Housing boom falls far short of meeting Mankato’s needs | Local News

MANKATO — The statistics are clear: people want to live and work in Mankato but many are finding it extremely difficult to find a home they can afford.

“Easily that’s our No. 1 issue,” City Manager Susan Arntz said.

Housing is “Goal 1” in the five-year strategic plan approved by the City Council a year ago, ahead of infrastructure, quality-of-life amenities, public safety and economic prosperity.

The severity of the problem was laid out numerically in a Comprehensive Housing Needs Analysis completed this summer. Mankato’s population is expected to grow 7.9% over the course of this decade and another 4.4% in the following five years. But the number of households is projected to grow even faster as the population of elderly individuals and couples — as opposed to families with children — soars.

The number of households is projected to grow by more than a third from 2020 to 2035, jumping by 6,340.

Attempts to keep up with the growing demand can be seen across the city, nowhere more so than Mankato’s east side, as new apartment buildings, senior housing facilities, townhouses and single family homes pop up weekly.

The building boom is not keeping up with demand, however, especially for lower-cost options, according to the housing study conducted by Maxfield Research and Consulting. A decade from now, the study predicts the excess demand over supply will be vast if trends don’t change.

Maxfield anticipates demand for more than 1,000 additional single-family homes by 2035, nearly 1,200 owner-occupied townhouses or condos, just under 2,400 apartments and more than 1,900 units of senior housing.

Looking at the numbers prompted Arntz, now 33 years into her career in municipal government, to look at the thesis she wrote as an undergraduate studying public administration at Augsburg College. Her paper researched the challenges of providing adequate levels of housing through public, private and nonprofit partnerships.

“All of the issues I wrote about way back when are still applicable,” she said. “There’s just more zeros and bigger percentages.”

Regulatory reform

The basic supply-and-demand problem is obvious in Mankato — too many residents chasing too few houses and apartments. But there’s an even more basic economic issue that continues to feed the problem: Increases in the wages paid to average Americans isn’t keeping up with the faster-growing cost of housing.

“It does feel at the current moment we have a little bit greater imbalance between wage growth and housing costs,” Arntz said. “But that’s been an issue for a very long time.”

With little ability to influence private sector wages, city leaders are continuing to implement strategies to make housing more affordable in Mankato. They are finding ways to expand the number of vouchers available to help cover the rent payments of income-eligible tenants, growing the size of a community land trust to make home ownership more attainable, supporting construction of new affordable apartment buildings, operating programs that provide financial advice and down-payment assistance for first-time homebuyers, helping landlords make repairs so that affordable apartments don’t disappear and more.

The latest efforts — identifying and easing regulatory burdens for developers of new apartment buildings — came before the City Council last week.

The first ordinance amendment makes apartments a conditional use in areas of Mankato zoned as “highway business districts.” With brick-and-mortar retail on the wane, vacant parcels on the city’s east side reserved for commercial growth have been increasingly eyed instead by housing developers.

The council, after reviews by the Planning Commission, has consistently supported repurposing those properties from business districts to residential uses. But the ordinance amendment will make it a much more efficient process.

Community Development Director Mark Konz laid out a scenario where a developer comes to the city in February with a plan to break ground on an apartment complex in a business district that spring. The current ordinance would require an amendment to the land use plan and a rezoning of the property, which involves public notices and trips to the Planning Commission and the council.

“So instead of a March or April submittal for a building permit, they’re submitting that in September or October and lose a whole construction season,” Konz said of the traditional process. “Which essentially makes our housing units be built a year later than they could have been built and available to the public.”

With the changes unanimously approved by the council, the process will be completed in as little as 45 days instead of four to six months while still giving staff and the elected officials an opportunity for oversight, Konz said.

Paring parking

A second ordinance was also amended to reduce the parking requirements for apartment buildings. Instead of two parking spots for each unit, 1.5 will be required.

That 25% reduction means less expense for developers of apartment buildings — not just when the parking lot is constructed but also when plowing snow and performing basic maintenance — “which is put on their tenants as part of their rent,” Konz said.

The city code still has provisions that would allow the council to require more or less parking in special circumstances, he said. But the current standard appears to be overkill.

“A number of the complexes that we have are seeing a significant number of vacant parking stalls,” he said.

Smaller parking lots also mean developers might be able to add a few more apartments to a new building. And it means less pavement, which brings environmental benefits by reducing stormwater runoff.

Council member Michael McLaughlin praised the proposals, saying the housing shortage and environmental concerns are two of the most common sentiments expressed by residents.

“So I just think it makes sense on all fronts,” McLaughlin said.

ISG engineer Nathan Hermer, who regularly represents developers navigating the municipal permitting process, also applauded the changes.

“It’s great the city is taking this stance to accommodate more housing,” Hermer said. “… These gradual steps will be very beneficial to the city.”

Additional apartments

Developers have demonstrated a willingness to invest in Mankato’s housing market in recent years. That’s continuing with nearly 400 units of new market-rate housing approved and ready to move forward to construction. An additional 287 units have been proposed.

Outside developers — who are new to the Mankato market or entered it less than a decade ago — have plans to bring hundreds more apartments and townhouses and several dozen new single-family homes.

One of them is Steve Kuepers, president of Brainerd-based Kuepers Construction.

“You guys saw me a few years ago. We did the Augusta Park Estates project up the road,” said Kuepers at a Planning Commission meeting two weeks ago while requesting a review of his latest development.

Called Victory Ridge, the new project will bring four apartment buildings totaling 180 units to a vacant 15-acre parcel east of Victory Drive, midway between Madison Avenue and Highway 14. Renters at the new complex would have access to enclosed parking garages, a central courtyard with grilling stations and a playground, a fenced-in dog park and recreational features such as basketball and pickleball courts.

Kuepers didn’t detail what rents he expects to charge but said the building designs would match those at Augusta Park Estates, which was constructed in 2022-23 just south of the Wickersham Health Campus and is now valued at nearly $37 million, according to Blue Earth County tax records.

One-bedroom apartments totaling 661 square feet are currently being offered at Augusta Park Estates for $1,320 a month. Units which are nearly twice as spacious and offer two bedrooms are going for as much as $1,899 a month.

“Happy to be back in Mankato,” Kuepers told the Planning Commission.

Driving demand

Considering anticipated job growth, keeping developers happy and incentivized to build more housing in Mankato could be critical — both for local companies trying to recruit employees and for workers desperate for more housing options.

Mankato added 2,038 jobs from 2020 through 2023 and is predicted to add another 3,388 through 2035, according to Maxfield. Those workers are going to need a place to live even as the city will be feeling a housing crunch from a growing number of elderly residents.

Among household types, the “living alone” category has become the largest in Mankato, representing 30% of all households. People living with roommates and married couples without children are the next largest categories at 22% and 20% of households, respectively. Married couples with children and other family types each make up 14% of households.

Because of a trend toward smaller households, the increase in the number of homes will have to occur at a faster pace than the overall population growth.

Demand for new housing units of all types is expected to be about 423 per year through 2035, according to the housing study. But building permit records show that Mankato has seen more than 400 units constructed in only three of the past 15 years. In six of those years, fewer than 300 units were added.

The resulting predicament isn’t hard to guess. There are relatively few available apartments in the city — and that includes units with high rents. Vacancy rates in market-rate rental units — carrying average rents of $1,318 a month — is just 2.6% in Blue Earth and Nicollet counties, according to a survey conducted by Maxfield. For student-oriented market-rate housing (with average rents of $1,148), the vacancy rate is less than 1%.

For housing complexes that received government subsidies and therefore must charge lower rents — $1,032 per month on average — just 1.7% of units are available for people seeking an apartment.

And low-income renters might face better odds buying lottery tickets than trying to find an available unit of subsidized housing. At those apartment complexes, which have an average rent of $647 a month, the vacancy rate is 0.1% — meaning a one-in-1,000-chance of an eligible apartment-seeker finding an opening.

With so few options in Mankato’s housing market, more than 21,400 workers are driving into the city from outlying areas every day — many from 50 or more miles away, the study found.

Badly burdened

For those living in Mankato, housing costs often leave them in a financial bind. A bit more than 22% of Mankato homeowners meet the definition of cost-burdened — meaning more than 30% of gross household income is consumed by mortgage payments and utility bills. Of those, 9% are “severely cost-burdened” with 50% of gross household income eaten up by their mortgage and utilities.

For Mankato renters, it’s even worse: 49% are cost-burdened with just over half of those (25.4%) severely cost-burdened.

In at least a couple of cases, local developers are attempting to provide a bit of lower-cost housing — through a new community land trust that can cut a home’s cost roughly in half — although their projects focus primarily on homes and apartments that will charge whatever the market will bare.

But even new housing projects that are targeting higher-income renters and homebuyers should ease the upward pressure on rents and home prices over time, Arntz said.

“It helps temper some of that,” she said.

With apartment rents consuming so much of many Mankatoans’ incomes, converting those payments to a mortgage would seem like a tempting alternative. Making the shift to homeownership is daunting, however, bordering on impossible for many in the current housing market.

The median price for homes sold in Blue Earth County was $151,000 a decade ago. In 2024, the median price was $309,000, according to the housing study. In Mankato, it was even higher — $334,000.

And the options available to home shoppers are very limited. In March of this year, Mankato had just 55 active listings of single-family homes for sale with a median price of $445,000. For would-be buyers hoping to find a starter home for less than $200,000, there were only five choices.

Part of the supply problem stems from older homeowners who are reluctant to sell their houses and move into senior housing that is extremely pricey compared to their current home. The average rent for independent living units targeted at seniors is $2,800 a month. The average monthly cost for an assisted living unit is nearly $3,400.

All of the above

With the surplus of grim news in the housing study, its recommendations provided some encouragement for city leaders. Basically, Maxfield advised Mankato to keep doing what it’s doing, just do more of it.

“It’s one of those things — there’s just no single solution here,” Arntz said.

She and the council regularly heap praise on the city’s housing staff, a tradition that continued after a lengthy summary of their efforts and successes in the past year. One of the most directly beneficial moves for struggling renters was an initiative that resulted in significant growth in the rental voucher program.

“We’re approaching 1,200 people in the region,” Arntz said of the monthly rent buydown provided to eligible households, primarily in Mankato and smaller towns in Blue Earth County.

Other initiatives range from the Partnership Community Land Trust, a new housing trust fund financed with public and private donations, funding to rehabilitate existing homes and apartments to avoid losing units to demolition and decay, support for the construction of more affordable rental housing and programs that offer advice and assistance to first-time homebuyers.

“This is a lot,” Arntz said of the breadth of the effort. “But it isn’t enough. That’s why we continue to do this … and meet the needs as best we can.”