At the corner of Plato Boulevard and South Robert Street, developer Schafer Richardson is four months into construction of Soul, a 178-unit affordable apartment complex quite literally breaking new ground for low-income families south of downtown St. Paul.
A dozen of the project’s four-bedroom units will be geared toward households earning no more than $35,200.
For affordable housing of that size, “we could hardly find rent comparable because they’re so rare on the market,” said Marsha Goff, who runs Merchants Capital’s Minnesota office, which arranged a complex layer cake of financing for Soul with city, county and state backing, as well as sizable investment from a labor trust. “Definitely, this project is unique.”
The goal is to make family-style housing affordable to households earning no more than 30% of area median income for the Twin Cities region, which is little short of unheard of in housing circles when it comes to pricing sizable units, each spanning 1,600 square feet. A similar income limit applies to more than half of the 42 three-bedroom units in the project, which will each span about 1,400 square feet. In short, that’s 35 units priced for the very poor.
$77 million housing project
As affordable housing goes, Soul will be roomy. The $77 million project will also be less expensive than the norm, and for longer than the norm.
All units within the property will remain priced for households at or below 60% of area median income for 40 years.
Schafer Richardson officials said Soul will include a rooftop solar array to support lower electricity rates, as well as ground-level space for future retail, among other characteristics often lacking in affordable development.
“With our affordable projects, we tend to skew them toward family units, because we know that’s what’s needed,” said Katie Anthony, a vice president of development with the Minneapolis-based developer, which is also developing 62 one-bedroom and 62 two-bedroom units in Soul. “We don’t have any studios in this project.”
Community support
Even before Soul opens its doors next year near the proverbial entrance to St. Paul’s West Side, the West Side Community Organization and other housing advocates have applauded the return of affordable housing to an area that lost some 480 homes in the 1960s to flooding and levee construction.
The displacement and uprooting of Latin and Jewish families from the West Side Flats with limited compensation remains a sore point for them and their descendants, who have sought to memorialize the destruction of an immigrant neighborhood.
Monica Bravo, executive director of the West Side Community Organization, said after some negotiation over greenspace and public access areas, public art and sidewalk widths, WSCO’s community review “scorecard team” gave Soul its unanimous support.
“I’m super pleased that they’re demonstrating what development can look like, especially in the gateway corridor,” said Bravo on Tuesday. “And they’re working very closely with the community from the start.”
Perhaps fittingly, the geography of the flats has lent itself to housing that could accommodate some of today’s mid-sized immigrant families.
“The neighborhood expressed interest and a need for family-style housing, particularly for people living in the neighborhood,” Anthony said. “We were able to find and create good layouts that were pretty efficient from a floor plan standpoint. The site is flat, it’s pretty rectangular, it’s kind of straightforward in terms of layouts.”
A layer cake of funding
If there’s another key underpinning making roomy affordability possible in Soul, it’s money, and from multiple sources. A long string of funders and financing mechanisms came together to make Soul possible, and some of them trace directly to the vagaries of the COVID-19 pandemic.
The city of St. Paul dipped into federal American Rescue Plan Act, or ARPA, funding issued during the early days of the pandemic to earmark $7.85 million toward Soul, or about 10% of the construction and development cost. No tax increment financing was used in the project.
“If you talk to developers or go to any conferences, everyone is talking about the gap that’s needed to support affordable housing,” said Merchants Capital’s Goff. “Many parties came together to provide the gap financing. Without that support, it would have been much more difficult to provide affordable family units, especially at 30% AMI.”
New multi-family housing is typically constructed with two primary loans — one to support actual construction in the short term, and the other that’s structured more like a traditional long-term mortgage. Merchants Bank of Indiana, parent company to Merchants Capital, provided the $33 million construction loan for Soul, with the expectation that loan will be paid off through a permanent loan from Merchants Capital after lease-up.
The pre-arranged permanent loan, or “Forward Commitment” — somewhat unique to affordable housing projects — locked in interest rates before rate hikes last November and December. It’s backed by a $27 million loan from the Federal Home Loan Mortgage Corp., otherwise known as Freddie Mac.
Other supporters
Soul will be built with entirely union labor, and the AFL-CIO Housing Investment Trust is one of the investors on the property, which proved helpful in reducing the interest rate on the permanent loan, Goff said, and lessened the need for gap financing.
Also supporting the project were federal low-income housing tax credits, issued through the city, as well as low-interest subordinate loans, or “soft” financing, from the Greater Minnesota Housing Fund, a community-development financial institution.
Ramsey County dipped into its Environmental Response Fund (fittingly known as “ERF”) to fund environmental cleanup, a typical requirement of urban “infill” development. The Minnesota Department of Employment and Economic Development provided additional contamination cleanup funding.
Each public funding source came with its own set of regulations.
“Sometimes these rules conflict with each other, and then you have to work together and figure out an alternative,” Goff said. “Why is affordable housing so complicated? Part of it is you have to have so many parties involved, and there are so many state, federal and local rules you have to follow.”
Even before opening, the final product is being celebrated by city officials as a win for the neighborhood.
“This project is everything we could hope for in an affordable housing project, including units large enough for families,” said Ward 2 city council member Rebecca Noecker, in a written statement.
Kaas Wilson Architects and Weis Builders are project partners. Soul is expected to open in the spring of 2024.
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