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Monday, December 19, 2016

The most expensive low-income housing project... ever?

In May, we published a report on the rise of white-segregated subsidized housing in Minnesota and around the nation.  These projects, which we called Politically Opportune Subsidized Housing, or POSH, take advantage of the range of different subsidies available to private and nonprofit affordable developers. By combining Low-Income Housing Tax Credits with Historic Tax Credits and other sources of funding, developers are able to produce architecturally striking, monumental buildings that resemble luxury condominiums more than traditional affordable housing.

Typically, using housing subsidies to construct units with luxury stylings and top-flight amenities would raise eyebrows. But developers have discovered a workaround: it turns out that nobody objects too heavily to subsidized housing, if the occupants are young, childless, moderate-income, and white. In the most extreme cases, the owners of these buildings have taken advantage of a specially-created "artist housing" exemption in federal law to screen for applicants who can demonstrate a commitment to the arts.  In practice, in many buildings, this has meant screening out anyone who doesn't fit the mold of the young, white "creative" -- and letting anyone who fits the mold in, regardless of whether they actually produce any art at all.

When the report was first released, it received coverage in the New York Times, Atlantic Monthly, and American Prospect, much of which centered around the A-Mill Artist Lofts on the Minneapolis riverfront. For good reason, too: this project is enormous, spectacular, and extraordinarily expensive. It provides striking views of the river and downtown, a rooftop clubhouse and deck (fully equipped with a bar, sound system, and grills, of course), and in-house art and yoga studios. State housing occupancy data indicated that residents were more than 85 percent white -- whiter, in fact, than the residents of the wealthy surrounding neighborhood. In many ways the A-Mill is the poster child for POSH development.

But truth be told, we never quite locked down the total cost of the A-Mill. News reports were all over the map, with reported costs gradually increasing throughout the development process, from $112 million to $138 million, to $151 million, finally topping out at $170 million, which was the figure we ending up using. This put per-unit costs in the range of an astonishing $665,000 for each of the building's 251 units. It was strange, though, that we couldn't find a detailed final cost figure anywhere; usually, accurate cost figures are relatively easy to locate in city documents. Here, they were nowhere to be found.

A few weeks ago, we received from the city the final cost certification for the A-Mill, after several months in data request limbo. And it's easy to see why no one was eager to publish the final numbers. The total project cost is $180,913,145, or $720,770 per unit, far above any public estimate that we're aware of. The new data proves, conclusively, that the A-Mill is the most expensive subsidized housing project in Minnesota history, by a large margin. On a per-unit basis, it might be the most expensive publicly funded low-income housing project in history.

The cost certification also reveals the the final developer fees for the project were $28,447,819. Developers' fees are typically calculated as a percentage of project costs, so it should be little surprise they're sky-high here. This system may also create an incentive to push those costs as high as funders will allow.

If $28 million in developers' fees and a $180 million flagship project weren't enough reward for the developer, keep this in mind: while federal law typically requires 30 years of affordability for tax credit projects, it includes an escape clause that lets owners switch to market rate rents after only 15 years. Most Minnesota developers waive their ability to do so, but the A-Mill's owners have not. One can't help but wonder if Minneapolis just spent tens of millions in taxpayer money building 2030's hottest new riverfront condominium complex.

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