St. Paul Housing: A Modern Historical Tragic Comedy

The “character” of a place means various things to different people. The Las Vegas strip clearly is of a different character than Boston’s North End. Highland, with it’s strip malls, peripheral stroads and a dendritic-street designed neighborhood by golf courses is of a different character than Mac-Grove, with its older buildings, grid structure, and more atomized zoning.

A map of the historical survey, with houses and one unexplainable overpass.

When I moved to the Twin Cities metro, in many ways a type of “character” drew us to look at houses in St. Paul. Despite nonsensical sidewalk gaps, and a bike infrastructure that just doesn’t compare to Minneapolis, a lot of the houses are, to put it one way, super cute. Interesting stonework, high peaked roofs, lovely details…not unlike some picture of a European village. Now, I live in a charming house built in the 1920s, the kind of unique home that I assume is meant to be preserved by a recently proposed historic survey in Merriam Park, one which was reversed, but is not unlike other housing moratoriums enacted by the City of St. Paul.

Sounds like a good idea, right? After all, it was this kind of charming building “character” (I’ve always loved old buildings), that led us to view a number of quaint St. Paul houses in our search for a new home. What followed was an eye-opening experience.

First, I should state for the record that my St. Paul home is the most expensive I have ever owned, and I’ve lived in a number of cities. In fact, every Twin Cities house I looked at would be the most expensive I have ever owned, and at this moment, a little over two years later, I believe I could yet make a tidy profit on my house, should I choose. So, to put it plainly; housing is expensive here. Nearly as expensive as portions of New York state.

Second, almost all of those very expensive houses were in laughable condition. I’m certain that people did, in time, purchase them, because they have almost no choice if they want to live in St. Paul, but that doesn’t mean they are good homes. It just means there are some dedicated, or naïve, homebuyers.

Or they were homebuyers without my means to search. Leaving out identifying details, what follows is a summation of my experience shopping these cute homes at prices near, or north of, $400,000.

At one house, my agent and I passed nearly an hour running from room to room and laughing hysterically, as we compared the various slanting floors, and made jokes about a kid learning to walk in that house, or what their concepts of gravity might develop to be. The sellers helpfully left a copy of an examination by a structural engineer, attesting to the fact that the badly listing structure was still, in fact, structurally sound and would not list further.

Another pair of sellers thought that it was entirely unreasonable for me, as a buyer, to insist that the plumbing in a $400K house should function.

A particularly adorable structure that resembled a tiny castle, one I was in love with, was suffering from nearly catastrophic water ingress issues being held temporarily at bay by what appeared to be the local hardware store’s entire inventory of caulking.

My ongoing home search, which ran a year, presented me with odd holes carved or smashed in walls, panels missing from floors, and any number of broken, broken things. Window frames that cracked and crumbled under the strain of opening, or were impossible to open. A main horizontal structural beam that was sagging in the middle because it had been notched to fit a refrigerator. A refrigerator! Highly dubious remodels and modifications to walls and structures. These were the houses that an initial walk-through with my agent, and my untrained eye, could eliminate immediately. There were others that I put contracts on, but cancelled the contract after a thorough home inspection revealed things that I insisted on being repaired, or brought to code, and the sellers simply refused, something they could do because another buyer would come along, one with, perhaps, greater need than myself and my family.

What I had to work with was the luxury of both time, and money. Time, in that we weren’t in a crunch to find a new house; we were shopping from a rental, having sold our previous house to do so. I have a flexible job, one that pays above average, and our savings account was healthy. The search for a home took a year of dedicated questing, and every time I walked from a contract, I walked away from both the earnest money, and the inspection fees. Most families shopping for homes do not have the ability to simply leave thousands of dollars like that in order to find a house that is suitable for them.

As the search wore on, I also looked at the inner and outer-ring suburbs, where the same amount of money would get me a house that wasn’t a horror show of problems. As dedicated as I was to living in the metro, to being a single-car family, to having access to walkable neighborhoods and bicycle infrastructure, that dedication was flagging in the demoralizing headwinds of house-hunting in St. Paul, even from my position of advantage. Ultimately, I found a house. One with issues, but issues that could be dealt with.

Yet even the inspector missed the critical problem that would compel me to spend $30K in repairs in the first year alone. That hit is still exerting a dire gravity over our finances. For many families, it would be crippling, a devastating blow from a house that, seemingly, had no really serious issues. Many of these old, and very expensive homes, have known problems up front that will likely require secondary loans to bring them up to the standard that a family would want to live in, and raise children in.

So. after asking forgiveness for how many concepts are going to be blithely glossed, let’s discuss housing Economics 101.

Developers are eyeing homes at 1911, right, and 1905 Iglehart Ave. W., in St. Paul’s Merriam Park neighborhood, seen on April 12, 2018, for three or even four new homes. The owners’ family wants their elderly parents to be able to sell the two stately houses, which date to 1885 and 1900, respectively. (Lisa Legge / Pioneer Press)

The first potential buyer for the dump pictured here is a young, working family, with 2.7 human children, and likely two careers. They are busy, they are on a budget, and they need a safe home for their children. They can buy this house, for $600,000, then put at least another $500,000 into making it a suitable home for their children. This is a rough estimate based solely on public inspection records, which seem to indicate structural, foundation problems, non-functioning windows, plumbing and electric that isn’t to code, and a host of other problems, large and small, that are not in public TISH statements, but are to be expected after what seems to be decades of benign neglect. One million dollars. That same family can spend $400,000 in the suburbs for a home with a builder warranty and no problems, and get on with worrying about school and work.

The second potential buyer for this dilapidated structure is a developer, who will buy it, bulldoze it, and use the lot to erect a quadplex, or a condominium, or even a large modern home worth more than a million dollars. Those options are the only way to achieve any ROI, and the last option is problematic. The best is to make multiple, modern units for sale or rent, units which four young families will occupy.

I suppose I have to admire the neighbors for their…passion…for old buildings, passion which has expressed itself in the form of tantrums at public hearings, and efforts to use the power of municipal government to dictate the nature of private property transactions in a capitalist society. But these neighbors don’t have to live in the houses, so why should they be able to exert pressure on the city to use the law to preserve their sidewalk, old building view? Perhaps these neighbors should become the third potential buyer; the enthusiast who purchases and restores the house simply out of the love of old buildings? That is how things are done in a world of private transactions.

It’s been endlessly fascinating to me, however, that there is not the same level of anxiety in St. Paul when old homes along Mississippi River Boulevard are torn down and replaced with new, million dollar, luxurious and modern single family homes. Only when old large homes are going to be replaced with condos or quads. Interesting.

Suffice it to say that our first buyer – the young family – simply doesn’t exist, while the second – our developer – absolutely does. The first buyer only exists if the sum of purchase, plus work to bring the structure to acceptable levels of safety, amenities, and building codes, can be brought quite a bit closer to the price of the suburban house. How does this happen?

Simply put, the “value” of the house must come down, which means that, paradoxically, the way to save some old homes is to allow more of them to be torn down. An influx of modern, denser, safer, less maintenance intensive, and more reasonably priced family housing will cause the prices on older dumps to plummet, because they won’t be able to compete on the market with their new neighbors at such grossly inflated prices. They will then be more likely to sell cheap to buyers willing to restore them.

I find myself in the curious position of endorsing capitalism and market forces as the instruments of social justice and housing reform.

But if St. Paul thinks that prohibiting development and passing various historic ordinances will preserve these properties, the city is sorely mistaken. Yes, artificially restricting supply and development will cause the “value” of these old homes to continue to rise, and will keep them in place, but it is an illusory and temporary form of civic vitality. The young families and working professionals the city needs will move elsewhere. Elderly neighbors will walk the streets by the old buildings, well satisfied with their efforts at preserving their carefully curated museum, while the houses go unsold, and the maintenance problems mount.

The sickness will spread, while the houses decay into stratospherically expensive decrepitude, the schools will decline as families take their children to suburban homes and schools. The decline of the schools will be another reason for young families to avoid St. Paul, and as they do so, the homes will crumble and the tax base recede.

But they’ll be historic.

In the meantime, St. Paul’s scarcity of homes, and restrictions on development, have apparently added 20%-25% to the value of my home in merely two years. As a rational person, I’m starting to ponder on the appropriate dollar amount to sell at, and take my young family elsewhere. There is a point at which logic and finances will dictate no other reasonable course. I bought here not just for the unique old house, but also because proposed developments like the Ford site indicated a community poised to thrive and grow. I’m wondering if that judgment was in error.

 

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30 Responses to St. Paul Housing: A Modern Historical Tragic Comedy

  1. Chris Moseng
    Chris Moseng July 23, 2018 at 11:00 am #

    This is a fantastic post. Good to read some realistic economic analysis of the facts on the ground. It also coincides with my own recent experience in the market.

    Preservation entails more than simply not tearing something down. The anti-density advocacy I’ve been reading chiefly preserves things with wishful thinking, government regulation, and other people’s money.

  2. Justin July 23, 2018 at 12:33 pm #

    “The sickness will spread, while the houses decay into stratospherically expensive decrepitude, the schools will decline as families take their children to suburban homes and schools. The decline of the schools will be another reason for young families to avoid St. Paul, and as they do so, the homes will crumble and the tax base recede.

    But they’ll be historic.”

    Very well said, some of the country’s most troubled cities are loaded with historic architecture, and while that can be an invaluable asset, it can also lead to decay when that architecture has no usefulness to people who currently need places to live or work.

  3. codyzwief July 23, 2018 at 12:57 pm #

    This is a great post. Thank you for making it.

    The only thing I’d add is that citizen-led historic preservation initiatives don’t necessarily come from anti-density NIMBYism, and can still be destructive as detailed wonderfully in this post. In St. Paul’s D10, for example, a group of citizens is working to preserve St. Andrew’s Church, a building which is currently owned by a charter school that’s proposing to tear it down to build better student accommodations. The school estimates ~$1.2M to repair the church, which if it gets historic designation, would likely drive the school to leave the premises entirely, creating multiple decrepit buildings in what could be a thriving neighborhood next to a beautiful lake. In this case, the building (currently used as a school) would be replaced with a school, so the land use is exactly the same, and the preservation group is still attempting to save the church structure.

    • Serafina Scheel
      Serafina Scheel July 23, 2018 at 9:04 pm #

      This makes me sad, to see neighbors of valued educational institutions put their own desires for nostalgia ahead of the needs of future generations.

  4. Andrew Evans July 23, 2018 at 3:41 pm #

    I’m not really sure what the author is getting at, to be honest. It could be a Monday, and I am tired, so there is that.

    They don’t seem to have really wanted an old house, and all the quirks that come with them. Then got their contractor estimates from someone with dollar signs in their eyes.

    They may have wanted a totally gutted and re-done old house, which isn’t really that environmentally friendly, or conserves anything historical inside, but at least saves the exterior look.

    It sounds like they want these homes to be rehabbed and brought up to modern standards, but, a few paragraphs later they want to keep these neighborhoods affordable, which doesn’t help rehabbing. Unless subsidies are involved, which is fine and an article on it’s own on their effectiveness.

    Then they talk about what rich people do with their rich people problems. Which is a totally separate article, and really a totally different conservation problem than perceived or real obsolete older homes that are tore down in normal neighborhoods for density, decay, or whatever.

    Finally, they end with some dire prediction that comes close to the recession 10 years ago, at least as far as the properties are concerned, but predict totally different reasons and methods for the decline. There may or may not be some validity to those predictions, and it depends on a number of factors, but I doubt anything the city does would drive that. However, as fun as that would be to discuss and forecast, it’s a different article.

    They did make a point about working class buyers, especially those with a young family, but that’s a different topic on it’s own than older homes or neighborhoods and preservation concerns.

    I personally think they were looking for something specific, and that they were a few years late in the market here. I know a little more about across the river in Mpls, especially Nomi, but the market now is way different than 4 years ago when we bought than even 2 years ago when the author bought, and totally different than in the heights of the recession when no one was really buying anything. The rehabbed gems are few and far between, and now a lot of these “lived in” homes are hitting the market as is, at more or less market rates, or what were market rates a few years ago. This doesn’t bode well for someone picky, who wants to take time, and doesn’t want to gamble a little.

    Or I think they were bored, and had a few minutes to write this, much like I have and do now with this reply.

  5. Shawn July 23, 2018 at 3:44 pm #

    I’m often a critic of this forum’s anti-neighborhood-preservation campaign, but I wanted to admit that this article resonates with me as it discusses preserving an aspect of a neighborhood’s socio-economic character rather than just ignoring that concern altogher. Summed up in the way that I hear it, Sometimes to preserve a neighborhood’s complexion is to rebuild and increase density to maintain current ownership prices.

    The author is absolutely right that very few will buy a 600k house that needs 500k in renovations.

  6. Frank Phelan July 23, 2018 at 5:38 pm #

    Although the lead in to this piece is not the point of the article, I did get a kick out of it. I’ve long heard people advise others, “Don’t get a permit! They’ll make you do all kinds of work and they just want to raise your taxes!”

    Having seen the results of work done by the Handy Homeowner, or Side Job Bob (hey, my brother-in-law knows a guy who had a guy install…), there is a lot of truth to the following adage:

    If you think hiring a professional is expensive, try hiring an amateur.

    When you call a real electrician to do some work, she’ll have a hard time finding those junction boxes that were buried under drywall.

    • Julie Kosbab July 23, 2018 at 6:21 pm #

      It’s like you were in my old basement!

  7. Dana DeMaster
    DanaD July 24, 2018 at 1:51 pm #

    This article resonates with me for so many reasons. Although $400,000 has never been and likely never will be in my budget, the question of what to do with aging homes that are “cute” and have “character” but also have dire structural problems is something I think about. In less trendy neighborhoods, housing is still relatively expensive and the costs of repair and maintenance are only increasing. At what point is a house beyond its useful lifespan?

    In 2007, near the height of the housing market, my husband and I bought a house in Hamline-Midway for $190,000. It was sorta run down and needed a lot of cosmetics, but the inspector assured us that it was a good house underneath. It just needed updates, including some expensive ones like siding. We lived there for eight years and poured about $50,000 into it. New plumbing, a new deck, refinished two bathrooms, ripped out plaster and lathe and replaced it with sheetrock on the entire second floor, replaced 10 windows, and new carpet in the upstairs. Luckily, my dad is a carpenter and was able to help with a ton of this so we hired out very little and were able to get extra supplies from his construction sites.

    Despite all of these improvements were were, in 2014, still $50,000 underwater on our mortgage thanks to the housing crash. We were getting ready to pour another $20,000 into it (new siding) when a contractor said, “You can’t replace that siding until you repair your roof.” We brought out roofing contractors who discovered that we didn’t have a chimney and our octopus furnace was venting directly into our attic! The damage to the second story and roof was immense. Water damage from condensation had caused between $50,000 and $80,000 worth of damage and most the of second story needed to be replaced.

    We discovered that the previous owners had hired a roofer who roofed right over the chimney! Saint Paul does not require permits be inspected and the permit was never inspected. Closed permits are on their website, but ones sitting open are not (this may have changed since then). So, unless our realtor or us had known this about Saint Paul and called the Department of Safety and Inspections (DSI) to ask about uninspected permits we had no way to know. I thought the city might be helpful so I called DSI. This was stupid. The city took away our certificate of occupancy.

    So, this was July and we had to move. The city said we couldn’t live there and, in any case, we couldn’t live there after heating season knowing we were putting our family at risk. We could afford the mortgage and had significant savings, but couldn’t afford to pay the mortgage on a basically worthless house and pay rent in an apartment. It became a Category II vacant building which resulted in a whole lot of hearings at the city and made it nearly impossible to sell. So, we walked away.

    At that point the estimated market value was about $50,000 and we owed $175,000. We could fix the problems for about $80,000 and still be $45,000 underwater.

    This is what I learned from the process.

    1) Don’t trust realtors. Even your friend’s sister. They are there to make money. Don’t believe the b.s. that the buyers don’t pay realtor fees. They are wrapped up into the cost of the house and realtors have every incentive to sell fast and sell expensive.
    2) TISH statements are completely useless. They can’t look at anything they can’t easily see.
    3) Inspectors are a scam and a waste of money. You can’t sue them as you typically sign those rights away. Our inspector missed that we didn’t have a CHIMNEY.
    4) Saint Paul has a messed up permiting process. After my experience I testified at the City Council about my experiences in the hopes that they would start following up on open permits (like Minneapolis and just about every other city I called does), but they only changed it to make them expire sooner.
    5) Buying a house is a total shot in the dark crap shoot. There are no guarantees and for most things you can’t sue after about two years. We couldn’t pursue the contractor, our realtor, the inspector, the city. There was a small chance to go after the contractor but the lawyer fees would have been higher than our court winnings because only the cost of the initial problem (i.e. the chimney) can be sued for, not the subsequent damages (water damage).

    What happened? We ended up doing a deed in lieu of foreclosure to the bank. The house “sold” for $500. A developer (enter evil laugh) bought it for about $90,000. They tore down most of the structure and completely rebuilt. The house is unrecognizable. It is no longer cute, historic, and no longer fits with the character of the neighborhood. They sold it 8 months after buying it for $276K. Good deal for them.

    We were fortunate to have family that was able to help us buy a house before our credit went completely south. My dad did the inspections. We didn’t get a realtor.

    I am sure there are tons of other houses just like ours all over the city and plenty of other households that buy them and have to spend tens of thousands of dollars in unexpected ways. These homes are not energy efficient (our heating bills were over $400 in the winter). Years of poor work (professional or otherwise) take their toll. The city has programs to help lower income homeowners, which is great, but not helpful for average middle class families. We were just over the income limits of all the programs and many required that you have equity.

    Eventually, all these 100 year old darling houses will outlive their usefulness as homes. What do we do then?

    • Michael Daigh July 24, 2018 at 2:39 pm #

      Thank you, Dana. This is exactly the sort of thing that I’m writing about!

    • Michael Daigh July 24, 2018 at 2:44 pm #

      LIke it or not, St. Paul is in a competition to attract and retain the young families that are the engine of a community.

      For young, working families, the ledger tilts ever more favorably towards suburbs, or even other cities altogether, depending on how ridiculous everything gets. I haven’t done a laborious comparison, but at first glance St. Paul appears to be rivaling parts of Westchester County, and nicer areas of Jersey, like those around East Orange.

      The Economist just recently placed Minneapolis as the #3 most expensive city, right behind San Francisco and NYC.

      • Adam Miller
        Adam Miller July 24, 2018 at 3:23 pm #

        That economist study did not include the cost of purchasing a house, however, and Minneapolis is still much cheaper than many coastal cities in that regard.

        • Tim July 25, 2018 at 10:03 am #

          The study was flawed, yes. But many people around here aren’t choosing between living in Minneapolis and San Francisco or New York, they’re choosing between Minneapolis and Sioux Falls or Des Moines.

    • Michael Daigh July 24, 2018 at 3:01 pm #

      Last reply:

      I thought for a while about whether to bring up price points in this piece, for two reasons. First, because I am a private person by nature about such things. Second, I didn’t want it to come across as bragging about my house/finances/etc., thereby distracting from the piece.

      I elected to talk money, to underscore the point that buying at the expensive end of St. Paul will still get you a zany funhouse where all the floors are listing at different angles. Or where people treat you like you’re a crazy person for insisting that the plumbing will, indeed, work prior to purchase. Buying dear doesn’t eliminate or mitigate the problems. It can even make them larger scale, if the house is really only worthy of demolition.

      I didn’t want anyone (preservation partisans and/or NIMBYs) to think, however quietly, that “some” of “those” houses (read; less expensive) might be worthy of teardown, but not houses on the higher end of the price spectrum. I wanted to illustrate clearly that no matter where on the spectrum you purchase in St. Paul, it is becoming a situation fraught with hazard, and getting worse the more effective certain entities are at freezing everything in place.

      • Dana DeMaster
        DanaD July 24, 2018 at 3:17 pm #

        My favorite part of the whole torturous process was during one of the many city legislative hearings I attended. The legislative officer said and I have it framed in my new house, “Let the record show that Dana DeMaster is an upstanding citizen of St Paul and has been honest and forthright in all of her dealings. She is an upstanding citizen who is getting screwed.”

        • Stuart July 26, 2018 at 9:21 am #

          That is wonderful and I would have had it framed as well.

  8. Frank Phelan July 24, 2018 at 8:36 pm #

    This raises a lot of questions.

    What are the implications of this for sprawl? Will it be cheaper to leave hundreds of urban houses to decline and build new in the ‘burbs, or to subsidize the tear down and rebuild of century old housing? Would a program like that be on a case by case basis? Would it be done block by block? A combination of both?

    What are the political implications of hidden subsidies to sprawl compared to more direct and visible subsidies to tear down/re-builds? I know in the past Saint Paul has received criticism for the cost of some re-habs where the inputs are greater than the subsequent sale price.

    • Dana DeMaster
      DanaD July 25, 2018 at 8:41 am #

      I don’t think it has to be sprawl. The land still has value, even if the building does not. The bank sold my house for $90,000, which was likely the value of the land. The developer clearly saw value in that and turned a tidy profit of nearly 300% in just eight months. While I don’t think we need to let it become a developer free-for-all, at the same time the market will take care of some of the issue if we let it.

      Having protections in place for buyers and homeowners to help that rehab housing affordably or at least know what they are getting into would be good. TISH statements are completely useless right now. Beef that up and allow inspectors to get behind walls or hidden spaces. Enforce permits and follow-up on them. Make it very obvious where to find information on all permits, especially those that are closed with no inspection. Right now you can’t sue after about two years – expand that. Provide assistance for rehab (like no interest or low-interest loans) without equity, maybe with a requirement that the building remains owner-occupied for some period of time (many programs require 10 years).

      Changing vacant building fee structures could also help. Developers or businesses should pay more if they are just sitting on a vacant property to wait for a better market. Individual homeowners should have a sliding fee based on income and some sort of assistance (not necessarily financial) to bring it up to code.

      There is a point at which a building is no longer useful, whether it’s because of damage, neglect, or just technological changes. That’s been a reality of cities since there were cities. Londoners aren’t stuck living in Roman buildings.

  9. Dan Choma July 25, 2018 at 10:13 am #

    “There is a point at which a building is no longer useful, whether it’s because of damage, neglect, or just technological changes. That’s been a reality of cities since there were cities. Londoners aren’t stuck living in Roman buildings.”

    This is a salient:

    If these buildings are not salvageable, why not start a county fund to put this land into a cooperative?

    The assets both bring our county a profit to keep our civic governments funded AND create a way that the public can retain control over rising costs associated with housing.

    • Dan Choma July 25, 2018 at 10:26 am #

      “The bank sold my house for $90,000, which was likely the value of the land. The developer clearly saw value in that and turned a tidy profit of nearly 300% in just eight months. While I don’t think we need to let it become a developer free-for-all, at the same time the market will take care of some of the issue if we let it.”

      I also see no reason why the civic government shouldn’t be able to get some of this profit in order to fund social programs, etc.

      Why should Ramsey County be responsible for the social costs associated with lack of housing but give all the profits to private entities?

      • Adam Miller
        Adam Miller July 25, 2018 at 12:04 pm #

        300% isn’t right though. They had to demo house and rebuild it. I’d be curious about how much profit was actually in there.

        But the civic government does get some of the profit via ongoing property taxes on a more valuable property.

      • Dana DeMaster
        DanaD July 25, 2018 at 12:12 pm #

        Ramsey County has their 4R Program for tax-forfeited properties which is similar. https://www.ramseycounty.us/residents/property-home/taxes-values/tax-forfeited-land-information/4r-program-reuse-recycle-and-renovate-reinvestment-program

        However, these are only tax-forfeited properties, which takes years of vacancy. We were told by St Paul not to pay our taxes and just not to worry about it because the consequences would be five or more years out and the bank (and eventually a purchaser) would just take on the tax debt in the sale. There are plenty of damaged structures that need rehab that aren’t to that point yet, but a model does exist.

        There is also the Community Development Corporation model. (https://community-wealth.org/strategies/panel/cdcs/index.html) The Fort Road Federation (the district council for the West End) was until very recently also a CDC in addition to being the district council. They bought and rehabbed distressed properties and then sold them with income restrictions to ensure they remained affordable. There are also organizations that function as CDCs, like Aeon Housing. They mainly rehab multi-family dwellings though as as this Strib article shows (http://www.startribune.com/as-conditions-at-richfield-apartments-remain-poor-nonprofit-developer-takes-the-heat/489066311/) aren’t always successful due to increasing costs.

        • Dan Choma July 25, 2018 at 1:44 pm #

          Thanks Dana. This is all good info and educational. Also: thanks for your candor in sharing both your personal story and your career expertise. We are all better for it. You rock.

        • Dan Choma July 25, 2018 at 6:50 pm #

          It would be nice if CDCs such as ESNDC had a county funding process. CIB funding through the city has pretty demonstrably been lousy for East Side and Frogtown.

      • Daniel Hartig
        Daniel Hartig July 25, 2018 at 12:33 pm #

        The proximate cause that civic government can’t get the profits is that city governments cannot, in the US at least, build affordable housing; that is, they can’t build houses cheap enough to make a profit on.

        Joe Cortright has examples (https://www.citylab.com/equity/2017/10/why-is-affordable-housing-so-expensive-to-build/543399/) citing recent city-subsidized developments in Emeryville (near Oakland) and San Francisco at $600-$700k per unit, whereas a private development in Portland was running around $100k.

        At government building rates and affordable rent, you any new housing project is a massive money loser; every million put in turns into maybe $20k a year tops in return on investment.

        Local governments are constrained by a combination of politics, poor leadership, onerous regulation, and possibly general corruption. If a government wants to take action on affordable housing, it an take action by removing many of the self-imposed cost limitations: onerous rules about mandatory union membership, contracting processes, etc.

        • Dana DeMaster
          Dana DeMaster July 25, 2018 at 1:41 pm #

          Those articles cite new developments. The article here is about rehabbing old houses and what to do with properties with so many problems to make them undesirable or financially out of reach for most buyers.

          We are fortunate in St Paul that we have excellent local leadership, sensible regulations, and no corruption. Having been a MAPE member for 10 years and a AFSCME member for two until my promotion into that excellent local leadership, I am glad public employees have fair representation, wages, and health care so we can retain and attract the great talent we have and contracting processes that are fair and mostly transparent.

  10. Dana DeMaster
    DanaD July 25, 2018 at 12:13 pm #

    Ramsey County has their 4R Program for tax-forfeited properties which is similar. https://www.ramseycounty.us/residents/property-home/taxes-values/tax-forfeited-land-information/4r-program-reuse-recycle-and-renovate-reinvestment-program

    However, these are only tax-forfeited properties, which takes years of vacancy. We were told by St Paul not to pay our taxes and just not to worry about it because the consequences would be five or more years out and the bank (and eventually a purchaser) would just take on the tax debt in the sale. There are plenty of damaged structures that need rehab that aren’t to that point yet, but a model does exist.

    There is also the Community Development Corporation model. (https://community-wealth.org/strategies/panel/cdcs/index.html) The Fort Road Federation (the district council for the West End) was until very recently also a CDC in addition to being the district council. They bought and rehabbed distressed properties and then sold them with income restrictions to ensure they remained affordable. There are also organizations that function as CDCs, like Aeon Housing. They mainly rehab multi-family dwellings though as as this Strib article shows (http://www.startribune.com/as-conditions-at-richfield-apartments-remain-poor-nonprofit-developer-takes-the-heat/489066311/) aren’t always successful due to increasing costs.

  11. Eric Osekowsky July 25, 2018 at 1:31 pm #

    What’s this about walking away from earnest money? You’re supposed to get that back when you walk away as the result of an inspection… I had to do this myself

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