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AGENDA RECOMMENDATION |
Item No: 4.B.
Economic Development Authority
- Meeting Date:
- 05/12/2025
Agenda Item:
Review the status of the Partnership Community Land Trust (PCLT) and Resolution authorizing the execution of the Phase IV contract.
Recommendation/Action(s):
Adoption of the attached resolution.
Summary:
The following update is being provided by Southwest Minnesota Housing Partnership (SWMHP) on the Partnership Community Land Trust (PCLT) activities in Mankato, along with the financial summary attached.
A Community Land Trust (CLT) is a unique solution in a community’s housing toolkit. Four years ago, the City of Mankato approached the SWMHP to expand the PCLT into Mankato. The Mankato City Council approved an investment which has leveraged other sources of funds and expanded the PCLT into the area. Three years after the initial City Council approvals, we are experiencing what was envisioned - low-income households who had the dream of owning their own home, are becoming homeowners.
Not only is the one-time investment in a home impactful for the family that is moving in, the nature of the CLT as a perpetual model means there is no continuous investment needed for future homebuyers to experience affordable homeownership. Homeowners are building equity, and the community has a sustainable tool to create affordable housing.
Phase Updates
Phase I - Closed out
Focused on three Acquisition/Rehabilitation homes not exceeding 80% of the statewide Area Median Income (AMI). The city contribution acted as a write-down/reduction of the purchase price, CDBG acted as funds to address items identified as health and safety needs, and the City paid $5,000 per home for SWMHP administration services after closing.
Progress Report: This contract phase closed out in March 2025. One PCLT home was purchased and closed in December 2023. A second home was purchased and closed in June 2024. The third home was purchased and closed in March 2025.
Phase II – Closing out by June 2025
The focus is on three New Construction homes not exceeding 60% of the statewide Area Median Income (AMI). The City and SWMHP contributions act as a write-down/reduction of the purchase price and were used as leverage to secure funds through the Minnesota Housing Finance Agency (MHFA) and Target Foundation.
Progress Report: SWMHP purchased a new construction home in March 2024 from Heartland Homes/Drummer Construction to make it available for a new homebuyer who purchased and closed in October 2024. SWMHP purchased two lots in the Groh Farms subdivision in partnership with Drummer Development/Wilcon Construction in March 2024. The homes are currently under construction and expected to be completed this month. There are four qualified buyers for the two homes, which are on a first-come, first-served basis. Therefore, the first two to make an offer with secured financing will be accepted. It is anticipated that the sale of both homes will occur in June 2025 and close out this contract phase.
These homes have been challenged to find a buyer who qualifies with an exceptionally low income and still qualifies with a lender to obtain a mortgage. As construction costs, including supplies and labor, continue to be high and/or increase, the amount of financing a household can qualify for remains too low. Value engineering for our homes where possible while seeking sources of financial stack to reduce the gap is imperative to transact a home sale. For example, the homes being built in Groh Farms have 4 bedrooms, 2 bathrooms and a garage. To comply with Minnesota Housing Finance Agency requirements, they are built as ‘visitable’, mandating zero-entry with accessible bathrooms and doorways, in addition to mandating the use of prevailing wage construction rates, which generally increase the cost by 20-25%. The total development cost of these homes is $480,000, and our buyers with 60% Statewide Area Median Income qualify for first mortgages of $175-$210,000, hence the need for significant down payment assistance and write-downs. The developer has also pledged a contribution.
Phase III – Pending New Market Tax Credits Award – Closing out Summer/Fall 2026
Part 1:
The focus is on two New Construction homes not exceeding 80% of the statewide Area Median Income (AMI). City and SWMHP contributions acted as a write-down/reduction of the purchase price and were used as leverage to secure funds through the Minnesota Housing Finance Agency (MHFA).
Progress Report: The MHFA contract was signed. The PCLT also secured New Markets Tax Credits (NMTC) to provide a repayable loan with net benefit to reduce the cost of the home price. The NMTC loan closes at the end of May 2025. SWMHP is currently evaluating a list of 12 parcels on which to build and anticipate purchase before July 2025. When the parcel is identified, SWMHP staff will select home concepts and request bids from contractors. SWMHP is planning for a late Fall 2025 construction start, with homes available for purchase by Summer/Fall 2026.
Part 2:
The focus is on five Acquisition/Rehabilitation homes not exceeding 80% of the statewide Area Median Income (AMI). City and SWMHP contributions acted as a write-down/reduction of the purchase price and were used as leverage to secure funds through MHFA, NMTC and Otto Bremer Trust Foundation (OBT).
Progress Report: The MHFA contract was signed. The PCLT also secured New Markets Tax Credits (NMTC) which will be applied as needed to fill the homebuyer assistance gap. City funds were also leveraged in a successful request to the Otto Bremer Foundation for write-down funds of $25,000 for this phase. Staff at SWMHP are actively discussing the need for homes
with local Realtors and shopping to preemptively purchase three of the five homes to begin rehab work prior to homebuyer acquisition. The delay is due to waiting until the NMTC funds are available, which will be at the end of May 2025. The remaining two homes will be homebuyer-initiated, meaning they will select their home, and we will support them through the purchase process.
Phase IV - Seeking Resolution Approving Contract – Close out Summer/Fall 2026
The focus is on ten New Construction homes not exceeding 80% of the statewide Area Median Income (AMI). City, County, and SWMHP contributions act as a write-down/reduction of the purchase price and were used as leverage to secure funds through the Minnesota Housing Finance Agency (MHFA), Greater Minnesota Housing Fund (GMHF) and NMTC.
Background: SWMHP included these homes in two applications to the MHFA Impact Fund last July with support from the City and County – one specifically for Mankato, and one as part of a Scattered Site Regional application. The Scattered Site application was awarded for 10 homes to be placed in communities where the PCLT is already working. SWMHP has chosen to place 6 in Mankato, 2 in St Peter and 2 in Willmar. They have leveraged existing funds to secure an NMTC award for 10 homes in Mankato for this phase. Therefore, the summary is split into two subsections reflecting the change of sources in this phase.
Progress Report: The MHFA contract was finalized in February 2025, GMHF was finalized in April 2025 and the NMTC contract will be finalized in May 2025. These homes will be part of the evaluation and execution of Phase III. SWMHP is currently evaluating a list of 12 parcels on which to build and anticipate purchase before June 2025. When the parcel is identified, SWMHP staff will select home concepts and request bids from contractors. SWMHP is planning for a late Fall 2025 construction start, with homes available for purchase by Summer 2026.
Requested Action: The PCLT is requesting the County to enter a service contract for Phase IV of the land trust activities in the City of Mankato. On June 25, 2024, the EDA adopted a resolution supporting an application to Minnesota Housing for Phase IV. A contract for Phase IV has been drafted and is attached. The contract contemplates a total funding of $250,000 of EDA Funding through the Affordable Housing Trust Fund.
Use of Local Housing Trust Fund to support
The EDAs have allocated Statewide Affordable Housing Aid to create local housing trusts funds throughout the city of Mankato and Blue Earth County. Additionally, in April 2025, they made applications to MN Housing seeking Housing Trust Fund grants matching EDA general funds to support the PCLT in Mankato for Phase IV and V. Should these funds be awarded, the EDAs will have $825,000 to commit to the PCLT.
Below provides a breakdown of the PCLT funding with funding set aside under the LHTF grant request with the EDA request of $225,000 matched with general funding of $300,000, totaling $525,000 to be allocated towards the PCLT. We anticipate notification on whether these funds are awarded in June 2025. The EDA has committed $250,000 of these funds to Phase IV.
Ready Homebuyers
Through outreach to existing SWMHP tenants, area non-profits, realtors, social media posts and media coverage of our initial home sales, word of mouth from our new homeowners and our pipeline of potential homebuyers is increasing. Currently, they have several buyers who are mortgage-ready and many others who are at various stages of purchase readiness – from working with a lender to shopping for a home. Families intending to buy range from 2 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. Their vision to not overburden new homebuyers reduces that client's responsibility to $150,000-210,000. Buyers working with SWMHP staff are evaluating the potential of leveraging the state’s down payment assistance programs such as 1st time and/or 1st Generation homebuyer programs through Minnesota Housing and Midwest Minnesota Community Development Corporation (MMCDC), Housing Choice Vouchers, USDA mortgages and other sources. SWMHP is meeting with more organizations to educate them about the PCLT and how they can partner, as well as marketing efforts to continue to spread the word. They are actively working with Gustavus Adolphus marketing students on plans dedicated to the promotion of the PCLT in Mankato and St. Peter.
Acquisition / Rehabilitation Summary Update
After the winter months, as expected, SWMHP is anticipating a typical for-sale market uptick, leading to more opportunities for potential acquisition/rehab homes on the market. Their experience shows that while a limited number of existing homes can be found at lower price points, the amount of rehab needed to address health and safety issues far exceeds the allocation of CDBG funds. Additionally, items that are excluded, such as sidewalks, garages and driveways, can be an immediate burden to new homeowners. The addition of more financial resources will be helpful in shopping for homes at a higher price point that will require less rehabilitation while still meeting the needs of our homebuyers.
Funding Opportunities – Homebuyers
USDA funds which have repeatedly opened and closed are now temporarily frozen. Congress allotted USDA-wide funding instead of funding specific programs, causing a hold on loans while USDA determines how much each program gets. Until the 502 & 504 programs receive their allotted money, they do not have money to close loans and applicants go on a waitlist.
There is no guarantee that USDA leaders will fund the program, but there are no signs that they won't either. Our team continues to work with qualifying households to add them to the waitlist. However, depending on when mortgage loans will be available again, we will need to resubmit applications.
In the meantime, homebuyers are continuing to seek local funding for their first mortgages. Two local banks have embraced the CLT model, and we continue to work on improved processes to expedite closings.
SWMHP continues to work with homebuyers to access first-time homebuyer funds who qualify, which can provide down payment assistance of up to $18,000. A first-generation down payment assistance program was rolled out in two forms: one directly through Minnesota Housing and the second through MMCDC, from which SWMHP is a distributor of those funds. The state’s program has run out of funds and the MMCDC funds are quickly being depleted. As a qualified distributor of these funds, many homebuyers in Mankato have benefited as SWMHP has facilitated over $1 million dollars in down payment assistance locally for PCLT and non-PCLT buyers.
Other PCLT News
The requested action is to accept the PCLT update and approve the resolution authorizing the Executive Director to enter the service contract for Phase IV and the PCLT through December 31, 2026.
A Community Land Trust (CLT) is a unique solution in a community’s housing toolkit. Four years ago, the City of Mankato approached the SWMHP to expand the PCLT into Mankato. The Mankato City Council approved an investment which has leveraged other sources of funds and expanded the PCLT into the area. Three years after the initial City Council approvals, we are experiencing what was envisioned - low-income households who had the dream of owning their own home, are becoming homeowners.
Not only is the one-time investment in a home impactful for the family that is moving in, the nature of the CLT as a perpetual model means there is no continuous investment needed for future homebuyers to experience affordable homeownership. Homeowners are building equity, and the community has a sustainable tool to create affordable housing.
Phase Updates
Phase I - Closed out
Focused on three Acquisition/Rehabilitation homes not exceeding 80% of the statewide Area Median Income (AMI). The city contribution acted as a write-down/reduction of the purchase price, CDBG acted as funds to address items identified as health and safety needs, and the City paid $5,000 per home for SWMHP administration services after closing.
Progress Report: This contract phase closed out in March 2025. One PCLT home was purchased and closed in December 2023. A second home was purchased and closed in June 2024. The third home was purchased and closed in March 2025.
Phase II – Closing out by June 2025
The focus is on three New Construction homes not exceeding 60% of the statewide Area Median Income (AMI). The City and SWMHP contributions act as a write-down/reduction of the purchase price and were used as leverage to secure funds through the Minnesota Housing Finance Agency (MHFA) and Target Foundation.
Progress Report: SWMHP purchased a new construction home in March 2024 from Heartland Homes/Drummer Construction to make it available for a new homebuyer who purchased and closed in October 2024. SWMHP purchased two lots in the Groh Farms subdivision in partnership with Drummer Development/Wilcon Construction in March 2024. The homes are currently under construction and expected to be completed this month. There are four qualified buyers for the two homes, which are on a first-come, first-served basis. Therefore, the first two to make an offer with secured financing will be accepted. It is anticipated that the sale of both homes will occur in June 2025 and close out this contract phase.
These homes have been challenged to find a buyer who qualifies with an exceptionally low income and still qualifies with a lender to obtain a mortgage. As construction costs, including supplies and labor, continue to be high and/or increase, the amount of financing a household can qualify for remains too low. Value engineering for our homes where possible while seeking sources of financial stack to reduce the gap is imperative to transact a home sale. For example, the homes being built in Groh Farms have 4 bedrooms, 2 bathrooms and a garage. To comply with Minnesota Housing Finance Agency requirements, they are built as ‘visitable’, mandating zero-entry with accessible bathrooms and doorways, in addition to mandating the use of prevailing wage construction rates, which generally increase the cost by 20-25%. The total development cost of these homes is $480,000, and our buyers with 60% Statewide Area Median Income qualify for first mortgages of $175-$210,000, hence the need for significant down payment assistance and write-downs. The developer has also pledged a contribution.
Phase III – Pending New Market Tax Credits Award – Closing out Summer/Fall 2026
Part 1:
The focus is on two New Construction homes not exceeding 80% of the statewide Area Median Income (AMI). City and SWMHP contributions acted as a write-down/reduction of the purchase price and were used as leverage to secure funds through the Minnesota Housing Finance Agency (MHFA).
Progress Report: The MHFA contract was signed. The PCLT also secured New Markets Tax Credits (NMTC) to provide a repayable loan with net benefit to reduce the cost of the home price. The NMTC loan closes at the end of May 2025. SWMHP is currently evaluating a list of 12 parcels on which to build and anticipate purchase before July 2025. When the parcel is identified, SWMHP staff will select home concepts and request bids from contractors. SWMHP is planning for a late Fall 2025 construction start, with homes available for purchase by Summer/Fall 2026.
Part 2:
The focus is on five Acquisition/Rehabilitation homes not exceeding 80% of the statewide Area Median Income (AMI). City and SWMHP contributions acted as a write-down/reduction of the purchase price and were used as leverage to secure funds through MHFA, NMTC and Otto Bremer Trust Foundation (OBT).
Progress Report: The MHFA contract was signed. The PCLT also secured New Markets Tax Credits (NMTC) which will be applied as needed to fill the homebuyer assistance gap. City funds were also leveraged in a successful request to the Otto Bremer Foundation for write-down funds of $25,000 for this phase. Staff at SWMHP are actively discussing the need for homes
with local Realtors and shopping to preemptively purchase three of the five homes to begin rehab work prior to homebuyer acquisition. The delay is due to waiting until the NMTC funds are available, which will be at the end of May 2025. The remaining two homes will be homebuyer-initiated, meaning they will select their home, and we will support them through the purchase process.
Phase IV - Seeking Resolution Approving Contract – Close out Summer/Fall 2026
The focus is on ten New Construction homes not exceeding 80% of the statewide Area Median Income (AMI). City, County, and SWMHP contributions act as a write-down/reduction of the purchase price and were used as leverage to secure funds through the Minnesota Housing Finance Agency (MHFA), Greater Minnesota Housing Fund (GMHF) and NMTC.
Background: SWMHP included these homes in two applications to the MHFA Impact Fund last July with support from the City and County – one specifically for Mankato, and one as part of a Scattered Site Regional application. The Scattered Site application was awarded for 10 homes to be placed in communities where the PCLT is already working. SWMHP has chosen to place 6 in Mankato, 2 in St Peter and 2 in Willmar. They have leveraged existing funds to secure an NMTC award for 10 homes in Mankato for this phase. Therefore, the summary is split into two subsections reflecting the change of sources in this phase.
Progress Report: The MHFA contract was finalized in February 2025, GMHF was finalized in April 2025 and the NMTC contract will be finalized in May 2025. These homes will be part of the evaluation and execution of Phase III. SWMHP is currently evaluating a list of 12 parcels on which to build and anticipate purchase before June 2025. When the parcel is identified, SWMHP staff will select home concepts and request bids from contractors. SWMHP is planning for a late Fall 2025 construction start, with homes available for purchase by Summer 2026.
Requested Action: The PCLT is requesting the County to enter a service contract for Phase IV of the land trust activities in the City of Mankato. On June 25, 2024, the EDA adopted a resolution supporting an application to Minnesota Housing for Phase IV. A contract for Phase IV has been drafted and is attached. The contract contemplates a total funding of $250,000 of EDA Funding through the Affordable Housing Trust Fund.
Use of Local Housing Trust Fund to support
The EDAs have allocated Statewide Affordable Housing Aid to create local housing trusts funds throughout the city of Mankato and Blue Earth County. Additionally, in April 2025, they made applications to MN Housing seeking Housing Trust Fund grants matching EDA general funds to support the PCLT in Mankato for Phase IV and V. Should these funds be awarded, the EDAs will have $825,000 to commit to the PCLT.
Below provides a breakdown of the PCLT funding with funding set aside under the LHTF grant request with the EDA request of $225,000 matched with general funding of $300,000, totaling $525,000 to be allocated towards the PCLT. We anticipate notification on whether these funds are awarded in June 2025. The EDA has committed $250,000 of these funds to Phase IV.
| 2023 | 2024 | 2025 | Subtotal | LHTF Grant Request | General Fund | Total | |
| Mankato | $288,957 | $288,957 | $123,108 | $ 701,022 | $225,000 | $300,000 | $1,226,022 |
| Blue Earth County | $165,141 | $165,141 | $ 69,985 | $ 330,282 | $150,000 | $150,000 | $ 700,267 |
| Total | $454,098 | $454,098 | $193,093 | $1,031,304 | $375,000 | $450,000 | $1,926,289 |
Ready Homebuyers
Through outreach to existing SWMHP tenants, area non-profits, realtors, social media posts and media coverage of our initial home sales, word of mouth from our new homeowners and our pipeline of potential homebuyers is increasing. Currently, they have several buyers who are mortgage-ready and many others who are at various stages of purchase readiness – from working with a lender to shopping for a home. Families intending to buy range from 2 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. Their vision to not overburden new homebuyers reduces that client's responsibility to $150,000-210,000. Buyers working with SWMHP staff are evaluating the potential of leveraging the state’s down payment assistance programs such as 1st time and/or 1st Generation homebuyer programs through Minnesota Housing and Midwest Minnesota Community Development Corporation (MMCDC), Housing Choice Vouchers, USDA mortgages and other sources. SWMHP is meeting with more organizations to educate them about the PCLT and how they can partner, as well as marketing efforts to continue to spread the word. They are actively working with Gustavus Adolphus marketing students on plans dedicated to the promotion of the PCLT in Mankato and St. Peter.
Acquisition / Rehabilitation Summary Update
After the winter months, as expected, SWMHP is anticipating a typical for-sale market uptick, leading to more opportunities for potential acquisition/rehab homes on the market. Their experience shows that while a limited number of existing homes can be found at lower price points, the amount of rehab needed to address health and safety issues far exceeds the allocation of CDBG funds. Additionally, items that are excluded, such as sidewalks, garages and driveways, can be an immediate burden to new homeowners. The addition of more financial resources will be helpful in shopping for homes at a higher price point that will require less rehabilitation while still meeting the needs of our homebuyers.
Funding Opportunities – Homebuyers
USDA funds which have repeatedly opened and closed are now temporarily frozen. Congress allotted USDA-wide funding instead of funding specific programs, causing a hold on loans while USDA determines how much each program gets. Until the 502 & 504 programs receive their allotted money, they do not have money to close loans and applicants go on a waitlist.
There is no guarantee that USDA leaders will fund the program, but there are no signs that they won't either. Our team continues to work with qualifying households to add them to the waitlist. However, depending on when mortgage loans will be available again, we will need to resubmit applications.
In the meantime, homebuyers are continuing to seek local funding for their first mortgages. Two local banks have embraced the CLT model, and we continue to work on improved processes to expedite closings.
SWMHP continues to work with homebuyers to access first-time homebuyer funds who qualify, which can provide down payment assistance of up to $18,000. A first-generation down payment assistance program was rolled out in two forms: one directly through Minnesota Housing and the second through MMCDC, from which SWMHP is a distributor of those funds. The state’s program has run out of funds and the MMCDC funds are quickly being depleted. As a qualified distributor of these funds, many homebuyers in Mankato have benefited as SWMHP has facilitated over $1 million dollars in down payment assistance locally for PCLT and non-PCLT buyers.
Other PCLT News
- Local real estate, title and banking professionals who were part of the first PCLT home sale are now champions and continue to help the PCLT spread the word about what a great option the community land trust is. In fact, more Realtors are reaching out to learn more and asking how they can be involved and send their homebuyers to us for education. SWMHP plans to hold additional educational sessions this summer and has been presenting to brokerages.
- CEO Chad Adams and other SWMHP colleagues were active at the State Capitol this year as well as last year to advocate for changes in the property tax rates on Community Land Trusts through the Minnesota Coalition of Community Land Trusts. Legislation was approved last year to reduce the property tax rate for single-family CLT homes from 1.0% to 0.75%, which will help current and future buyers of CLT homes. The new tax rate does not go into effect until taxes are payable in 2026. Several of their staff also went to the Capitol last month to advocate for housing funding. Chad has had the opportunity to testify twice in the past month, and recently returned from advocacy efforts in Washington D.C. The MN Coalition of CLTs is also leveraging a $1 million contribution from a Minnesota foundation to help Minnesota CLTs get access to more affordable construction financing for homes throughout the state.
- SWMHP continues to plan for housing and other community development opportunities to support the City of Mankato’s Strategic Priorities. In February 2025, SWMHP and the School Sisters of Notre Dame executed a Purchase-Sale Agreement for the purchase of the Good Counsel parcels. The purchase includes multiple parcels of approximately 95 acres encompassing buildings, gardens and landscape on top of the hill and in the pasture. The pasture parcel, located on N. 4th Street across from Tourtellotte Park, is planned to be one of the first projects to include 8 or more PCLT homes (included in Phases III & IV). The purchase of the property will be completed in Fall 2025. However, much work with the City Staff has already occurred to inform the plating process. In addition to housing, plans for multipurpose space, offices, heritage center and more are planned, as well as maintaining the presence of the Living Earth Center for the foreseeable future.
The requested action is to accept the PCLT update and approve the resolution authorizing the Executive Director to enter the service contract for Phase IV and the PCLT through December 31, 2026.