City finances new affordable housing, seeks TIF on apartment development

Continuing efforts to expand the local housing supply, the St. Peter City Council took action on Monday, June 24 to fund the construction of affordable housing and incentivize the development of a 50-unit apartment building.

In collaboration with the Southwest Minnesota Housing Partnership, the City Council agreed to assist the non-profit community development corporation in building six new single-family homes in Traverse Green. The city will spend $242,000 on the development of four houses on Lunden Street and two homes on Nelson Street.

The slate of affordable housing projects funded by the city and SWMHP has doubled over the previous year, when the city dedicated $145,000 toward the construction of a new home on Lunden Street and the rehabilitation of two more single-family dwellings.

Both payments were sourced from a $900,000 housing fund accumulated from state grants, payments of housing gap funds and tax increment resources.

If all seven of SWMHP’s construction projects in Traverse Green move forward, and Habitat for Humanity constructs a new home this year and in 2025, Community Development Director Ben Baker said there would just be six affordable housing lots remaining in the neighborhood for future development.

North Industrial apartments

After dedicating funds to new housing projects in Traverse Green, the St. Peter City Council entered a development agreement with Community Asset Development Group, under the name St. Peter Land LLC, to build a 50-unit apartment complex west of Klein Street in the North Industrial Park.

In the past few years, the developer has built two 67-unit apartments along Clark Street in North Traverse Green. CADG now aims to build a new apartment building by October 2026, modeled after a similar-sized complex the developer is currently constructing in Little Falls. With a mix of beige and black paneling, the facade of the Little Falls building closely resembles the group’s existing Clark Street apartments.

CADG initially scouted Clark Street as a site for the new building, but with the city already in the midst of planning the development of a 42 neighborhood north of Cullen Street, the City Council raised concern that another apartment building would add too much housing density to the area. Instead, a land swap was devised with CADG receiving 4.97 acres of land off Klein Street from the city, while in exchange the city would obtain 2.2 acres of land in North Traverse Green.

Per the development agreement, tax increment financing (TIF) district would be applied to the development for 12 years. A TIF reimburses developers for the costs of building and improving their properties through paying back the increase in tax value generated. Under the conditions of the TIF, the developer would receive either $1,011,164 in assistance or twelve consecutive years of reimbursement, whichever occurs first.

The TIF also applies income restrictions on the apartments, requiring the developer to either make a fifth of the units available to tenants making below half the median income of their family size or make 40 percent of the units available to tenants below 60 percent of the area median income. Furthermore, at least one tenth of the units must accept federal and state housing dollars.

“From a practical standpoint that then ensures that the developer will provide opportunities for section 8 vouchers also to be used,” said City Administrator Todd Prafke.

Community members will have the opportunity to weigh in on the proposed TIF district in a public hearing to be held on Aug. 26. Copies of the tax increment plan will be distributed to Nicollet County and the St. Peter School District in advance of the public hearing.

In addition, the agreement requires the developer to build a new sidewalk along Klein Street, connecting the east and west concrete trail, and create a trail around the north and west side of the property.

The proposed apartment complex is part of a subdivided plat which dedicates 2.7 acres for the construction of storage units, 2.4 acres for commercial office and storage space and 1.5 acres for indoor agriculture.