Hot Property: Steele Flats in Minneapolis

Published March 28, 2005

Steele Flats
4500 Chicago Av. S.
Minneapolis

Cost: $6 million

Units: 32

Residential square footage: 55,000

Type: Condominium

Owner and developer: Master Development Group

Details: Master Development Group, already busy in and around Minneapolis with several condominium projects, said it has completed the land purchases for its next two efforts and will begin marketing the first of the pair in early April.

The Steele Flats at 45th St. and Chicago Av. in the Field Regina Northrop neighborhood of south Minneapolis are ready to begin construction. Charlie Nestor, Master's director of real estate development, said the 55,000-square-foot building will house 32 condo units ranging from 800 to 1,400 square feet.

Price ranges on the units -- all of which come with underground parking -- will be from $175,000 to $300,000.

A second south Minneapolis project is not as far along. Planned for the intersection of 46th St. and 46th Av. S. near the Ford Parkway Bridge, the still-unnamed project is set to have 20 condominium units in the $250,000-to-$450,000 range, Nestor said.

"We probably won't begin marketing on that one until later on in the summer," he said.

Master Development has gained attention in recent months for its successful efforts to convert the former Brookside School along Hwy. 100 in St. Louis Park to housing. The firm also has several other urban residential developments in its portfolio, including the Arts Quarter at 28th St. and Nicollet Av.; the Greenleaf at Nicollet and Franklin avenues; Hiawatha Square at 2803 E. 38th St.; and the Fulton Lofts at W. 50th St. and Xerxes Av.

On the commercial real estate side, Master is redeveloping the Jackson Building near the intersection of Central Av. and Broadway St. in northeast Minneapolis into a mixed-use venue with office-retail space and artists' studios.

"We look to build in neighborhoods that are already neighborhoods," Nestor said. "They might be on the fringe when it comes to what's considered trendy. They're the kind of places that are going on the upside but don't have a lot of development going on yet. At 45th and Chicago, for instance, there has been no new construction for 60 years."

Project manager Jason Wittwer said the Steele Flats project will incorporate the brick-and-stucco look of the surrounding houses, most of which were built in the 1920s.

"We see it as a complement to some of the attractions of this neighborhood, like the Parkway Theater and the nice commercial node there with its restaurants and coffee shops," he said.

Master Development is serving as its own general contractor on the project. Tushie Montgomery is the architect.

Joseph Errigo: Making housing tougher to afford

Joseph Errigo

Published March 16, 2005

If someone told you their property taxes more than doubled in the past four years, you would think they had moved to an expensive new home in a fancy neighborhood. Most likely, though, you would be talking to one of the affordable-housing providers in Minnesota who have experienced this rate of increase on their apartment buildings.

CommonBond Communities is the largest nonprofit provider of affordable housing in this state, operating almost 3,800 housing units in 32 cities. On average, we have experienced this level of increase on our property taxes over the past four years!

Part of the explanation lies in tax reform enacted by the Legislature to phase out a special class rate for affordable housing called 4(d).

In 1971, the Legislature passed a law that allowed affordable housing to pay about half of the going rate for apartments so that the owners could then charge less for rent, thereby making the housing more affordable. That was sound public policy which encouraged the production of affordable housing.

The more recent 4(d) classification is now being phased out, eliminating tax advantages for housing serving people with low incomes. As a result, all rental housing, market rate and affordable, now pay the same property taxes. This change makes it much harder to produce and operate affordable housing and takes away the incentive to try.

While one-fourth of the increase in tax rates on CommonBond's housing portfolio can be attributed to the loss of the 4(d) classification, increased valuations are the biggest reason for tax increases. Tax assessors have been directed to assess value based on market price, even though those of us who operate this housing are subject to rent restrictions and cannot raise the rents to pay the increased rate of taxes. One of our housing sites in St. Paul, assessed at $13 million just four years ago, now is assessed at $30 million!

We're in business to keep rents low. Assessors need to be directed to determine values by taking into account these rent restrictions. This direction will start to reestablish the property tax differential necessary to make affordable housing affordable.

Increased property taxes are strangling affordable housing, and we need state action to fix the problem. It affects all affordable housing in the state, those owned both by nonprofit organizations and by for-profit companies. This housing is a valuable resource that needs to be protected.

The Legislature needs to take the opportunity to reestablish public policy that really supports affordable housing.

By taking rent restrictions into account for tax assessments and making every effort to go back to a classification system like the one we had in 1971, the Legislature is taking an important step in making sure that Minnesota does not become a more unaffordable place to live. We have already dropped from being one of the top 10 most affordable places to live in the nation to being 66th. How low do we want to go?

Some may balk at reducing taxes when the state and other levels of government are in a financial crunch. But this is one tax that directly affects thousands of people who are least able to pay.

This is only one of the major funding issues facing affordable housing. The state should restore much-needed funding for workforce housing and address the challenges of the chronically homeless, even if it requires those who are better off to pay more taxes. The return on investment would benefit all of us.