MANKATO — A fledgling program aimed at making homeownership a reality for lower-income Mankatoans is coming to the City Council for a third phase that would bump the number of houses to 13.
The first phase of the Partnership Community Land Trust was approved by the city nearly two years ago, subsidizing the purchase and rehabilitation of three homes.
A second phase — this time with a funding boost from the state — began a year ago and will add three new-construction homes.
The third round, if approved at Monday’s council meeting, would buy and rehab five homes and build two more.
And the Southwest Minnesota Housing Partnership — Mankato’s collaborator in the Community Land Trust — is already thinking about another phase and thinking bigger than ever.
“Given the challenges in finding good quality existing homes in price ranges that meet homebuyer’s financial ability, SWMHP is prioritizing the creation of 10 new construction homes in the next funding round,” according to a memo to the City Council.
In each case, the program is using a model increasingly employed around the country to make homeownership possible for people with modest means, despite ever-rising home prices and high mortgage rates. The concept involves creating a nonprofit trust to purchase and maintain ownership of the land beneath a house. That reduces the overall cost of a home because the buyer is responsible only for financing the structure, paying only a nominal amount to lease the underlying land.
In return, the homeowners — if and when they decide to put the house on the market — agree to sell it only at an affordable price to another income-eligible buyer. With that approach, each new home added to the trust will remain almost perpetually more affordable than similar nearby houses.
The houses in a land trust can be either existing homes purchased by the nonprofit for resale to the eligible buyer or newly constructed homes.
Mankato’s program, which provides additional subsidies in addition to the land purchase, got off to a slow start following its approval in summer of 2022.
To date, just one of the first-phase homes has been sold and occupied by an eligible family. That phase was subsidized exclusively by the city, which provided up to $83,333 each for the purchase of three existing homes, $35,000 each for repairs and rehabilitation of the structures, and $5,000 each to cover administrative costs incurred by SWMHP.
Potential buyers needed to be at or below 80% of the area median family income — currently $62,650 for an individual and rising to $71,600 for a two-person household, $89,450 for a family of four and $103,800 for a six-person household.
The first family — a single mom and her two children — closed on their Partnership Community Land Trust home in December. A purchase agreement has been made on a second home with a closing expected within 45 days.
“Currently, PCLT has several buyers at various stages of purchase readiness — from working with a lender to shopping for a home,” according to an update from the Southwest Minnesota Housing Partnership. “Families intending to buy range from two to 11 people in the household, and are qualifying for mortgages in the $150,000-$350,000 range, however for some, that equates to up to 49% of their income, which is higher than our target of 29% income spent on housing payments.”
SWMHP staff are helping the would-be buyers look at various government and nonprofit programs that help qualifying families with mortgage subsidies and down-payment assistance.
As part of the phase-two program, which is reserved for families at 60% or less of the area median income, PCLT purchased a home constructed by Heartland Homes and developer Mike Drummer, who is a supporter of the land trust. The home is expected to be sold to a qualifying buyer in June or July. In partnership with Drummer and Wilcon Construction, two lots in Drummer’s Groh Farm Subdivision on Mankato’s far eastern edge are to be purchased with construction expected to begin in the next 60 days.
Local contributions toward the six homes in those first two phases totaled $475,000 in city funds from Mankato’s Economic Development Authority budget and $105,000 from the annual allocation from the U.S. Department of Housing and Urban Development, known as the Community Development Block Grant, which is dedicated toward housing programs and other services for lower-income residents.
The Minnesota Housing Finance Authority contributed $270,000.
The seven homes in phase three, if approved, would use another $611,000 in funds approved by Minnesota Housing, plus $175,000 in Mankato EDA funding and $175,00 from the federal grant program.
The hopes for 10 more new-construction homes in a fourth phase will be dependent on the Slayton-based SWMHP’s success in winning $1.25 million from Minnesota Housing in a statewide competition for funding that begins in July. SWMHP is also looking to cobble together $750,000 in funding from other sources. If successful, the city and Blue Earth County will be asked for $250,000 each to complete the financing package.
Public relations also has been a focus of the first two years of the Partnership Community Land Trust. A February fundraiser at the civic center attracted 120 people and raised awareness about the program — along with $30,000 in contributions. People in the private housing industry are also becoming advocates.
“Local real estate, title and banking professionals who were part of the first PCLT home sale are now champions and helping to spread the word about what a great option the community land trust is,” according to the update from the SWMHP.
That’s true of one local homeowner, too.
“A local resident had expressed interest in donating their home to the PCLT upon their need to move to assisted living or upon death,” the update stated. “SWMHP was notified that the home donation has been legally established in the resident’s estate plan.”