ELY- A new housing study predicts that a planned workforce housing project here would be 50 percent pre-leased before completion and fully leased within six months after the doors open on the new homes. The study assumed that rents would be targeted for local workforce employees earning $35,000 to $50,000 annually.
The housing study updated the feasibility of the city’s proposed townhouse development on city land near the Ely-Bloomenson Community Hospital (EBCH). The city’s proposal is for a 22-unit rental townhome project, featuring 820 square-foot one-bedroom units and 1,068 square-foot two-bedroom units. Before the new study, the city suggested monthly rents from $1,300 for one-bedroom units ($1.59 per square foot) to $1,500 for two-bedroom units, or $1.40 psf.
The proposed site for the development is 25 acres owned by the city near the southwest corner of Pattison St. West and South 2nd Ave. West, south of the Ely-Bloomenson Community Hospital, and north of the golf course.
Updated study
The Ely Clerk-Treasurer, Harold Langowski, reported at the March 21 city council meeting that the Minnesota Housing Authority recommended that the city update its most recent housing study done in 2019. The agency pointed out that a new study could help Ely with obtaining funding for housing projects.
The Ely Economic Development Authority approved $8,200 for a new housing feasibility study for the city’s property near the hospital. Ely hired Maxfield Research and Consulting LLC of Roseville to conduct the study.
Maxfield has been in business for 32 years. The firm specializes in market and feasibility studies for all submarkets of residential and commercial real estate. The city has had a relationship with Maxfield for many years. The business also did the 2015 and 2019 housing feasibility studies.
For the 2023 study, Maxfield researched local and regional market and economic conditions, using established sources such as the U.S. Census Bureau, the Minnesota Department of Employment and Economic Development (DEED), St. Louis County property records, and several others. The firm also conducted interviews with local real estate professionals, city officials, landlords, and business owners needing to hire workforce employees.
The report produced by Maxfield looked at Ely’s workforce economics and its residential rental supply, demand, and pricing. It also made recommendations that should help the city compete more favorably for state and federal workforce housing funds.
Study findings
Maxfield found the location of the 25 acres near EBCH to be “a quality location for the proposed development concept” of workforce rental housing, noting the appeal of the site next to the golf course, along with its convenient access to major arterial roads in Ely, its walking distance to downtown and short commutes to other businesses, and the recreational amenities of the Ely area.
Defining workforce employees as those making 50 to 120 percent of the area median income (AMI), Maxfield determined that an estimated 2,955 or 60 percent of area households fell into that income range. The study noted, “Based on income guidelines for St. Louis County, the workforce housing household income band ranges from $31,650 for a one-person household in a studio or one-bedroom unit at 50% AMI to $143,040 for an eight-person household in a four-bedroom unit at 120% AMI.”
The number of renter households in Ely increased by five percent between 2010 and 2023, with the largest increases in the 35-to-44 and 25-to-34 age groups. Growth occurred in the household types that “typically comprise the target market for rental housing,” including single-person and non-family roommate households.
Maxfield found that demand in the Ely rental market is currently outstripping supply, remarking that the “Equilibrium vacancy rate for rental housing is considered to be 7 percent,” but that Ely’s actual vacancy rate for “market rate and affordable/subsidized housing,” was 1.9 percent, leading to “pent-up demand for new rental housing” for a wide range of incomes.
The study determined that the average rental rate across all market-rate properties in Ely is currently $876 per month, which equates to $0.95 psf. One-bedroom units rent for $679 per month on average while two-bedroom units average $961 per month and three-bedroom units rent for an average $1,156 per month. These rates are about one-third lower than the rents originally suggested by the city.
Maxfield recommended rents of $1,050 for one-bedroom units, which would be affordable for single people making $42,000 annually, which is in the 60 to 70 percent AMI range in St. Louis County, stating, “This is consistent with the typical starting salary range for entry-level workers at the major employers in Ely ($35,000 to $50,000 depending on position) and would capture a larger portion of the workforce housing target market.”
The firm found that a 22-unit project would achieve maximum stabilized occupancy of 93 percent within three to five months after completion and would capture “21.1 percent of the workforce rental housing demand” in the Ely area rental market.
What next?
Langowski noted that the state of Minnesota has $37 million for housing. Armed with an updated housing study, the city intends to pursue some of that funding. “Applications become available in October,” Langowski noted, “and are due in December.”
While the receipt of the housing study was noted by the Ely Economic Development Authority at its July 25 meeting, the first serious discussions of the city strategy for funding and building a workforce rental project will commence next week at the monthly meeting of Ely’s Housing and Redevelopment Authority (HRA), according to Ely City Council member Angela Campbell, who is the council’s representative on the HRA.
“The housing study is not yet approved by the HRA,” Campbell told the Timberjay. “It will be presented to the HRA at our meeting next week.” As part of its agenda, the HRA will discuss how it wishes to proceed with the housing project and pursue funding. The meeting is open to the public. It will be held at the Pioneer Apartments, 114 N. 8th Ave E., on Tuesday, Aug. 8, at 10 a.m.