St. Paul has released a request for proposals for its Inspiring Communities program, an initiative where the city’s Housing and Redevelopment Authority will pay developers to rehabilitate old properties or build new homes on priority sites.

Developers can submit proposals for eight properties around St. Paul and in return receive up to $175,000 in forgivable gap financing to create affordable homes in areas that were hit hard by foreclosures during the recession.

“In some cases we’ve done clusters of these Inspiring Communities projects, which have really turned around whole blocks and sections of neighborhoods in a profound way,” said Jonathan Sage-Martinson, director of the city’s Department of Planning and Economic Development.

One neighborhood is Dayton’s Bluff, where the city’s efforts to preserve a cluster of homes along East Fourth Street were recognized earlier this year by the Preservation Alliance of Minnesota during its annual awards ceremony.

Of the eight properties in five neighborhoods in this year’s RFP, two are single-family homes that need rehabilitation. The city is prioritizing the homes at 69 Garfield St. in the Little Bohemia neighborhood, and 971 Jenks Ave. in the Payne-Phalen neighborhood.

The others are empty lots primed for infill development in St. Paul. Those lots are at 686 Burr St., 716 and 704 Desoto St., 699 Preble St., 376 Sturgis St. and 947 Sylvan St. Proposals are due Dec. 15.

Purchase prices for the sites range from just more than $8,000 to nearly $50,000, but the acquisition costs can be rolled into the $175,000 in forgivable financing, said Joe Musolf, project manager for the city.

But the funding comes with stipulations.

“The requirement is really two-fold,” Musolf said. “One is an income restriction on the end occupant and second is a period of occupancy.”

The gap financing comes from a list of sources, including the Minnesota Housing Finance Agency and the federal Community Development Block Grant program.

The lowest income limit would require the property to ultimately be sold or rented to a family making 80 percent or less of the area median income, according to the RFP. Other financing programs limit the owner or renter to making between 115 percent and 120 percent of the area median income.

Development financing is forgiven after the property meets occupancy goals. For instance, if the site is used for rental housing, the loans or grants are forgiven after the property has been leased at affordable rates for 15 years.

But most of the properties will likely be owner-occupied, Musolf said. In that case the financing is forgiven after five years.

The Inspiring Communities program was launched in 2013 with about 280 vacant homes and empty lots, according to city documents. Since then, the city has released six RFPs to rehab and redevelop those sites, whittling that number down to the single digits, Musolf said.

When the program started, the city staff planned to sell all of the properties by 2018, but sites have been purchased for redevelopment at a faster pace than the agency initially expected, he said.

In part, the program is benefiting from a booming development market in St. Paul, Sage-Martinson said. Developers have focused on multifamily housing in recent years, but the demand for single-family homes is up as well, he said.

“It is really the marketability and price point developers can get for these houses, which have helped move this [program] along at a fast clip,” Sage-Martinson said.

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