Greater Minnesota leaders say that apartment houses may be the answer to their housing shortages.

The Greater Minnesota Partnership and Coalition of Greater Minnesota Cities propose a state program to give grants and tax credits to companies willing to erect apartment buildings in cities without enough housing for jobs already available.

“There is not the ability of the private sector to respond,” Rick Goodemann of Southwest Minnesota Housing Partnership said. “It’s a complicated problem.”

Representative Rod Hamilton, R-Mountain Lake, chief author of a bill designed to help fix that problem, said that Greater Minnesota’s economy cannot grow unless there is more housing for workers.

“We should have done this a long time ago,” he said.

The problem is that businesses from AGCO farm equipment maker in southern Minnesota to Digi-Key in the northwest have jobs open, but struggle filling them. Even if they can find workers, there often are no homes available nearby.

The legislation would help the Alexandria area, according to Jeff Hess, director of the Alexandria Housing and Redevelopment Authority.

“It’s been difficult to get people to see the link between the local workforce and housing,” he said in an interview with the Echo Press. “So I’m glad to see there’s a lot of energy about this topic at the Legislature. There’s a tremendous need for it here.”

Complicating the housing shortage problem is that it is becoming more expensive to build, Hess said. Materials have increased nearly 40 percent and changes in the building code require greater energy efficiency, which also drives up costs.

“It’s difficult to build a building that you can afford that meets a level of rent that satisfies the workforce,” Hess said.

The housing can’t be a one-size-fits-all scenario. Alexandria’s workforce is diverse with three main sectors – retail, health care and manufacturing, Hess said. Because the wages vary widely, so does the amount of money workers can spend on housing.

It is a different problem than a shortage of homes for low-income Minnesotans, said Dan Dorman of the Greater Minnesota Partnership and a former state lawmaker. The apartments need to be for workers in decent-paying jobs, he said, which is what many manufacturers and others have available.

After the financial crisis hit in 2008, Goodemann recently told a House committee, state policy shifted to preventing foreclosures and homelessness, and preserving the state’s aging stock of existing affordable housing.

That came with less emphasis on building new housing, leading to what he termed “a broken market.”

Hamilton’s bill and one by Senator Dan Sparks, D-Austin, in the Senate would:

• Provide a tax credit for all or much of the apartment construction cost for small investors.

• Allow a 30 percent tax credit for larger investors.

• Give grants for building Greater Minnesota apartments, as long as the developer provides as much money as the grant.

The rural groups want $100 million in the next two-year state budget, $60 million to cover the tax credits and $40 million for grants.

The program would be limited to communities with little available rental housing and open jobs. 

Two years of funding for the program would allow up to 2,000 units to begin construction, said Chris Henjum of the partnership.

The bill requires that apartments be built where roads, water, sewer and other infrastructure already exist.

Hamilton said he thinks people would move into the new apartments, but soon would buy houses. That would leave apartments available to new employees, he added.

Backers of the Hamilton bill said that once some apartments are built, private investors will build more.

“It’s just a start,” Tim Flaherty of the cities’ coalition said of the apartment bill.

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Chris Steller of the nonpartisan Minnesota House publication Session Daily contributed to this story. Don Davis, Forum News Service reporter, also contributed to this story.