has faced are lessening.
Sommers said that many of the projects done in Minnesota are stick-frame. That means that rising lumber prices were a challenge to the industry. At the same time, other supplies – such as steel and insulation – remain in short supply and are taking longer to reach construction sites.
Despite this challenge, Sommers is predicting a busy year in 2022 for HIT.
“We have a healthy pipeline,” Sommers said. “At HIT, we have an initiative in which we identified nine cities to do a billion dollars in financing. Minneapolis-St. Paul is part of that initiative. We are ready to put our best foot forward in 2022.”
