Cost to build in Cook County continues to impact local housing crunch

Even with support from state, federal, and local government, housing projects in Cook County face a steep climb in terms of becoming reality.

Take, for example, a proposed project for Tofte known as Sawbill Village. The project includes four business retail spaces for rent on the lower level, six apartments on the upper level and a detached garage featuring one stall for each apartment. The 2.2-acre development site is located near Highway 61. It borders Tofte Park near Lake Superior. In 2022, the project was approved for a grant from the Minnesota Housing Finance Agency in the amount of $648,000.

Prior to the state grant, Cook County officials agreed to a tax break in the form of an abatement for the Sawbill Village. The abatement was for an estimated $686,000 over the course of 15 years.

However, the Sawbill Village is not likely to become a reality. At least not in 2023, according to Cook County Housing Redevelopment Authority Director Jason Hale. The reason the project continues to struggle to gain traction, despite state funding and local tax breaks, is because the cost to build in Cook County is so high. On top of high building costs, developers can only charge so much for rent and still call their projects “affordable housing,” Hale explained.

“You have to be able to build something that you can also on the back end rent to make it make sense,” Hale said. “It can’t be a bad investment. And that’s where the math really gets messed up here.”

During a Jan. 4 interview on WTIP, Hale said Sawbill Village is only one example in terms of how challenging it remains to build housing in Cook County. Meanwhile, Hale and the HRA are moving into 2023 with intentions to bring more housing units to Cook County. The HRA is seeking funding to begin infrastructure and construction of a 51-unit mixed-income multifamily apartment building in Grand Marais. If things go according to plan, the project could start as soon as this year. The tentative name of the anticipated housing development is Sawtooth Flats. The HRA secured $500,000 from Iron Range Resources and Rehabilitation (IRRR) for infrastructure for the project in late 2022. Even with the significant grant, the HRA still needs the Grand Marais City Council to sell the lot for cheap (the HRA asked the city to sell the lot for $1) and to provide tax incentives. The council is expected to discuss the sale of the lot during a council meeting Jan. 11. Supplemental discussion about tax increment financing is expected later this winter or in early spring between the HRA and city council.

In addition to building new homes, the HRA continues to navigate its role in restoring or repairing current housing units in Cook County. An example of this is the 24-unit Birchwood Apartments in Grand Marais. Hale said the HRA is looking at the possibility of creating a “preservation project” with the Birchwood Apartments. This would allow for upgrades to the subsided housing units in Grand Marais while allowing for the current tenants to continue living on site.

WTIP’s Joe Friedrichs spoke with Hale Jan. 4 about the ongoing housing crunch in Cook County. Audio below.

Joe Friedrichs January 4, 2023